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.
Key point/focus here is charging directly for the operation on the API (1-1 relationship between operations ordered and payment): “utility computing” can apply to messaging, CPU time, storage, transaction processing etc. – primarily used for “Infrastructure as a Service” type APIs. Twitter arguable fits here also since it charges for access to it’s full data feed.
This category is for APIs which enable and extend a product in a significant way – making those products more useful, integrating them more tightly with customer systems, third parties, mobile devices etc. Here there may be a direct revenue relationship which can be calculated between how much the API is used and the revenue generated by the main product. The category can increase both depth of use and breadth of reach for a product. The Salesforce API allows both third party applications to run on top of Salesforce (or on dedicated hosting such as Appirio) and connection from customer/third party server applications.
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 is often combined with others but essentially uses the API as a way to generate value back into the core product by capturing data rather than releasing it. Twitters traffic is free on the API to write but in turn creates huge value for twitter in republishing back to it’s user base, the youtube API similarly allows for video upload, Foursquare gathers check-in data. How the data is monetised after collection is not connected to the API in general.
Most APIs combine a number of elements
Most APIs combine a number of elements
- Model is your data- Controller is the business logic- View is how you experience it
The API Economy:API Provider Perspective 3scale Steven Willmott EIC 2012/ Munich, Germany
One of the top API Infrastructure Providers Worldwide
Out of the Box Control Internal and External Audiences Access Control, Rate Limits, Developer Portal, Monetizationhttp://www.3scale.net Plug-and-play Setup Get Traffic running immediately Scale quickly and efficiently 4
The Talk will cover 3 things How the API Economy Economy Examples Works
The Value of an API Revenue Ecosystem Amazon.com Mobile Apps Affiliate Sites + API Ancillary Services Internal Developers 7
Projected Growth: APIs Programmable Web API CAGR: 100% Directory Growth Project 250k APIs by 2016 Adding Approx 100 APIs a week 10% API Traffic growth / quarter(*)e.g. Think of this as 10% of the Alexa 2.5 Million top Websites 8 (* source – 3scale customer base average)
Massive Diversity Wide range of industries starting with APIs Companies large and small APIs driving success for early adopters B2C APIs B2B APIs Partner APIs Internal APIs … 9 (image source: http://www.programmableweb.com)
APIs will become the major way of doing business on the web 10
Broad classes of business APIsFirst it’s worth thinking about the different functional roles of an API e.g The API is the product The API projects the product The API promotes the product The API powers and feeds the product
DiggingDeeper Direct revenue Utility / Pay per transaction Tiered Pricing Bands is the product Reach more places Provide more utility Enable Mobile projects the product Allow deeper integration Biz Development Lead Gen promotes the product User Acquisition Advertising Brand promotion powers and feeds Affiliate Programs the product Content Acquisition Partner tie-in Internal Innovation
The API Openess Cycle Internal Re-Use Inter Dept, Dashboards, Processes Raw Service Measure, Collate, AnalyzeCustomerRe-use CoreApps, Integration Assets Open to Anybody 1000 Flowers, Market Extension Partners and Distribution New Revenue, New Reach, Ecosystem
The API IS the product Core value is tied up in the API OthersAPI is core value Direct Customer Usage API Encourage Resellers Amazon AWS Build Tech Knowledge Ecosystem Strategy Build Switching Costs e.g Enable new ServicesHuge Growth Encourage 3rd Party Tools API >> Websites $ If core service sees usage growth
The API Projects the product Extends availability of functionality to new placesMobile apps / 3rd OthersParties / Added UtilityAdded to a product Encourage partner ecosystem API Innovation opportunities Salesforce.com Build Tech Knowledge Ecosystem Strategy Build Switching Costs e.g Enable new Services 50k + devs Encourage 3rd Party Tools Thousands of value increasing customer spend (primary) add apps $ If and numbers (secondary) for core product
The API Promotes the product Secondary function and indirect revenue impactSecondary (non core) serviceDesigned to drive OthersLeads / traffic Distribute “Teaser” Information API Brand Diffusion Amazon.com Promote to niches Ecosystem Strategy Cultivate Partners e.g Improve Partner Impact Widgets to Whole sites powered 10’s 1000’s of affiliates $ If increasing customer numbers (primary) and spend (secondary) on core product
The API Powers and Feeds the product Content acquisition via the APIContent, User information,Ratings, comments OthersEtc. into the service Reach all relevant producers API Facilitate Access Twitter.com Virtuous circle data in/out Ecosystem Strategy e.g 75% of traffic By API 250,000 Apps $ If when UGC brings appreciable value to the central product.
Hybrid ModelsMany APIs combine these models Support The API often starts by serving a different particular need and is repurposed over audiences time. Multiple revenue The API separates Data from Business streams Logic and presentation to make this possible.e.g • Started to power affiliates • Core P2P Infrastructure an API • Evolved to running auctions • “Skype as a platform” • 60% of listing now via API • Third parties embed Skype • Core part of revenue stream • End user uniform experience • Entrenched market power • Huge reach as a result
Entities (and Identities Involved)Managing Ecosystems, not closes silos Internal Customers • Developers • Apps • Business Units • Integrations Partners Wider World • Suppliers • Independents • ISVs • End Users • Contractors • Aggregators •Affiliates • Resellers
MODEL = DATAVIEW = FORM Model View Controller CONTROLLER = BUSINESS LOGIC
Think of your business as MVC• Are you… – Model: Data, Content, Core Service, Raw Material – View: Audience, Market Access, Visualisation, Presentation – Controller: Transformation, Recombination, Logic, Value Add – More than one?• What are the interfaces between these things? – Partners that could grow the whole? – Can you build an ecosystem around your strength? 26
The API Economy is Upon Us! APIs are Key to Unlocking This Data Value Look Ahead in the Cycle Derive Value from Every Step
Thank you and QA 3scaleContact: email@example.comWeb: http://www.3scale.net and @3scaleOffices: San Francisco, Barcelona, LondonSpeaker: @njyx or firstname.lastname@example.org
Credits & More Resources• 3scale: http://www.3scale.net• More on API Business Models and Development Models – http://www.slideshare.net/3scale/apis-for-biz-dev-20- which-business-model-9672038 – http://www.slideshare.net/3scale/apis-power-mvc-for- the-web• Images: – Flickr & iStockphoto