API Business Models

The API Industry Supply Value Chain


APIs are more than just a business tool and a product opportunity. They are a contract between the business and its partners, they are a channel for distributing the agency’s assets and data, they are an enabler allowing a business to transform into a platform.

As APIs have matured, a more complete API lifecycle has emerged to describe the various journey stages that are implemented as an API grows in its utility for the provider and for consumers.

API Evangelist Kin Lane has documented a thorough look at all API journey stages.

When an established business, startup, not-for-profit, or government agency wants to develop and implement an API strategy, they work through many of the business and technical journey stages outlined in Lane’s map.

An API industry has risen up to support businesses to develop, implement and succeed in their API journey. This industry is creating value by supplying the goods and services needed for success. These suppliers make up an API industry supply value chain.

APIdays’ API Starter Pack helps link businesses who are beginning their journey with some of the leading industry suppliers who are able to support the growth of an API strategy, both on the technical side and on the business side.

Business Model Definition

When commencing an API strategy, a business needs to be clear about its goals and expectations. Defining a business model around what the API is intended for is an important first step as it can help guide decisions like:

  • who should have early access?
  • what types of developers (developer market segments) are expected to make use of the API?
  • what metrics will help measure if the API is reaching its intended goals?
  • how can an API continue to grow in its potential as a business tool or product?

How this is done

There are a number of tools that can help a business map its business model. The business model canvas is a well-respected tool that can be used to focus on how an API is expected to add value to an agency and its customers.

This will also help define how your API is initially going to be used. Will it be an internal (private) API, aimed at helping your internal developers to create products faster and build more efficient automated workflows that share organizational data? Will it be a partner API that is made available to specific, trusted third parties you are already working with? Or will you jump straight in and create public, open APIs to let others build new products and services that draw on your digital assets or on your services?

Who can help

APIdays events provide insight into how businesses are thinking through their API business model. Recent presentations by Kristen Moyer from Gartner, Saul Caganoff from Sixtree, and Cyril Vart from FABERNOVEL have all showcased examples of how businesses are defining their API business models.

Many providers across the industry supply chain are keen to help API providers think through how to define the goals of their API ahead of any implementation or use of their services. The best suppliers across the value chain will ask about your API business model in order to ensure they are aligning with your goals and key objectives.

Manfred Bortenschlager from 3scale has developed the API Model Canvas to help businesses define their API business model, based on the Business Model Canvas.

Platformable can help API providers define their business model and help document an API strategy.

Online resources available

[slideshare id=16695001&doc=jmusserapibizmodels2013-130222072356-phpapp02]

API Design and Creation

APIs often move along a continuum so that after they are first used internally, they are then opened up to selected external partners or even more widely. Once APIs are integrated into business processes, they can be difficult to unplug, as they are used to drive key functionalities within a larger product. Adding features and additional capabilities to an API is often easier than initially thinking through how an API should be structured so that it is able to grow as it becomes recognized as a useful business tool. Good API design and creation helps ensure an API is built for the long haul.

How this is done

Agencies can bring together their business and technical leads in a team to help map an API strategy. While technical leads may be responsible for decisions around API definition format, tooling used, and architecture choices, these are increasingly done in partnership with business and product leads who help ensure the technical decisions are an extension of the business model.

Who can help

LaunchAny provides onsite and remote REST API design and training for software architects, developers, project managers, QA, and business analysts. From small software teams to Fortune 500 organizations, LaunchAny helps any size team understand the principles of REST API design and how to design great APIs for greater developer adoption.

Apiary is an API design tool that lets you design, collaborate, prototype, test and deliver well-documented APIs fast. Teams can collaborate seamlessly on your API design, move quickly using the mock server, test your implementation and deliver beautiful interactive documentation.

Paw is a full-featured and beautifully designed Mac app that makes interaction with REST services delightful. Whether you are an API maker or consumer, Paw helps you build HTTP requests, inspect the server’s response and even generate client code.

API Security Layer

APIs provide a direct connection to key agency assets and data and need to be secured so that access is only granted to those who have permission. In addition, the way that APIs are consumed by approved users can lead to security risks. Where consumption is poorly organized, users may drain online resources by making more API calls than necessary, for example. An API security layer ensures that only authorized access is granted for an API, whether that be permission to all the API functionalities, or a subset, and also monitor to ward off denial of service and other attacks from poorly crafted API consumption.

How this is done

To secure your API, you will need to decide on an authentication method for how parties access your APIs. Depending on the level of security that your API requires, it can be Basic Auth with classic login and password delivering an API key or through OAuth for managing better authorizations.

Services are now available that can provide authentication and client authorization services for internal, partner and public APIs. This identity management layer can be added in front of an API so that it is a core part of how the API functions to ensure that it is working within a secure system.

Who can help

Stormpath is an identity management API for developers building web and mobile apps and APIs.

OAuth.io provides a complete login and identity API that lets APIO providers integrate up to 120+ services or provide OAuth on your own platform.

