API Monetization Unveiled: What You May Miss at the Tech Talk

According to Gartner, organizations increasingly embrace a mix-and-match approach with diverse vendor tools for API management, emphasizing core requirements. In light of this API landscape, API monetization plays an essential role in transforming APIs into strategic assets that drive revenue, innovation, and competitiveness.

API monetization has captured the attention of industry professionals. To explore this topic, API7.ai hosted a captivating tech talk on August 30th, with a panel of renowned industry experts providing valuable insights and perspectives. The event, moderated by Keer Liu, Head of Global Growth at API7.ai, welcomed insights from panelists Jason Cumberland, Co-founder of HyperCurrent.io, Daniel Kocot, Head of API Experience and operations at codecentric AG, and Zhiyuan Ju, Head of Global at API7.ai. The discussion delved into the complexities of API monetization strategies and emphasized the critical role of well-designed API portals in driving business growth.

Attendees left with invaluable ideas and actionable tips, making this tech talk an essential resource for individuals and organizations seeking to optimize their API potential and enhance their monetization endeavors. The article below documents the fantastic discussions from that day.

Understanding API Monetization

What Is API Monetization, and Why Does It Matter?

Jason:

API monetization sells APIs in paid plans instead of those used for free, in a word, paid access to products. It typically starts with integrated partnerships. For example, when a partner or a potential customer expresses interest in getting access to a higher tier than is currently available, there is a great chance of API monetization.

Based on bundling and packaging APIs, API monetization can be presented in various subscription or usage-based plans, helping users fulfill customer use cases instead of using a single API.

Daniel:

API monetization is a buzzword because many people still have problems identifying what an API is as a product and what product marketing has to do with APIs. In the region I am active in, there is no accurate understanding of the word "monetization".

API monetization is more of a barter model that ensures people exchange the things they have inside the company. I take it as a way to make things more open to the external world and suggest that exploring partnerships and exchanging resources with external parties could be an avenue for organizations to consider.

Zhiyuan:

Companies are switching from Monoliths to Microservices architecture and considering how to enable developers to benefit from internal APIs. API monetization operates much like API providers selling their APIs, similar to how sellers use Shopify to sell goods.

Maximizing API Usage: Tips for API Consumers

What Are the Benefits of API Monetization for API Consumers?

Jason:

We generally focus externally on monetization, while internal monetization is sometimes called "chargeback". Externally, the most significant benefit we see and work with primarily large companies is access to new revenue streams and sales models.

Large enterprises often have lengthy sales processes led by account executives targeting budget holders. API monetization enables them to create a self-service consumption and sales model, which is often lacking. This aligns with the desire for a low-friction, self-service sales model in the developer world. API monetization allows enterprises to offer small portions of their capabilities individually or bundled, providing a new route to market and revenue.

Zhiyuan:

This creates a positive cycle for providers, as they can sell APIs and generate revenue from external users. This allows them to receive valuable feedback, improving quality, licensing, and performance. Additionally, providers can identify popular APIs among their users and gain insights into which APIs are in high demand. This knowledge is beneficial, as some organizations may have numerous internal APIs and struggle to determine which ones are popular or deprecated.

Daniel:

When I think about monetization, if somebody has an excellent digital product. They should put it at the lowest level. So, for free, add features to this new digital product over time to ensure that people follow the track and maybe see if somebody is eager to pay for that. As Jason mentioned, even large enterprises must consider innovation and flexible self-service. Then, it comes to one of the last steps, which is on the same level as talking about API marketplaces with people.

What Factors Would You Consider for Using Third-Party APIs?

Zhiyuan:

Firstly, I would consider whether to build ourselves or buy from external providers. Then, I'll choose some APIs that can enable me to focus on the final business goals rather than the building process.

Daniel:

For a better product, I might need to present data from my company and get additional data using a third-party API. I care more about what can bring more value to the partner level, and I'm looking for it to clarify that everything is available.

