Is it more important than ever? Just one word: yes. APIs rapidly become the central element of networked digital business processes. And they increasingly become business models themselves. Because in APIs there are not only billions of opportunities, but also billions in revenue. That’s why their monetization deserves the highest attention.
And it takes place – now:
Over the years, the interest in APIs as an investment opportunity and innovation accelerator has grown quickly. At this point, over 40% of large companies use more than 250 API’s. And 71% of developers plan to use even more APIs in the future. Beside the fact that we will see a rush of new API development to tap into new markets, developers and producers will also be looking for new ways to make money off their API’s.
And it’s based on a very simple calculation: APIs increase the reach of a company’s own offering by allowing it to be integrated into third-party apps and platforms (e.g embedded insurance). This alone can lead to more customers and thus more revenue.
So, it’s no wonder that API’s have also become a hot topic in the insurance industry and are high on the priority list of providers around the world. And they are becoming increasingly important in the transformation of insurance companies’ systems. In Europe alone, 50% of insurance companies intend to build their own ecosystem using APIs. On one hand, this naturally improves existing customer relationships and experiences. But on the other hand, APIs can be monetized in their own ways by charging a price for their usage.
This can be done either internally or externally:
For example, to promote value creation and innovation within organizations. So if a team develops a great digital product, it can also be used by many other teams within the company. A fair price for the use of this API leads to the fact that development and operating costs are covered. This provides enough incentive for the internal API owner to ensure quality in terms of documentation, reliability and first and foremost build the API in a generic way so other developer teams can benefit as well.
How API’s are monetized is also an important factor. The pricing model used can make or break adoption. A fair, value-first pricing model like pay-per-use drives adoption, innovation, and revenue. There is a clear business case for API monetization with usage-based pricing. Businesses will be charged for API use in the same way as a power bill.
As you can see, monetizing APIs is the ticket to the future. No wonder, that the API economy has been called the next billion-dollar opportunity.
Monetizing APIs on a marketplace
The success for API economy participation on the marketplace of apinity follows three fundamental factors: transparency, standardization, and presentation.
The first factor is to create transparency. That means to find APIs at all, use them again and let them scale. Because many companies don’t even know how many APIs they have, what kind of APIs they have and who is using them.
The second factor is the setting of standards to reduce complexity and ensure a good API experience. For example, by standardizing authentication methods or setting a certain quality standard in API description and documentation.
And finally, the presentation of APIs as products to enable innovative digital business models. It’s quite wrong to assume that it is enough to just build an API and users will be found. In this case, APIs are just like books or clothes, they must be actively promoted and made available as conveniently as possible. Because only then they will be used and create added value for your company.
All these factors only come into play when IT and business work together. After all, it is not only the expertise of developers that is needed to make the APIs technically available. Marketing know-how is also important to make the service attractive and to market it. Just like the fact that it requires experts from accounting who take care of inter and intra company charging.
“Before monetization starts, start to make a strategy.”
Instead of a myopic focus on an API, you should approach API monetization with a holistic view of how the API fits into your ecosystem. Based on the chosen business model, organizations should define monetization parameters to correlate the investment in an API and the value generated by it. Because API monetization is more than just the revenue itself. It’s about overall planning to generate that revenue. The costs incurred to keep APIs running and to make them a reliable product must be also considered. So, API monetization and API management are closely linked.
Furthermore, it’s advisable to get key components for monetization. Organizations need a central platform like an API Marketplace to offer, price, meter, and bill their API products dynamically. And the more these processes are automated, the easier they are to handle. That’s why apinity collaborates with nitrobox – a centralized billing automation platform on which you can scale your business with subscription, pay-per-use, and order-based business models through smart automation of billing, accounts receivable management, payments, and revenue. So, companies can grow globally without worrying about the complexities of monetization.
There are a few steps to take on the path to monetizing APIs. And if you want to be successful, you must never forget the first one: creating a great API. That means to focus on providing a real value for customers (internal and external). Because an effective API can give existing and potential customers new reasons to interact with a business and connect with it on a personal level. And only when you offer a reliable and relevant product, you can focus on it’s expansion, like any other digital business plan. In other words: there is an excellent chance of becoming a viable source of revenue for you and your organization.
This article is the second part of an expert overview of API monetization and pay-per-use business models, which we wrote together with our partner Nitrobox. The first part explores a pay-per-use API business model and why you should monetize your APIs. This can be found at our partner Nitrobox: The business case for API monetization with usage-based pricing | Nitrobox
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