“When one door closes, another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the one which has opened for us.” The famous words of Alexander Graham Bell could so easily be applied to the emerging API economy when looking at the API strategies that organizations have pursued recently.
Take ESPN and Uber, for example. Last summer, ESPN announced that it is retiring its public API. The ESPN public API has included access to headlines, athletes, teams, research, medals, scores, schedules, audio, video, photos, and a handful of other resources. But just over two years since it launched, the ESPN team announced that they had made the difficult decision to close their public API so that they could “better align engineering resources with the growing demand to develop core ESPN products on our API platform.” And ESPN isn’t alone in rethinking the use of public APIs. Other prominent brands to close their public APIs include Netflix who explained that “public APIs are waning in popularity and business opportunity and that the internal use case is the wave of the future.”
Does this mean that all public API programs are dead in the water and heading off for early retirement? Absolutely not! In fact, days after ESPN announced the retirement of its public API program, Uber announced it would be opening its own API so that partners can integrate Uber into their own applications. And this makes a lot of sense. By integrating its service with other popular applications, Uber increases the opportunities for people to “Request a Ride” and the more rides people request, the more money Uber makes, with the stronger coverage it is able to achieve. Uber also took the approach of ensuring, from the outset, that its API program was managed and aligned with its business model.
Now I know what you are thinking: comparing the API strategies of one of the world’s largest sport broadcasters/publishers with the poster child of the sharing economy is hardly an apples-to-apples comparison. And that’s the point. No two businesses are exactly the same. Instead, when considering whether your organization should pursue a public or private API strategy, here are a few important questions that you need to ask.
Who is your audience? As with any business strategy, it is important to start with a clear understanding of your audience. In the API economy, it all comes down to understanding API consumers, which can be broadly divided into two distinct groups, as described by Daniel Jacobson of Netflix Edge Engineering: LSUDs (large sets of unknown developers) and SSKDs (small sets of known developers). If your business objectives call for targeting as many external developers as possible, then you should choose a public API that targets LSUDs by providing a common, one-size-fits-all (OSFA) request/response model. However, if you are targeting a more customized segment such as a preexisting group of partners, a private API for SSKDs will be a better approach.
Is your business model and industry a fit? APIs are starting to play a central role in business-to-business (B2B) connections (Gartner predicts that 50 percent of B2B collaboration will take place through APIs by 2016) and are becoming an increasingly important gateway to your organization’s data. Thus, to ensure the security, privacy, discoverability, and reliability of your organization’s data flows, it is important to understand the entire lifecycle of the resources you are making available. For example, successfully using public APIs in the movie and sports industries is challenging, as those business models are based on tightly controlling the content, messaging, distribution, branding, and other elements. The same is true for industries like healthcare, which are governed by strict regulations that not only require extremely high levels of data security and privacy, but also demand audit trails. By contrast, sharing-economy companies such as Uber or Airbnb offer services that by their very nature are designed to complement other apps and services. Of course, most organizations will fall somewhere between the two ends of the spectrum, but an evaluation of the applicability of your business and industry will help guide the direction of your API strategy.
Have you weighed the rewards and challenges? It might sound obvious, but in the rapidly emerging API economy, where the stakes are high and many lessons are still to be learned, people don’t always stop to consider the cost/benefit analysis. This analysis is unlikely to be black and white, as in some cases it is difficult to determine the benefits of a public API without launching one and seeing how the market reacts and its needs evolve, but it is vital as the development and support costs (not to mention legal) for an API are not a minor thing. APIs should be treated like standalone products, and as such, companies should afford APIs the same resources and people as products. Public APIs can pose management challenges/risks such as ensuring that developers protect credentials, and these risks can outweigh the benefits of app proliferation.
How will you measure ROI on APIs? If your organization decides to build an API, the inevitable question is likely to come up: “How do we make money from this thing?” Like with most technologies, measuring ROI on an API is not a simple calculation and requires you to consider everything from the pricing of the API, which in many cases will be free, to how it could impact your business strategy, e.g., will it help you enter new markets, reduce the time of onboarding new sellers, collaborate more effectively with partners, or establish a new business model? For instance, Google offers a free Places API to power location-based applications with information about various destinations based on categories. In cases such as these, it can be difficult to assign a strict dollars and cents value to the API, however, Google derives value in others ways, such as visibility with end users and greater market saturation. At the end of the day, understanding the potential benefits is critical to making the business case.
What is your partner strategy? This might not be something that immediately comes to mind when determining your API strategy, but it can provide important insights when considering a private or public API strategy. For example, if your business has a healthy ecosystem of business partners, a private API that can be customized for each partner makes the most sense. If, on the other hand, you work more directly with public consumers, a public API is likely the better option. However, perhaps you are working with a large and ever-expanding ecosystem of partners. It may not be practical to develop an API for each partner, in which case you might instead employ a private API with an OSFA approach.