When an organization's various stakeholders contemplate the numerous decisions they will encounter as they execute an API strategy, the API's business model will prove to be one of the key decisions to make. But as Ziggeo CEO Susan Danziger learned, in the interests of seizing the biggest opportunities, you may have to go back on your initial business model decision.
Ziggeo is a video recording and playback API service. At the 2016 API Strategy and Practice conference in Boston, Danziger presented a keynote on Ziggeo's business pivot and how it built a new business model to match its new direction.
Originally, Ziggeo's platform was built to allow job applicants to create a video to send with their job application. It found that videos offered an incredibly powerful engagement technique that quickly built trust between the applicant and potential employer. As a result, Ziggeo began thinking of all of the other use cases beyond job interviews that video could empower in other verticals. With a growing revenue base in the original business value proposition, and a powerful API at its core, the company realized it could become a key enabler for future communication but did not have the team or business structure to take on two complete and different business goals. With boldness, Ziggeo decided to shelve the video recruitment platform plan and double down on its API as a product.
Customers were offered just two weeks before job applications were "completely obliterated" as a pre-configured use case. In hindsight, Danziger admits Ziggeo could have given more time for its original customers to move off the company's initial platform.
As the company prepared to relaunch as a video recording, playback, and storage API, the biggest challenge that it faced was the expectation that the initial volume of usage wasn't going to be that high for customers. The sales outlook was "dismal."
Ziggeo looked at three types of business models:
- A traditional plan-based model where customers buy a certain level of access to the API, usually based on transaction calls or levels of usage
- A buffet-type all-you-can-eat plan, which would be easy for customers to understand, but would leave Ziggeo with a huge cost if a customer's video went viral
- A country club-type model based on an annual membership fee, with customers able to buy additional services beyond a basic membership plan offering, which would be similar to what Ziggeo would have provided in the traditional plan
None of these models were quite right, so Danziger introduced a new API business model, which she calls the "Mickey Model" because it is in part based on her experiences dealing with media companies like Disney and LucasFilm. This model offers a guaranteed level of service access at a plan level of basic, premium, and professional (where each level of service unlocks additional features). On top of this minimum service guarantee, customers only pay for the amount of video recording, playback, and storage they use each month, with any overcharges added to their next monthly account. Adding an element of the country club model, customers could also request additional support at an hourly rate.
As Ziggeo felt that this might be considered more complicated than the other business models, the company created a cost calculator for its pricing page so customers could either import or enter information on their anticipated usage during the term and identify the best plan for them.
"We are big believers in no surprises," says Danziger, accentuating the need to ensure transparency in pricing for Ziggeo's customers. Learning from its mistake when pivoting to the new business, the company gave customers plenty of notice before implementing the new model.
As a result, Ziggeo reported a huge 4200% increase in customer purchases when the company implemented its new business model.