APIs for biz dev 2.0 - Which business model?

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APIs are rising. APIs are everywhere, already disrupting industries like telecoms, banking....
However many companies still wonder what Business model they should apply for their API.
This presentation given at APIDays.io in Paris in December 2012 exposes a typology and classification of API business models.

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  • These four categories have distinct revenue models. Some APIs combine elements of several classes.
  • This breakdown is not 100% comprehensive, but many currently public APIs can be classified against it. We use this at 3scale to identify the primary areas of value being created by an API.
  • Kickapps provides 100% whitelabel social tools/widgets for websites and directly charges partners using it’s service – users of the sites may be unaware that KickApps is in use. Skype enables partners to put “Skype everywhere” (such as on Samsung TVs) but retains brand control and skype users login via third parties.
  • The twitter API is free to use, benefits accrue to twitter via the content which is uploaded, other indicators have to be used to measure revenue impact. Oodle.com is a large affiliate driven marketplace, the API allows high levels of custom content display on third party sites to drive traffic to Oodle. Note though that twitter also sells access to it’s firehose API – but this isn’t yet the core value of the API.
  • This category uses the API as a dynamic promotion channel – providing useful but limited content / features to third parties in order to promote usage of the core service. eBay, Amazon and others engage in this through affiliate programs – the API “supports” the affiliate program by allowing third parties to “suck out” exactly the right product meta data to display to their users. Amazon also exposes valuable product popularity data in order to help partners what to display.
  • This category uses the API as a dynamic promotion channel – providing useful but limited content / features to third parties in order to promote usage of the core service. eBay, Amazon and others engage in this through affiliate programs – the API “supports” the affiliate program by allowing third parties to “suck out” exactly the right product meta data to display to their users. Amazon also exposes valuable product popularity data in order to help partners what to display.
  • This category uses the API as a dynamic promotion channel – providing useful but limited content / features to third parties in order to promote usage of the core service. eBay, Amazon and others engage in this through affiliate programs – the API “supports” the affiliate program by allowing third parties to “suck out” exactly the right product meta data to display to their users. Amazon also exposes valuable product popularity data in order to help partners what to display.
  • APIs for biz dev 2.0 - Which business model?

    1. 1. APIs for Biz Dev 2.0Which Business Model? Guillaume Balas - CMO @3scale guillaume@3scale.net - @guillaumebalas
    2. 2. IntroductionTHE RISE OF THE APIS The Plug & Play Cloud API Management 2 Platform & Infrastructure
    3. 3. APIs are growing & reshaping the newWebThis is not a trend, this is a fact 13B / Day (May „11) 5B / Day (April „10) 5B / Day (Oct „09) 3B / Day (March „09) 1.1B / Day (April „11) 1B / Day (Q1 „12) 50% Traffic (March „08) Success for these businesses is 8,000 APIs heavily relying on their API(s) The Plug & Play Cloud API Management 3 Platform & Infrastructure
    4. 4. 8,000 APIs: that’s just the tip of theIcebergPrivate for Partners At 3scale we actually believes that there is 5x to 10x this number outPrivate (for Now) there. With an approximated 100% annual growth, that would mean around 1Truly Private Million APIs by 2017 The Plug & Play Cloud API Management 4 Platform & Infrastructure
    5. 5. APIs are everywhereExamplesMedia & Content SaaS IntegrationSocial & e-Commerce Others Interest is broad and deep. APIs are currently reshaping the web, and disrupting some industries: telecoms, payments, etc! The Plug & Play Cloud API Management 5 Platform & Infrastructure
    6. 6. What is an API ?API 101 The Plug & Play Cloud API Management 6 Platform & Infrastructure
    7. 7. Application Programming InterfaceTech. Definition “A particular set of rules and specifications that a software program can follow to access and make use of the services and resources provided by another particular software program that implements that API. It serves as an interface between different software programs and facilitates their interaction, similar to the way the user interface facilitates interaction between humans and computers.” The Plug & Play Cloud API Management 7 Platform & Infrastructure
