Money making is the likely final goal of most of the companies using APIs. API management is the common layer that process all the API traffic. This layer provides security enforcement, monitoring and additional integration and governance capabilities. And it is the only location to enforce a consistent monetization strategy on the top of APIs. But while API monetization it requires good API Management, a Business Model is even more important.
As API is a source of revenue now, it must be considered as a true product. Now here comes the concept of the API product, which introduces the new role: the API Product Manager. He/she is aware of both the business of the product and the new distribution channel of API and makes the link between the existing business units and the expectations of the costumer.
Access to the services is provided through APIs by enabling new and innovative usage of the assets to drive additional revenue. This is known as API Monetization. APIs can also be used either in this indirect or direct monetization model. However, the monetization model leads someone paying you for the use of the API (APIs on banks, news, telco),and also you pay them to use (API for advertising, marketing).
Free Model is generally used when there are typically low valued assets. While no money is exchanged but clearly there must be a business purpose, this free model is tried when a company drives brand or loyalty and enter new channels.
In some cases, API must be of value to the Subscriber which means the Subscriber may obtain downstream revenue through using of the API. This Subscriber may develop application or mobile App using the APIs. Basic scenarios include selling an asset or services through an agent. This payment method is seen in the marketing industry a lot.
In Indirect Payment method, API has to achieve some goals that drives the business model, Like
- Content Acquisition means APIs allows for the content submission by the third parties which also attract customers to you.
- Content Syndication APIs this allows third parties to distribute your content. Here multiple financial models may surround this and you might also create a contract between parties
- Software as a Service (SaaS): More than one lever should drive SaaS pricing, API based pricing makes things one-dimensional. It’s easy to set up any additional user parameters, as your parameter to define pricing as an add-on. Software as a service is a software licensing and delivery model in which software is licensed on a subscription basis it helps reduce licensing price and bring cost also depending on the feature in the software.
- Internal use Consumer, here APIs are used by the same company employees to build customer-facing capability for the company. It includes creating Mobile Apps and Web Commerce sites.
- Internal Non consumer, here APIs are used internally to assist in productivity, it aligns cross-Lines of Business and Business units in the company. It includes providing simplified secure access to systems of record and managing asset.
- B2B Customer, this is the case where APIs are used by the customers to integrate into your enterprise. Customer value is provided through the use of the API so they are incensed to use the API. APIs are also used to expand into new geographies to offer new products or upsell new capabilities to existing clients.
- B2B Partner, in this scenario APIs are used by the partners to integrate into your enterprise, this helps to increase existing partner relationships and also expand to new partners.