API Hosting and Management

Once an API is created, it needs to be published on the internet in the same way as a website needs to be hosted somewhere in order for people to access it. If an API connects to an existing internal services enterprise bus or Service Oriented Architecture, you may also need an API gateway.

How this is done

API hosting and management helps maintain control over who access your API, putting in place rate limits, and providing billing if you have a paying model in your strategy.

Who can help

3scale is the API infrastructure to build on now, and for the future. We make it easy to manage your APIs for internal or external users. Share, secure, distribute, control, and monetize your APIs with the platform built with performance, customer control, time-to-value, and growth in mind.

Oxxus.net provides quality support and infrastructure for Java-based applications.

API Testing and Monitoring

Once you create and host APIs, you need to be able to test that API calls are functioning correctly and to ensure availability of your service. It is also helpful to know when API calls are slow or down, so that you can respond immediately to fix any infrastructure problems and alert customers and internal business users accordingly. Testing tools are also becoming more sophisticated so that they can help ensure that documentation and endpoints are consistent, define what error messaging is provided, and a host of other API lifecycle activities to maintain a high quality to your API.

How this is done

Testing and monitoring tools let you verify that the structure and content of your API calls meet your expectations. You can create simple tests with dynamic data from real API use cases. You can build API tests and use them across local development, staging and production environments.

Who can help

Runscope ensure less downtime, fewer support tickets and faster time to resolution for your API problems. Their suite of tools help tell you when your APIs break before customers notice.

Galileo is an analytics platform for monitoring, visualizing and inspecting API & microservice traffic.

Developer Portal

So far, all the value being generated by best practice API strategy falls on the provider side of the equation. Defining a business model, API-first design, security, hosting and management, and API testing and monitoring help API providers ensure they are providing a quality API and a quality experience for their API developer-consumers. A developer portal is the bridge that lets API providers share their quality APIs both internally and with external users.

A developer portal typically offers (as a minimum set of features):

  • a catalog library of all the agency’s APIs
  • detailed user documentation
  • a sandbox environment to test API calls and queries
  • registration and signup for an API key
  • a developer forum for community feedback and discussion
  • tutorials, code snippets, and sample application code.

Developer portals usually follow the URL structure developer.business.com. This makes it easy for developers to quickly check if there is a developer portal for the business they may wish to partner with. In some instances, URLs start developers.business.com or have a non-standard sub-domain entry point.

How this is done

A developer portal is a well-designed interface which provides an entry point for internal or external developers to learn about your APIs. They may be able to register for an API key, test APIs in a sandbox environment, review documentation, access integration tools and SDKs, code snippets and sample applications, and participate in a community forum.

A developer portal is a bridge that connects all of the work done by an API provider to all the needs of the API consumer.

API Management Providers usually include a developer portal within the services they offer. Some businesses use their intranet or internal knowledge management system to share internal APIs and related tooling. A range of open source and developer as a portal services also exist.

API Monetization

Once developer-consumers are able to sign up for an API key on the provider’s developer portal, and depending on the business model, they may be required to pay for use of the API.

How this is done

API management vendors often have payment options built in to their product features. For example, 3scale offers a range of product features to help their customers monetize their APIs. Alternatively, API providers can set up a payments system themselves to collect API usage fees.

A payments gateway can accept user fees (whether they be one-off, regular subscription-based model or based on usage rates), ensure security of transactions, bank and transfer monies, convert currencies, and provide a range of data analytics and book-keeping functions.

Who can help

Stripe provides a set of APIs to help businesses manage platform-based businesses including those delivered by API providers. The new Stripe Atlasservice can also help international startups register and build a U.S. based business.

API Engagement and Customer Support

Once an API begins to build a community of users, these developer-consumers have customer needs just like in any other business.

They may have trouble integrating the API into their specific use case and can’t find the help they are looking for in the documentation. They may be looking for help with using the API in their preferred language or in a more easily consumable form. Internal developers may need to know what APIs the business has and how they are expected to be used alongside external APIs being consumed.

As an API provider takes on customers, you need to provide a range of customer supports.

How this is done

This is an emerging industry value chain that has often previously been amalgamated with marketing and developer relations activities. But developer relations and marketing often refers to the development of content and tooling that help developers adopt an API (see next section below). API Engagement and Customer Support services help you to maintain relationships with your current developer-consumers, and to be able to respond in a timely, efficient manner to their needs.

Who can help

Hitch is taking a new approach to API developer engagement. They provide tooling such as the API Changelog that helps developer-consumers keep up-to-date about changes that may occur to an API. Developers who are actively consuming and integrating an API in their end product need to be aware of changes to terms of reference, documentation, feature availability and endpoint resource modeling as soon as changes occur so that they can assess the risk these changes may have on their commercial product or business use case. API Changelog lets developers track the APIs they are consuming so they are notified immediately of any significant changes that may have a business impact for them.

