The New API: Apps, Partners, Income

APIs are no longer technical nice-to-haves. These three letters are being spoken in board rooms and used as the basis for business strategy. One place you can see the effects of API growing up is the sheer number in our directory. But big numbers only tell us so much. In our many discussions with API providers, we've noticed a pattern with how many are approaching their platforms. These threads point to an alternate meaning for API: Apps, Partners and Income.

There's no denying that much of the growth in APIs the last two years is thanks to mobile. Phones and other devices connect to consumers, but businesses are built on partnerships. APIs provide lubricant to make partnerships fast and easy. Companies are now discovering that an API can be a great way to increase revenue, sometimes even directly by selling access to the API.

Below I'll look at each of these in detail to show how apps, partnerships and income are becoming the new API.

Apps: Every Meaningful App Needs an API

There's a good chance that any app on your phone that does something interesting is using an API. It needs to communicate user details, send content to its servers or at the very least show you the latest information. The only way to do that is using an API.

A whole new API category has emerged in less than a year to fuel the mobile API craze. These backend-as-a-service APIs take the hard work out of setting up users and transferring data back and forth. One of them, the Parse API, really innovated with its service, allowing potential hires to apply via API.

By preparing an API for public use, companies are recognizing a benefit within their own organizations. Though foursquare is best known as a mobile app, it's an extremely API-driven company. Anything that ends up in the app starts in the foursquare API. The utility of intra-organization API usage becomes clear when looking at where API calls originate. In our discussions with the people behind the Evernote API and Guardian API, we learned most of their API requests start from their own applications. Guardian has seven internal requests for every external developer request. Evernote is 99 to one, which makes sense given its popular mobile and desktop apps.

The majority of APIs for mobile apps are private. But many are what I call private for now--they'll come around to recognize the business benefit of being a Platform. Even some that are truly private get reverse engineered, which Instagram found out about early in its popularity. Developers, wanting access to their own data, sniffed the now billion dollar app's traffic and documented the interface. Now, of course, there's an official Instagram API.

Partners: Being Open to Partners is Good for Business

Some app creators are enlightened from the get-go. Alibras and FanFeedr each launched their APIs and apps on the same day. Why not? They needed them for the app anyway. Others need more encouragement, which often comes from potential partners, or even internal teams. The ESPN API developed out of the public eye for two years before it launched.

The suite of NPR apps were built by a combination of internal and external teams. NPR didn't have to employ experts in every platform. They just needed to create the template for how their data is shared.

There's probably no better example of Scaling the number of platforms than Netflix. The Netflix API covers more than 800 phones, tablets, TVs, video game systems and other devices. Each of the companies behind those devices is a partnership negotiated by Netflix. A partnership completely depended upon the API to serve the mutual customers of both companies.

Not just anyone can login to Netflix and start writing streaming apps. The full API is private for partners. There are probably at least as many APIs for partner consumption as the public APIs in our directory. From talking to teams supporting these APIs, many are likely poorly documented, if at all. An upside to being public is that it encourages the path to clear Documentation, though not all providers make it to the destination.

TwilioAnother upside to being public: partnerships that wouldn't have happened any other way. So the story goes, an Intuit employee was checking out the Twilio API documentation on a Friday afternoon. Intuit is a large payroll and accounting software company that wouldn't have been on Twilio business development's radar, at least not back then. The Intuit employee looked at the public docs, signed up for a trial account and spend the weekend creating a prototype. On Monday she shared a system that now performs payee verification for the millions of employees processed by Intuit's systems. All while the team from Twilio was none-the-wiser.

More traditional partnerships still have a place in the API world. There may be no sector more traditional, in fact, than finance. XIgnite has based its entire business on its suite of XIgnite APIs, gaining an impressive collection of major partners: McDonald's, Dow Jones, GE, Autobus, among others. Even the NASDAQ API is powered by XIgnite as a white label solution.

Income: Make Money With Your API

Partnerships clearly bring income to a business, but the goals for a particular company are going to be different. The API business model, of which there are many more than there used to be, is going to determine how a company approaches its API.

It's pretty easy to see income in a story like that of Twilio and Intuit. That's probably why Twilio's "API as Product" model has become popular. Twilio charges a penny per text or minute of voice. Urban Airship does similarly for push notifications. SendGrid pioneered transactional emails over API, something that's been copied by Amazon, among others. Charging your customers--there's a concept, right?

The web was built on free and that's still alive--and successful--in some of the popular business models. For some APIs, distribution is simply the goal. Take the Yellow Pages as a prime example. The state of the art for distribution used to be thick books on everyone's doorstep. Now it's getting their customers' information in as many apps as possible. The Yellow API for the Canadian Yellow Pages even pays some developers simply for showing local results.

Another clear API where distribution is the goal is Netflix, which sits comfortably in all three categories of The New API. Netflix charges its customers, then uses its API to get on as many devices as possible, which in turn should lead to new customers.

As on the web, advertising is used by APIs. CityGrid considers advertising to be one of the three pillars of local, along with places (ie, business listings) and content (ie, reviews), with each represented in the CityGrid API. In fact, it's common to see both a distribution and advertising model within local APIs, usually giving developers a revenue share.

Advertising can also be what you get with the free version of the API. For example, the Guardian API gives headlines away for free, bundles full text stories with required advertising and will remove the advertising if you enter into a formal partnership (where you're presumably paying a monthly fee).

Regardless of business models, it's important to employ some creative business development when seeking developers for your platform. The best place to look turns out to be someone who already has a popular app. That's what Retailigence does: “If developers haven’t launched an app yet, the chance they’ll launch and move the needle is slim,” Retailigence CEO Jeremy Geiger said.

Accuweather agrees, calling this "partner-first, not ecosystem first." It looks for apps that could use the Accuweather API, but not just simple weather apps. The company's content is on TVs, at gas stations and even see games as a great use of weather data: imagine if your Angry Birds game changed based on the weather conditions in your city.

The New API is Open for Business

When our directory hit 6,000 APIs, we said APIs mean business. But clearly they have for some time.

We often point to the Google Maps API as the beginning of the API movement on the web. It's been seven years and, perhaps, it's a sign of API maturity that Google is charging heavy users for maps. APIs are no longer technical nice-to-haves and each needs a business purpose if it is going to survive.

Just as freemium is not the only model on the web, there are many ways APIs show return on investment for their providers, some of which I've shown here. If your API powers your apps, it's worth investing in it, so long as your apps have a business model. If your API powers your partners, there's no doubt you should support those who are paying you money. And if your API powers at least some of your income, then you're probably already convinced that an API--specifically, the New API--is open for business.

Handshake graphic via buddawiggi

Be sure to read the next Financial article: The Color of Money is...Yellow? Lemon's New "Wallet with a Twist"