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On average, it costs $20,000 USD to build an Application Programming Interface (API), and this does not include maintenance costs. But there is hope: Those who expose their APIs as products and develop a partnership ecosystem around that initial financial investment are likely to see greater returns.
By seeing APIs as assets, more IT decision makers are seeing the value of API management as a way to monetize APIs. These resilient and secure digital architectures will be vital to powering API-led connectivity, which is one of the reasons why the API management market size is expected to grow to $5.1 billion by 2023.
How can CIOs and CTOs use collaborations to build an effective API revenue strategy as both internal and external APIs become a key factor in driving business economic growth?
Identify your assets
Exposing everything as an API is difficult, so look closely at what you’re already consuming internally that can be useful to the outside. Global IT spend is expected to grow at a 5% annual rate, and companies that deliver software-as-a-service (SaaS) by externalizing APIs will be a big part of this expansion. You may have the means to generate income without knowing it.
Google Maps and Uber are excellent examples of the effectiveness of collaboration at scale and how APIs can be used externally. Google was able to use the existing map feature and expose it to multiple carriers, including Uber. Although Uber experimented with other map providers, it always chose to return to Google’s API and then launched its own Uber API for adoption.
Many other companies have learned the cost and time-saving benefits of partnering with third-party APIs instead of building their own. According to the Q3 2021 Global Developer Nation survey, 68% of developers are already using third-party APIs.
This top-down API monetization strategy looks at what is already in use and then identifies microservices that can be repackaged for external partners. This starts with an API management platform with a clear cross-organizational view of who uses which APIs and how.
Every industry is subject to disruption, especially when technology gets involved. The relationship between banks and fintech is a great example of how technology can innovate, but traditional institutions still retain much of consumer confidence.
While fintech companies can lower fees and reduce the bureaucracy associated with brick-and-mortar banks, they may lack the government-backed regulations and certifications of established financial institutions. The question is, how can you leverage a bank’s capabilities and let fintects use APIs to build in a way that meets customer demand for speed, improves efficiency, and creates a better user experience?
Banking is a rigid industry that has been disrupted with new players such as neobanks and fintechs adopting Open Banking and PSD2 guidelines requiring Open APIs. Traditional banks can use these API-supported partnerships to be more competitive and provide faster services to customers. Leading with an API-first design approach allows them to break away from the legacy architecture and form a monetization strategy that is more flexible in response to customer needs.
In today’s competitive global market, mutual cooperation is necessary for the survival of businesses as there is no winner-takes-all scenario.
Prepare your product
Any API monetization strategy should focus on design-first thinking. Deciding what your API will be for and who will help determine how you document and ultimately make your API public. Getting your design right at the outset will give you a stronger product, help you withstand industrial challenges, and increase your chances of successful API revenue.
Typically, behavior-driven development is the best way to get this started so that you model the technology after the user experience. For example, imagine a typical e-commerce workflow:
Browse categories or perform a searchAdd to cartLog in or register for the first timeAdd shipping informationPayReceive a trackable order ID
Each of these steps involves an API. Therefore, using external API partnerships – such as with Shopify, Stripe or PayPal for the payment side and Google Maps for tracking – helps to dramatically reduce costs compared to in-house production.
Since API revenue is inherent in funding data, decisions need to be made early to determine the risks of what data you may be exposing and to whom. The distributed nature of APIs inherently increases your attack surface. There was a 681% increase in API attacks in 2021, with 95% of respondents saying they had been the victim of an API attack in the past 12 months. For those looking to enter the API economy, rigorous testing is imperative to ensure safe and secure APIs that consumers can trust.
Testing is also a way to ensure that your technology’s API backbone meets industry standards and remains compliant. An API management platform makes it easy for developers to automate testing. Low-code platforms also allow developers to simulate and mock APIs without having to write new code, making it easier to get feedback early, before launching APIs.
With standardized documentation with API design templates through a platform, you can set benchmarks for quality, security and compliance across the company. Documentation design templates further enable a self-service approach to API adoption, making it easier to scale your product services and reducing the need for customer support.
Choose your monetization API model
Finding ways to monetize APIs is still relatively new and there is no right way to do it. If you think your API and data are ready to be made public, the next step is to choose a public or partnership model. While public APIs are available to anyone who adheres to your terms and can mean a higher adoption rate, Partnership APIs are only exposed to strategic business partners with whom you can build trusted relationships.
How you choose to enter the API economy depends entirely on the product offered and the model you choose for scaling and selling that product. Most organizations start their API monetization strategy with just a few partners to test the process and see if there is demand for the data they expose.
In the case of ride-sharing apps, for example, insurance could benefit both the driver and passengers, but there are multiple ways it can be sold. Perhaps an insurance company would charge per trip/driver/vehicle or pass on the cost as an optional extra to the customer. How you decide to charge for your API usage must be properly justified to ensure that monetization is worthwhile and there are no partnership overheads.
Staying open and remembering that there is no one-size-fits-all business model to participate in the API economy will put companies in the best position. Collaboration monetization strategies at the center will yield the best returns if they start with the API as the product and develop a partnership ecosystem around that initial investment.
Darshan Shivashankar is the co-founder of Apiwiz.
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This post API-first cross-collaboration: The secret of any API monetization strategy
was original published at “https://venturebeat.com/2022/04/24/api-first-cross-collaboration-the-secret-of-any-api-monetization-strategy/”