Last few years has been a great year for API Gateways and API companies. APIs (Application Programming Interfaces) are allowing businesses to expand beyond their enterprise boundaries to drive revenue through new business models. Larger enterprises are adopting API paradigm — developing many internal and external services that developers connect to in order to create user-facing products. As the number of APIs management products increases in 2018.API and API Mangement / Gateways can be found in a lot of enterprises today. Those enterprises level API management solutions allow external companies and external users to use these APIs. Enlightened businesses are recognizing a new channel to market through APIs.
As the above figure shows Company A, B, and C are interconnected with API-M solutions. End-user also connected to the APIs. Developers are rapidly driving new opportunities for businesses, developers and customers from these APIs.
API Economy
The API Economy allows access to business assets and digital services through a simple to use API. Software developing company see the economic advantages of integration, many large, monolithic software systems currently supported on premises will decompose into highly-organized sets of microservices available in the cloud.
The ultimate goal of the API economy is to facilitate the creation of user-focused apps that support line of business goals. Enterprise uses APIs to bring together ecosystem partners and unlock new sources of value. Successful companies or enterprise will see APIs not just as technical tools, but as sources of strategic value in today’s digital economy. As managers look for creative ways to monetize services and assets through APIs.
API Monetization
Access to the assets or services is provided via APIs enabling new and innovative usage of the assets to drive additional revenue. This is referred to as API Monetization. APIs can also be used in this indirect or direct monetization model. However, the monetization model leads someone paying you for the use of the API (APIs on banks, news, telco), you pay them to use (API for advertising, marketing).
Free
Free Model is used when there is typically low valued assets. While no money is exchanged clearly there must be a business
purpose. When a company drives brand or loyalty and enter new channels Free model is tried. There are many portals used this API example is rapidapi, any-api. Some company used this free model to identify user usage patterns. An example is Facebook APIs
purpose. When a company drives brand or loyalty and enter new channels Free model is tried. There are many portals used this API example is rapidapi, any-api. Some company used this free model to identify user usage patterns. An example is Facebook APIs
Subscriber Pays
API must be of value to the Subscriber. The Subscriber may obtain downstream revenue through its use of the API. This Subscriber may developer application/mobile App using those APIs.
- Pay As You Go: Developer / Subscriber pays for what has been used. There is no minimums, no tiers. It is usually billed periodically (e.g. monthly / weekly).
- Freemium: The Basic API is free, with higher value APIs priced.
Tiered — Multiple tiered options: A developer/subscriber chooses the tier they believe they need and pays for the tier. Tier contains the level of access. - Unit Based: There are different API features or APIs have a different value. Those are assigned a number of units/score. The developer buys the unit before API use and the point will reduce upon the usage.
- Point (Box) Base: Same like Unit Base. A point will buy before the API usage. Point reduces upon call and call will contain the Categories, like Freemium.
- Transaction Fee: A fixed or percentage of a transaction is paid to the API Provider.
Subscriber Gets Paid
API Gateway holder provides a monetary incentive for a developer to leverage your web API. Basic scenarios include you selling an asset or services through an agent. This payment method can be seen in the marketing industry a lot.
- Revenue Share: It is acting as an agent to help sell a provider product/asset. A fixed or percentage of a transaction is paid to the API Consumer
- Affiliate: In this model, a partner includes your content/ advertisements to drive potential customer traffic to you. There may be several possible sub-models:
- Cost Per Action (CPA): This specific Developer earns the affiliate a commission based on a successful conversion. Generally, a flat rate per user who subscribes to the merchant’s API / service. There can be commission structure also
- Cost Per Click (CPC): This method developer / API subscriber is paid for every click they send to the merchant’s site / API consume.
- Sign-up Reteral: Developer gets paid once, he able onboard API / API list consumer (Completing process). There are two sub-models, one is once he completes a full list of API consumer he gets paid the amount of money. (Pre-define amount) is paid for each completion. Next submodel is ‘Recurring’. This is where the developer will get paid each consumer after 3rd party completes the process of API calls.
Indirect Payment
By Indirect Payment, API achieves some goal that drives the business model.
- Content Acquisition: APIs allow for content submission by 3rd parties which attract customers to you.
- Content Syndication APIs: allow third parties to distribute your content. Multiple financial models may surround this. You might create a contract between parties
- Software as a Service (SaaS): More than one lever should drive SaaS pricing, API based pricing makes things one-dimensional. It’s easy to set up any additional user parameters, as your parameter to define pricing as an add-on. Price help attracts a different lot of users. This model can be seen in many place Salesforce (Upsell — model). Software as a service is a software licensing and delivery model in which software is licensed on a subscription basis it helps reduce licensing price and bring cost also depending on the feature in the software.
- Internal use Consumer: APIs are used by the same company employees to build customer-facing capability for your company. Typical scenarios include creating Mobile Apps and Web Commerce sites.
- Internal Nonconsumer: APIs are used internally to assist in productivity, It aligns cross-Lines of Business and Business units in the company. Typical scenarios include providing simplified secure access to systems of record and managing asset. Those help handle charge bill in company asset over the business units.
- B2B Customer: APIs are used by your customers to integrate into your enterprise. Customer value is provided through the use of the API so they are incented to use the API. The same way those APIs are used to expand into new geographies or new demographics, offer new products or upsell new capabilities to existing clients
- B2B Partner: APIs are used by your partners to integrate into your enterprise. This is used to increase existing partner relationships or expand to new partners.
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