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In Lesson 102: The Business Value of APIs, we provided an overview of the key business drivers behind API programs. In this lesson, we take a deeper dive into five ways you can bring value to your business through APIs. Specifically, this lesson explores how APIs can help your organization to:
- Generate revenues directly
- Increase market reach and customer retention
- Stimulate innovation
- Enable API integration
- Support the internet of things (IoT)
Direct Revenue Generation In some cases, it is possible to generate revenue directly from an API. For instance, the API may facilitate the development of apps that provide mobile access to an ecommerce system or make it easier for customers to order additional services. In such a case, it may be worth creating a revenue sharing model to incent external developers to build apps against your API.
On the other hand, in different uses cases, you might be able to generate revenue by charging developers for access to your API. It is important to understand, however, that developers will not pay for access to your API without a compelling reason. If they can get the information elsewhere, it is not likely that they will pay you for it.
Nevertheless, there are many types of data and functionality that developers may be willing to pay for. Every instance is unique, so it is not possible to provide a list of common use cases that you can always charge for. It is up to you to decide whether your API offers developers enough value for this kind of revenue generation to be appropriate or even possible.
When making this assessment, it is worth considering a couple of different models you might use to charge for API access:
- Charge per call It is, generally speaking, more appropriate to charge a developer for each call their app makes to your API in revenue sharing models, where app usage results in revenue for you and the app developer alike
- Tiered access In cases where app usage generates revenue for the developer but not the API provider, a tiered model is more appropriate. As the developer gets more paying users they will require more bandwidth and have the resources to pay you for that bandwidth.
Reach & Retention As well as creating opportunities to generate revenue directly, APIs also facilitate the creation of apps that allow you to connect more deeply with your target audience. Whether this connection is with your customers or partners, APIs can offer a very deeply integrated way of developing direct relationships.
APIs simplify the process of creating engaging touch-points via new channels (such as social media or mobile apps). They also make it possible to collect information from these interactions, which can be used in a feedback loop to fuel marketing campaigns or even influence distribution strategies with partners.
By enabling you to utilize new online channels and better understand the preferences of your target audience, APIs make it possible to reach whole new audiences. And the greater the reach you can achieve through APIs, the more connected and personalized an experience you can provide for your target audience, thereby improving customer retention.
In today’s increasingly app-oriented world, it is critical to note also that APIs provide the data funnel for mobile and social media apps. The days when you could rely on people typing your URL into a browser are over. Today’s users access information via Google, Facebook or Twitter – increasingly using apps rather than browsers – and you need an API to reach those customers.
Innovation As app development requirements get more complex, the platform specialization required is difficult to source strictly in-house. Enterprises are casting their nets wider in order to gain access to the right specialists who can build apps, while focusing their internal resources toward API development.
If you provide an API, in theory you know your services and you know how to be really good at providing those services. But you don’t know everything about how those services can be used. Open APIs allow you to leverage external developers, who can look at what you do best, combine it with what they do best and come up with innovative new ideas.
Additionally, you can use any data you collect on how your API is being used in order to come up with new innovative ideas of your own. In other words, by opening up your data and services via APIs, you can leverage the interests, ideas and behavior of the developer community and your customers to help your business grow organically.
Integration From a technical standpoint, APIs are all about integration. An API is essentially an integration tool and APIs allow organizations to achieve business goals by facilitating various types of integration. But for many organizations, integration itself can be a business goal, so API integration has an inherent value.
In the past, mergers and acquisitions were core drivers for integration projects. However, with organizations of every size increasingly utilizing critical applications and infrastructure that run in the cloud, there is greater than ever necessity for integration – especially with partners and corporate customers.
As more companies take advantage of software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS), there is a growing need to integrate cloud services with existing backend systems or even other cloud services. Whether you are migrating to the cloud completely or choosing a hybrid model, you will need APIs to make those connections.
Furthermore, by using APIs, you can integrate with other companies that provide services which are outside your core competencies, allowing you to concentrate on what you do best. By the same token, you can focus your resources on creating the best product or service and then provide that to other companies through your own APIs.
IoT Support With the Internet of Things (IoT) proliferating via smart appliances, connected vehicles, RFID sensors and much more, we are now able to collect data from more places than ever. For instance, companies can enhance field equipment with sensors or enable field personnel with specialized mobile solutions in order to feed valuable information back to on-premises systems.
While this can lead to huge amounts of data spread across various silos, APIs make it possible to integrate this information into a single, consolidated view. Furthermore, with APIs, you can take your data and combine it with data from other systems to offer more fine-grained information, or collect data from multiple points that can be correlated with the your base information.
The value is created by combining existing information into more usable knowledge. Once you have APIs to provide programmatic access to all that data, you can combine that information through an analytical system that has access to the API and build in rules or scenarios in order to maximize the value of the data.
Explore the role APIs play in empowering teams and enabling organizations to innovate.
Mike Amundsen on May 24, 2018