Ottspot offers a slackbot product that lets API providers communicate directly with their developer-consumers in their preferred channel: Slack. Ottspott is a the ideal phone bot for API customer support inside Slack. In 30 seconds, choose a phone number and start making and receiving calls & SMS in a Slack channel. You can provide alert message or respond to developer needs directly in a more engaging setting than a community forum, right when your developer customers need support in optimizing their use of your API.

APIMATIC lets you engage developers with your APIs via high-quality SDKs/Client libraries. APIMATIC helps API providers save time by auto-generating software development kits in a range of languages that meet your community’s needs.

Online resources available

[slideshare id=55990041&doc=ottspottcoapidays9dec2015botsarethenewapps-151209195030-lva1-app6892]

API Marketing and Distribution

You are now one API among many thousands on the web.

You now have the same issues you had 15 years ago when trying to evangelize your website on a network of millions of websites.

API marketing and distribution can help ensure that your API is discovered by the developers who can use it. It includes all of the standard types of marketing that may be needed, from search engine optimization and online advertising, to offline activities like hosting hackathons, attending and sponsoring conferences, and participating in local meetups. Many API providers hire an API evangelist to help build a community around using the API. Given that the word marketing is considered untrustworthy and too akin to advertising, many API providers prefer the term ‘developer relations’.

How this is done

review of successful API business models conducted last year found that API providers that were able to create a J-curve trajectory of growth in their user base did so by implementing a steady stream of developer engagement activities:

  1. This process begins with best practice API-first design and high quality developer resources (see Developer Portal section above).
  2. API providers clearly define their business model and create resources such as developer personas and value proposition maps to help guide their priority setting around which developer resources to create next and how to frame their communications and language.
  3. API providers make sure their API is discoverable in key marketplaces including ProgrammableWeb, Mashape, apis.io, Exicon, Microsoft Azure marketplace, IBM Bluemix platform, Blockspring, SDKS.io, apis.guru, apifood.co, Slack app directory, and GitHub integrations directory.
  4. API providers use search engine optimization, search engine marketing, and engage in community discussions around their broader industry domain in order to stake their market position.
  5. API providers create SDKs for their APIs and make them available on key platforms such as GitHub, Ruby Gems, and npm. Savvy API providers encourage network effects and promote when developers build and share API wrappers or other tools that make your API available to other developers.
  6. As developers become conversant with the API, you can create a marketplace page on your developer portal and promote both expert developers and the third-party apps created using your APIs.
  7. Next, API providers seek to reach non-developer use of the APIs as a market focus by creating new tools that enable customers to consume the API without having to code for themselves (with tools like widgets, Google Sheets add-ons and IFTTT/Zapier integrations).
  8. Finally, API providers create tutorials and content that speaks to the wider industry vertical the API is operating in.

Who can help

Mailjet is a powerful all-in-one email service provider that ensures maximum insight and deliverability results for marketing and transactional emails.

MarketJump specializes solely in PPC (pay-per-click) marketing solutions. They work with companies all around the globe — helping to bring them better quality leads and higher conversions, using Facebook Ads, Google Adwords and Advanced Retargeting. MarketJump uses advanced PPC strategies, custom-built ‘click focused’ landing pages & conversion rate optimization techniques to help API providers expand their market reach.

Platformable helps businesses share the value that your API creates for others. Platformable helps you use industry research and analysis to align your business model strategy, developer persona research, and your value proposition with storytelling and community engagement techniques. All activities are designed to include a measurable feedback loop, helping you create an evidence-base around what works for your specific business. All API providers are also assisted to identify social good opportunities that can help you make your APIs useful in reducing social inequalities.

API Integration Middleware

API Integration middleware can be considered part of the marketing and distribution value chain (see section above, particularly stages three and seven in the diagram), but is worth discussing separately as well.

As businesses seek to reorient themselves to a platform-based business model for the digital era, an ever-proliferating catalog of app stores, intgeration directories, and marketplaces emerges as each platform business lists the APIs and apps that ‘plays nice with’.

How this is done

In some cases, API providers can directly list their API on directories such as with ProgrammableWeb. In other instances, it may be necessary to create a specific wrapper that makes your API accessible to members of a particular platform ecosystem, such as with the Slack App Directory.

Who can help

GitHub Integrations can help make your API accessible to over 13 million developers who are building products and looking for powerful tools to integrate into their software and processes.

The API Industry Supply Chain in One Starter Pack

The beauty of the API industry as it now stands in its stage of maturity is that for each link in the supply value chain, there are now multiple suppliers available and competing for your business. This is a strong sign of a dynamic and growing industry sector.

On the technical side, new programming paradigms — most notably serverlessand microservices-based architecture — both point to the increasing importance of APIs in building a scalable, flexible and robust organizational technological infrastructure.

On the business side, the move towards platform business models where partners, suppliers and end-consumers can participate in a co-creation of value by using your assets, products and services will also require an API-based infrastructure.

The APIdays Starter Pack helps you get started today and will welcome you into a global community of suppliers and industry leaders who are committed to ensuring your success.

The API Industry Supply Value Chain” was written for APIdays bMark Boyd, with input from Mehdi Medjaoui

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