    8. 8. Application Programming InterfaceA Business Definition“ We are nearing the time when pps opening our supply chains across the Web isn‟t just a good idea, it will be essential for competitive survival. Dion Hinchcliffe, ZDNet A artners“ APIs provide a scalable way to do business development and create P ncome I partnerships. “BizDev 2.0. I call it”. Caterina Fake, Flickr Adam DuVander, The Plug & Play Cloud API Management 8 Platform & Infrastructure
    9. 9. APIWHY IS IT IMPORTANT? The Plug & Play Cloud API Management 9 Platform & Infrastructure
    10. 10. Web sites are localThere was 645 Million Web sites as of March 2012 Disadvantages:  Limited reach  Lost business opportunities  Very Limited brand awareness  Significant SEO and SEM costs  Web scraping risksSource: Dion Hinchcliffe, http://blogs.zdnet.con/Hinchcliffe The Plug & Play Cloud API Management 10 Platform & Infrastructure
    11. 11. APIs help you grow your businessAPIs are Biz Dev 2.0 – The first paradigm shift Advantages: APIs unlock new distribution channels & enable the expansion of your business beyond the limits of your web site. API Deployment Focus 38% Multi-Channel 51% Mobile Apps 11% Non-MobileSource: Dion Hinchcliffe, http://blogs.zdnet.con/Hinchcliffe The Plug & Play Cloud API Management 11 Platform & Infrastructure
    12. 12. APIs Deliver Raw Data, Content andServices Allowing you to… Create New Build an Power Mobile Distribution Partner Up Ecosystem Apps Channels Serve any type Rationalize & Decrease your of Control access Protect IPR cost of servingdevice, software to your your customer , anywhere resources “Externalize” Create New your R&D. Lower Barriers Reach More Business Foster to Integration Customers Models Innovation The Plug & Play Cloud API Management 12 Platform & Infrastructure
    13. 13. APIs Deliver Raw Data, Content andServices Generating Strategic Advantage Business Advantage New Revenue Streams The Plug & Play Cloud API Management 13 Platform & Infrastructure
    14. 14. An API?SO WHAT NOW? The Plug & Play Cloud API Management 14 Platform & Infrastructure
    15. 15. Take away #1 Don‟t put lipstick on a pig. It will still be a pig… The Plug & Play Cloud API Management 15 Platform & Infrastructure
    16. 16. Take Away #2 Don‟t just build it and think they will come… You might wait very long… The Plug & Play Cloud API Management 16 Platform & Infrastructure
    17. 17. Take Away #3It is the organization‟s core business which is valuable.The API is “just” the channel into this. The Plug & Play Cloud API Management 17 Platform & Infrastructure
    18. 18. Take Away #4 What API for my Business Model? The Plug & Play Cloud API Management 18 Platform & Infrastructure
    19. 19. So what now?API STRATEGY 101 The Plug & Play Cloud API Management 19 Platform & Infrastructure
    20. 20. API business strategyGet the most from your APIAPIs enable cloud scale MVC, ① Identify your core asset ② Choose the complementary asset which will deliver most value ③ Define the strategy to capture the value most effectively Examples of API Business Strategyallowing you to focus on your core Presentation Logic Data Mission Revolutionize the wayasset. ✓ people watch movies Simplify the world of ✓ telecom by providing simple, powerful, pay-as- you-go IaaS Increase the worlds ✓ access to data, especially free and open data The Plug & Play Cloud API Management 20 Platform & Infrastructure
    21. 21. API typologyConcepts Typical Evolution of an API 1Private APIs RationalesThey are used internally to facilitate the Rationalize infrastructureintegration of different Reduce costsapplications/systems used by your Increase flexibilitycompany. Improve internal operationsPartners APIsEnable the integration of software betweenyour organization and your business Value-added servicepartners. Up sell Must have for your partnersPublic APIsPublicly expose information andfunctionality of one or various of your Foster innovationsystems/applications to 3rd that don‟t Increase reach, trafficnecessarily have a business relationship New revenue streamwith your company 1 Not necessarilly always the case (e.g musiXmatch, Viadeo, Skype) The Plug & Play Cloud API Management 21 Platform & Infrastructure
    22. 22. API openness cycle Concept Internal Re-Use Inter Depts, Dashboards, ProcessesRaw Service CustomerMesure, Collect, Analyze Re-Use Apps, Integration CORE ASSET S Open to Partners & Anybody Distribution 1000 Flowers, Market Extension New Revenue, New Reach, Ecosystem The Plug & Play Cloud API Management 22 Platform & Infrastructure
    23. 23. API business modelAnother paradigm shift Source: John Musser, ProgrammableWeb.com The Plug & Play Cloud API Management 23 Platform & Infrastructure