Jason:

In general, when we talk about the benefits for API consumers, which essentially means our customers' customers, it consistently comes down to a "build versus buy" choice whenever they consider using a third-party service as opposed to building it in-house. The advantage for these consumers lies in their ability to enter the market quickly. By integrating non-core functionalities, they can allocate their developer resources exclusively to what makes them unique, thereby driving the adoption of their offerings, instead of trying to create every service from scratch. In such situations, a greater number of people tend to embrace these services.

Monetization Strategies Revealed: Insights for API Providers

What Are the Benefits of API Monetization for API Providers?

Jason:

API monetization, particularly from an external perspective, has some clear advantages. One major perk is access to new revenue streams and sales methods. Large companies often follow lengthy sales processes led by account executives that span months.

However, with API monetization, things take an exciting turn. These enterprises can pivot to a self-service model that's far more developer-friendly. It's like testing a service with little hassle, deciding if it fits the bill, and seamlessly incorporating it.

This approach enables companies to engage with customers and generate revenue, fundamentally transforming our industry. It provides the adaptability needed to respond to shifting market dynamics and customer preferences, all while fostering growth and profitability.

Zhiyuan:

From my perspective, API monetization offers a significant advantage for providers. It sets off a positive cycle where APIs can now be sold to external users once used internally, generating revenue. This shift also opens the door to valuable feedback from these users, which enhances the APIs' quality, licensing, and performance. It's essentially a continuous loop of improvement.

Furthermore, API providers gain insights into the APIs that are highly sought after by their users, allowing them to fine-tune their offerings to match user preferences.

Daniel:

While API observability is crucial, API monetization is closely linked to innovation and robust digital product development. This road typically starts by offering essential features for free, and then gradually introducing premium options to engage users effectively.

In my view, API Monetization serves as one of the final elements in this process, following a well-established path of growth, flexibility, and the implementation of self-service capabilities. Educating enterprises and users about the value of APIs is imperative, as misunderstandings can hinder progress. API monetization aligns with observability and other essential aspects, creating an evolving, interconnected strategy.

What Kind of APIs Are Suitable for Monetization Opportunities? What Cannot be Monetized?

Daniel:

I would say it depends on which area I'm active in. If I am in the automotive industry, it might be interesting to have a service to make sure that everybody can exchange stuff with me because, in the automotive industry, you have the OE (Original Equipment) numbers. Hence, there's something specific you can rely on.

Sharing sensitive customer or order data with external vendors is not a good use case. A unique and innovative product can set itself apart from others. Then, it's a successful start to transform the existing software tools into API-operated products.

Jason:

I may have a slightly different opinion on the data example because many companies are taking access to their data and turning it into new revenue streams. If it is your core intellectual property, you will never sell it to someone else; if it's data that is secondary to your core business, but valuable to others, it presents an opportunity for monetization.

You cannot charge for access to a product that someone is already paying for and consuming. But if you build products where the API is the product, then those that make sense to monetize.

We learned from the survey that many companies, particularly those using Postman, are already monetizing their APIs. Some companies surveyed reported that APIs generate over 25% of their total revenue. However, this still represents a minority market, indicating a significant opportunity for other companies to explore API monetization. By examining their existing assets, such as valuable data, they may uncover untapped potential to sell to new markets.

Zhiyuan:

I can give some specific examples. For instance, certain fintech companies offer stock information APIs to banks and their customers, who then build applications utilizing this data. These companies require monetization for such functionalities. I also noticed that some companies provide wiser information, which freelancers utilize to develop wiser applications.

What Is the Strategy for Enhancing the Value Proposition for My Customers?

Jason:

To enhance the value proposition for my customers, I believe that forming strategic partnerships with established players in the industry is a pivotal strategy. This approach can effectively circumvent many initial hurdles. Rather than solely relying on the "build it and they will come" approach, having initial partners on board is essential. These partners can serve as valuable testers of the API, contribute to the formulation of pricing strategies, and collaborate on marketing efforts. Their API usage in real-world scenarios can significantly boost trust and credibility among potential developers, even if the partner is not widely recognized. In essence, building solid partnerships is my go-to strategy for elevating the early value proposition of my API product.

What Risks Should I Consider When Providing APIs?

Daniel:

The main risk that needs careful consideration revolves around a potential lack of understanding of our audience's needs and expectations. Building an API without understanding our potential users' requirements carries significant risks.

