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API Commercialisation

Although APIs have been a core aspect of software development for many years, until relatively recently only developers deep within an organization were fully aware of their use and importance.

However, talk around APIs has spread from the backroom to the boardroom.


Their importance to the growth and success of businesses is now widely appreciated and has even given rise to a commonly used term - that encapsulates their newfound position - “The API Economy”.


Two simple questions help us understand this rise to prominence:


1. Why? (Why are APIs now spoken about in board meetings?)

2. How? (How do APIs create value for businesses?)


Why?


The term “data is the new oil” demonstrates the understanding that data is a valuable commodity. And, like oil, if data is not effectively extracted and distributed its true value remains unfulfilled.


APIs enable the effective extraction and use of data and create a channel between software, businesses, and end-users. And, very importantly, APIs enable transactions; the quick, easy and secure flow of digital value.


The use of APIs mean that software no longer needs to be monolithic in nature but can be broken down into modular parts that allow far greater flexibility and utility while also reducing cost and complexity.


Developers can utilise ready-made solutions instead of reinventing the wheel, and moreover, can earn revenue and promote their offerings by developing APIs that offer solutions for specific problems.


How?


This ability to effectively enable the flow of data and value that APIs offer, opens many possibilities for companies to achieve strategic business goals that boost or protect bottom-line earnings. To easily understand how, let’s look at some high-profile examples.


Digital Transformation/Scaling

Netflix transformed the movie rental business. Remember how people used to physically visit a shop, pay their rental, and take a video home to watch? While Netflix began as a DVD postal service, their breakthrough came by making the move to a purely digital online streaming service.


The Netflix platform has made extensive use of APIs to enable it to scale to over 200 million customers in 190 countries worldwide and over USD 25 billion in revenue.


Pay-as-you-go

Google Maps is a very good example of an API enabled pay-as-you-go service. It is used by Uber, Free Now, Airbnb, and over a million other companies that use location services as part of their own offering.


It follows the freemium model. APIs are offered for free up to a limit, however, once use passes a set threshold, charges are levied. As usage grows, the revenues to Google increase. Even though Google must be paid, all parties to the app are increasing revenue and thus upscaling their businesses which encourages customer loyalty and scaling for all parties involved.


Customer Engagement

Ryanair, a company which was at one stage famous for its reluctance to establish an Internet presence, now intensively focuses all its communications with customers through their App. This includes real-time information about flights (which even appears on the app before it appears on airport information boards) and most alerts and support functionality.


The App serves hundreds of thousands of boarding passes per day and caters for over 149 million passengers per year.


Network Expansion

Where your strategy is to expand your partner network, as is the case with Mastercard, providing the best possible onboarding experience becomes of paramount importance.


Mastercard have invested very heavily to provide an API Platform for developers to access a large and quickly growing number of rich APIs, with tools such as detailed product and technical documentation, tutorials, reference implementations, sandboxes, client libraries, and success stories to enable rapid integration and inspire innovation.


Regulatory Requirements

Sometimes API strategies are driven by regulatory requirements (privacy, security, open banking) and rather looking to increase revenues, companies are looking to protect their existing market position and avoid fines.


There are many ways that companies can use APIs to scale their business and increase revenue (subscriptions, a point-based model, transaction fees, referral and affiliate programs, advertising, the list goes on…). The strategy to use depends upon the overall business goals decided upon in the boardroom.


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