    24. 24. API deliveryHow? Developers Your core assets Customers Partners Your API Affiliates Mobile Users Internal Projects The Plug & Play Cloud API Management 24 Platform & Infrastructure
    25. 25. API deliveryHow? Access Control? DevelopersYour content & services Security? Customers Monitoring? Partners Your API Monetizing ? Affiliates User Experience? Mobile Users Scalability? Internal Projects Flexibility? Reach? The Plug & Play Cloud API Management 25 Platform & Infrastructure
    26. 26. API Management“Managing” your API operations Developers Your content & services Access Control Customers & Security Analytics & Partners Your Reporting API Business API Developer & Affiliates Partner Portal Engine Billing & Mobile Users Payments API Management Solution Internal Projects The Plug & Play Cloud API Management 26 Platform & Infrastructure
    27. 27. What is your API? Who will use your How do you offerWHAT HOW WHO API? your API?Your API is the product? Business Partners? Business Model?Calls/requests to your API are the Facilitate the integration of your product Direct/Indirect? Tiered/Freemium?primary (only?) way to interact with your in as many devices, services or software Revenue sharing? White labeling? The Plug & Play Cloud API Managementtechnology, data, content provided by your business partners Partnerships?(e.g. Twillio, Amazon (e.g. Samsung & Skype, Spotify &AWS, SImpleGeo, Musixmatch ) 7Digital) (e.g. Bluevia, Wine.com, PeopleBrowsr) Platform & InfrastructureExtends the reach of your Customers? Technology choice?product?Your API is a way for your partners to Sell your product (content, data or Authorization, provisioning and control ofmake their customers experience your services) directly to clients through your accesses? Usage Tracking?product via their own API Proxy versus Plugin API Managementapps, devices, solution or service (e.g. Twilio, Daily Telegraph, LiveOps) solution?(e.g. Skype, Maxdome, 7Digital)Promotes your product? Developers? User Experience?Advertise your product in different ways - “Outsource” your R&D to Developers. SDK? Widget? Interaction and Support?such as via an affiliate program. Tap into their fantastic creativity and T&C and SLAs proposed? Blogs?(e.g. Wine.com, Oodle.com) innovation skills to evolve your product Forum? Documentation? (e.g. Twilio, Salesforce)Makes your product better, richer? Your Company? Marketing, Promotion?Your API is a channel to get new Make it easier, faster and more flexible to Hackathons, Dev. Challenges? Privatecontent/value "into” your business that use/access your assets. Homogenize Beta, Public Beta? Use cases?goes to make up part of the service. and centralize access to your data. (e.g. Viadeo Dev Challenge)(e.g. Twitter, eBay, Facebook) (e.g. Netflix, Seevl, The Guardian, NPR) 27
    28. 28. ConclusionRECOMMENDATIONS The Plug & Play Cloud API Management 28 Platform & Infrastructure
    29. 29. Dos & Don’tsTips and tips to avoid pitfallsDos Don’ts① API first, Mobile second, Web third ① API as a “side project”② Do your homework ② Neglect developers (Who, What, How) ③ Bad documentation (or inexistent)③ Start “small” in terms of functionalities (you can always add ④ Bad sample code/examples (or but you can never remove) inexistent)④ Provide a compelling value ① No or unclear Terms & proposition to drive adoption and Conditions grow your API ecosystem⑤ Remain flexible to evolve with the needs of your user base The Plug & Play Cloud API Management Platform & Infrastructure 29
    30. 30. Business OpportunitiesAPIS TYPOLOGY The Plug & Play Cloud API Management 30 Platform & Infrastructure
    31. 31. 4 types of business APIsFirst it’s worth thinking about the different functional roles of an API e.g1 The API is the product2 The API projects the product3 The API promotes the product4 The API powers and feeds the product The Plug & Play Cloud API Management 31 Platform & Infrastructure
    32. 32. Digging deeper Each type of API has different potential business value associated with it 1 2 3 4 Powers and Projects the Promotes the Is the product feeds the product product product• Direct revenue • Reach more • Biz Dev / Lead • Content• Utility / Pay per places Gen acquisition transaction • Provides more • User acquisition • Partner tie-in• Tiered pricing utility • Advertising • Internal bands • Enable mobile • Brand promotion innovation • Allow deeper • Affiliate integration programs The Plug & Play Cloud API Management 32 Platform & Infrastructure