It is crucial to embrace a consumer-centric approach, engaging in conversations with users and gathering their insights to drive the development process. This approach minimizes the risk of launching an API that falls short of user needs, thereby reducing challenges related to versioning and potential user dissatisfaction. Close collaboration with partners and incorporating specific use cases from the outset can substantially mitigate these risks, and contribute to a more successful API deployment.

Mastering API Portal Monetization: Guidance for Portal Builders

Why Do You Choose to Build an API Portal?

Zhiyuan:

Customer demand can be our biggest motivation. Before embarking on the API7 Portal's development, we had been aware of the concept of API monetization for quite some time. With the increasing number of customers expressing the need for API monetization, we saw an opportunity and decided to take up the challenge.

What Are Your Key Considerations for Building the API Portal?

Jason:

Most gateway providers include their portals, but some customers may decide to build their own if they require specific features not provided by their current provider. However, the long-term costs of maintaining a custom portal are high.

It is important to carefully consider whether it is necessary to fully customize and own a portal forever or if purchasing an off-the-shelf solution that meets the requirements is sufficient.

Monetization is not a technology project; the technology and engineering teams need to work hand in hand. Then, there's a lot of opportunity.

Daniel:

When considering the critical aspects of building an API portal, my first point is not to build it on your own, as past experiences have shown that this can be quite an undertaking. Instead, we have worked on substantial projects like the developer portal for Mercedes-Benz, recognizing the value of existing solutions. Often, our clients have their own preferences, and we lean towards a federated approach. Those scenarios have led us to look at the backstage, which we frequently recommend as a starting point.

It is crucial to differentiate whether the focus is on internal or external use because external-facing APIs require more thorough documentation and a marketing-oriented approach. Understanding the audience, which may include non-technical users, becomes paramount. Also, clear API descriptions and defining the purpose of the API are essential.

Furthermore, having a strategy for what to offer externally and internally is vital. Governance is another critical aspect of ensuring high API quality, as poor-quality APIs are unlikely to gain traction.

While monetization is important, it should not be the initial focus; instead, understanding your data and capabilities should come first, followed by a platform for sharing and gathering feedback.

Zhiyuan:

API monetization involves more than technical aspects, including marketing, sales, and API quality. Secondly, when developing API monetization solutions, it is essential to identify the minimum requirements necessary to achieve the desired goals, rather than building overly complex solutions.

API monetization can be achieved without necessarily creating a new product. They can determine the appropriate developer requests by assisting customers in generating metrics from existing data and providing them with the necessary tools. Building a new product is driven by the specific needs of startup prospects. Ultimately, the approach depends on the situation at hand.

Concluding Remarks

The API monetization panel organized by API7.ai was a resounding success, with a significant turnout of enthusiastic attendees. The panelists provided valuable insights and tips for the participants. The event received positive feedback, and attendees expressed satisfaction with the knowledge shared during the panel discussion.

The engagement and participation of the attendees underscored the growing importance and interest in API monetization and portals within the industry. In the current API landscape, they perceive API monetization as an undeniable trend, and the API Portal stands out as a significant enabler in expediting this popularity. Therefore, it is time for you to contact us for comprehensive information about our API7 Portal. Don't hesitate to reach out and discover how our API Portal can benefit your business!

Start Your API Portal Journey With API7

Embark on your API adventure with API7 Portal, a groundbreaking product from API7.ai. It's not your ordinary website; it's a dynamic bridge that seamlessly connects API providers and developers.

This centralized hub grants developers access to comprehensive API documentation, specifications, code examples, and all the essential information they need, making API utilization effortless and efficient. With a user-friendly registration process and crystal-clear instructions, the API7 Portal simplifies API usage, allowing developers to focus on their core tasks. It also empowers effective API management, real-time notifications, and user control, enhancing security measures. The intuitive interface showcases APIs practically and aids in user understanding and integration. Moreover, it supercharges development efficiency with monitoring tools and offers businesses various API monetization options.

Start your API portal journey with the API7 Portal and unlock the boundless potential of APIs!