API Business Models

The three foundations for making money with APIs

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Preparing for upcoming apidays Helsinki & North 2022 API thinkers Matthias Biehl, Claire Barrett, and Marjukka Niinioja have been comparing notes on common challenges facing companies and individuals around doing business with APIs. We agreed that many organizations are asking questions such as:

“How can we talk about API products with the rest of our organizations?”
“How can we monetize our APIs when we are already selling other products and services?”  

The following three topics are the foundation for any API productization opportunity: the right business model, an appropriate pattern for API monetization, and support from the organization. Matthias, Claire, and Marjukka have been describing these foundations in more detail. This is a quick summary.

The first foundation:  API product strategy versus business model

It can be confusing to have an internal conversation about API products. Will there be room for API products in the company’s business model? 

Marjukka answers this through the theme of “connecting physical and digital”. She explores API options for a company selling fire alarm systems (physical products) to customers and partners in many different sectors. 

The main message is that APIs can be productized for ease of use whether the audience is internal or external, customer or partner. The difference is that when you need to fit existing physical or digital products or services together with API products, they need to co-exist in your product strategy and your organization needs to deal with the new client and partner personas and the way they are acquired, onboarded and supported. 

In short, you need to make changes in the business model.

The second foundation: Direct vs. indirect monetization

Resolving the business model and identifying your products and value propositions is a good start. As you explore API-enabled business models, you start thinking about monetizing your APIs. You might think that translates immediately into API consumers paying directly for the number of transactions they make with your API — the direct API monetization pattern. For established companies — such as an insurance company selling insurance policies or a car manufacturer selling cars — direct API monetization would require establishing a completely new line of business and targeting a new type of customer. In contrast, indirectly monetized APIs support your current business model. They make your products more attractive and competitive to your existing customers. They often even help you sell your products. But what is indirect API monetization and how does it work in practice? 

Matthias Biehl elaborates on this by describing 5 simple-to-follow patterns for making money with APIs.

The third foundation: Support from your organization

Getting productized APIs on your organization’s agenda can be a hard sell in traditional organizations. A lot of people need to be on board to commit to planning and budgets. 

Claire Barrett discusses some of the challenges at mature organizations with getting commitment to productized APIs and ways to address them.

Details are described in Getting organisational buy-in to your API products.

apidays Helsinki & North 2022 on March 16-17, 2022 is an opportunity to explore this topic further with Marjukka, Matthias and Claire in conversation, bringing real-world examples to life. 

Marjukka Niinioja

Marjukka Niinioja

Founding Partner at Osaango.com
Niinoja is a co-author of API Economy 101 book. She is also the creator of the free "Introduction to API Economy" course with Tampere University. Niinioja is the “Mother” of the lean, open and business-oriented APIOps Cycles method. Niinioja works as API business consultant, architect, and trainer for companies and public-sector. She has 10+ years of experience with API Economy from retail, energy, ICT, construction and traffic industries, among others. Her team at Osaango Academy work together with universities, public sector and companies. They create courses on how to use APIs, Platforms and Data in business to grow thriving ecosystems.

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