Value of an API

24 October 2017

Your business is growing. Sales figures keep rising, sophisticated marketing people keep doing their magic, customers keep returning, developers keep adding new fancy product features, and you have nearly signed a contract with this industrial partner.
Still, you feel this is not enough…

Have you thought about developing an API?

Value of an API

What’s an API?

Application program interface (API) is a set of functions and procedures which help 3rd parties access data or features of an operating system, application or service. It allows independent developers write programs that use private company’s services or data.

API makes it possible to receive requests and send responses from external apps to company’s IT systems so that no additional integration is required.

“API is a sort of a rulebook which allows developers to integrate services and data, based on private IT infrastructure, into their apps.”

Application program interface helps programs communicate, but where is money?

Digital assets and services monetization with API

A company may use API to increase sales of its digital assets and services. In this regard, API allows getting access to a wide customer base via 3rd party applications.

Value of an API

With API a company may distribute the value of its services and data through external systems and applications. For example, a company owning a location identification service or payment gateway may benefit from integrating it in 3rd party applications, as it increases exposure of the service to end-users.

“Creating APIs is like handing out building blocks for apps”

The long-term goal of building an API is usually to create a growing ecosystem of API users (developers), who will find new ways to apply existing company’s services and data.

Value distribution with an API:

1. Self-evolving distribution channel

Partner, using service via an API, may sell it directly to end-user, use it as an additional feature, or as an enabler for some high-level services (example, payment gateway). Regardless of its use, your services get a higher exposure to consumers.

Moreover, when service is integrated into an application, efforts to promote this app indirectly affect the popularity of a service delivered with API.

2. Frictionless integration

A well-developed API reduces integration costs for B2B partners. It becomes easier for a 3rd party developer to add your service into his products.

3. Increased customer retention

Google maps everywhere. It is quite a challenge to find a website which doesn’t visualize their location with google maps service. We got so used to it, so whenever we are looking for a physical address, the first place we will go to will be always Google Maps.

If your service is good enough to become an ultimate solution to customer needs, you should definitely distribute it with an API.

4. Ecosystem and network effect

API lays the foundation for building an ecosystem around your products. Moreover, a service adopted as an industry-wide standard encompasses the entire potential market.

Consumer prefers solutions which may be adopted with fewer frictions. The consumer shouldn’t spend a moment thinking how to use the service and how to integrate it with his digital environment.

API allows companies to pack all services in one environment so that consumer transition costs are minimized.

Conclusion

It depends on the nature of the product, whether a company could benefit from value distribution through with API. Though, it has already become quite a common growth strategy.

For a company, developing application programming interface means:
1. Greater product exposure
2. Lower integration costs
3. Higher customer retention
4. Foundation for an ecosystem

Value of an API

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Coming next:
- API: who pays who?
- Engineering consumer adoption process
- Ecosystem food chain