    33. 33. 1 2 3 4Direct RevenuesThe API as a direct revenue driver The only customer experience may be is the product via the API or via a 3rd party using the API. projects the product Billing relationship may be to the end user or the partner / distributor. e.g Whitelabel Channel “Sell Through” Channel The Plug & Play Cloud API Management 33 Platform & Infrastructure
    34. 34. 1 2 3 4Indirect RevenuesThe API as a indirect revenue driver promotes the The API plays a supporting role – the product product is the main event. The billing relationship is unlikely to be tied to the API. feeds the product API ROI needs to be measured by product metrics. e.g “Free” Modality “Affiliate” Modality The Plug & Play Cloud API Management 34 Platform & Infrastructure
    35. 35. Business OpportunitiesAPIS & BUSINESS MODELS The Plug & Play Cloud API Management 35 Platform & Infrastructure
    36. 36. The API Is the productCore value is tied up in the API Others API is Core Value Direct customer usage Encourage resellers API Ecosystem Build tech knowledge Strategy e.g Enable new servicesBrings easy access Encourage 3rd party toolsto complex Telecomtechnologies $ If Core service sees usage growth. The Plug & Play Cloud API Management 36 Platform & Infrastructure
    37. 37. The API Projects the product Extends availability of functionalities to new places Mobile apps 3rd Parties integration Added utility Others Added to a product Cultivate partner ecosystem Innovation opportunities API Ecosystem Build switching costs Strategy e.g Encourage 3rd party tools Enables new services1,700+ Apps onForce.com50k+ Developers Increasing customer spend (primary) and $ If number of customers (secondary) for core product The Plug & Play Cloud API Management 37 Platform & Infrastructure
    38. 38. The API Promotes the product Secondary function and indirect revenue impact Secondary (non core) service Designed to drive leads/traffic OthersWidge t Distribute “Teaser” information Brand Diffusion API Ecosystem Promote to niches Strategy e.g Cultivate partners Widgets to Whole sites powered Improve partners Impact 10‟s 1000‟s of affiliates $ If Increasing customer number (primary) and spend (secondary) on core product The Plug & Play Cloud API Management 38 Platform & Infrastructure
    39. 39. The API Powers & Feeds the product Content acquisition via the API Content, User Others information, Ratings, comments Etc. into the service Leverage social networks Brand Diffusion API Ecosystem Facilitate Access Strategy e.g Virtuous circle data in/out13 Billion calls/day on API Improve partners & businesses>75% of traffic by API Impact250,000 Apps (probably lessnow…) when UGC (user generated content) brings $ If appreciable value to the central product The Plug & Play Cloud API Management 39 Platform & Infrastructure
    40. 40. Conclusion Business Models Diversity What API(s) for my Business Model? 10.40%  What are my core assets?12.50%  Who will use my API(s) and for what 23.60% purpose?  How will I make available my API(s)? Don’t put lipstick on a pig, it will 26.30% still be a pig… 20.10% Don’t just build it and think they7.20% will come… API is the Product Product Addition It is the organization’s core Product Projection Government business which is valuable and the Scientific Non-Profit API is the channel into this. The Plug & Play Cloud API Management 40 Platform & Infrastructure
    41. 41. Thank you !QUESTIONS & ANSWERS The Plug & Play Cloud API Management 41 Platform & Infrastructure
    42. 42. Thank you ! | Q&A Web: http://www.3scale.net Email: guillaume@3scale.net Twitter: @guillaumebalas 3scale USA. 3scale SPAIN 3scale UK 440 N Wolfe Rd, Calle Llacuna 162-164 Techhub, 76-80 City RdSunnyvale, CA 94085 08018 Barcelona London EC1Y 2BJ USA Spain United Kingdom +1 (408) 524 1503 +34 933 092 786 +44 758 069 2832 The Plug & Play Cloud API Management 42 Platform & Infrastructure
    43. 43. Resources• http://www.3scale.net/wp-content/uploads/2012/06/What-is-an-API-1.0.pdf• http://www.youtube.com/watch?feature=player_embedded&v=7r7QpIDEI_o• http://www.slideshare.net/3scale/apis-the-glue-of-cloud-computing• http://blog.programmableweb.com/2012/06/13/the-new-api-apps-partners-income/• http://www.youtube.com/watch?v=lFv5lH7nNX8• http://www.slideshare.net/3scale/more-than-the-sum-of-its-parts-the-apis-whole• http://blog.programmableweb.com/2011/11/03/private-api/• http://www.slideshare.net/3scale/reaching-1-million-apis-and-what-to-do-when-we- get-there• http://blog.apievangelist.com/2011/02/28/if-you-build-it-they-will-come/• http://www.slideshare.net/jmusser/j-musser-apishotnotgluecon2012• http://www.3scale.net/2012/11/building-great-apis-the-api-gold-standard-part-i/• http://www.slideshare.net/3scale/the-api-economy-api-provider-perspective- european-identity-summit-2012 The Plug & Play Cloud API Management 43 Platform & Infrastructure

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