API Monetization

One of the most demanding features of an API Management Tool

As a business analyst at WSO2, I have worked with various customers from different industries during the last one and half years. Most of these customers were looking for an API Management solution. In practice, they list down their requirements/features and send it to us where we analyze their requirements and propose the best solution to cater their requirements. In this procedure, I have gone through nearly thousands of different type of API requirements. Among them, I found out that one of the most demanding features is “API Monetization”.


Before jumping into the questions from potential customers directly, let’s see what it really means by API Monetization first.

API Monetization is allowing API Publishers to bill API subscribers based on their API Usage which available in their API store. To be more precise; API Publishers can define API in the API Store with specific throttling tiers attached to them. API Subscribers can subscribe to these APIs and invoke them. They will be billed based on the throttling tiers, they are consuming.

Some of the customers directly ask for the feature as the following question;

  • How does the solution support “Monetization of APIs”?
  • Describe the ability of the solution to support monetization. What are the various revenue models supported? Some of the APIs will need to be monetized. Given that there are multiple ways to monetize an API, does the solution allow for mixing and matching of these models?
  • Does the solution support configurable payment schemes to monetize API usage?

Some customers ask for it in different ways as follows:

  • What are the billing features available at the gateway for developers to access, based on API access?
  • Does your solution support billing based on a period of time and/or aggregate transactions for each developer/application?
  • Describe how the engagement platform supports the API economy and presents API value; establish usage rates, metering, billing.

Basically, all these customers are looking for the same functionality of monetizing APIs even though they put that into different terminologies. I come across similar questions over and over again from different customers from various industries such as banking and finance, education, healthcare, retail, and telecommunication.

Why are they interested in API Monetization all of a sudden?

That demand did not increase at once. It was gradually grown by the last few years where organizations started to adopt API driven business models in their businesses. API Business allows to expose internal digital assets to the third party such as internal/external developers, partners through APIs and make a business out of them. In order to make money out of these APIs, API Publishers have to enable API Monetization in their store-front. Hence, this feature has become an essential feature to be included in an API Management tool.

There are few key players in the API Management space who provide API Management solutions including API Monetization capability. However, today I’m going to look at WSO2 API Manager, which is an open source approach that addresses full API lifecycle management, monetization, and policy enforcement.

How can API Monetization be enabled WSO2 API Manager?

Use-Case: API publisher publishes the APIs by specifying throttling tiers and related security and governance configurations. Published APIs are listed in the API Store. Subscribers can subscribe to these available APIs and invoke them via API Store. In this billing model, API subscribers get billed based on the subscribed tiers.

In WSO2 API Manager, the throttling tiers act as a billing plan. In order to define a new billing plan, users need to define a new throttling tier in WSO2 API Manager to reflect those business rules.

The below steps need to be followed to achieve API Monetization.

  1. Activate a subscription workflow
  2. Enable billing related developer subscriptions
  3. Configure WSO2 API Manager Analytics
  4. Configure Billing engine

WSO2 API Manager documentation provides a detailed user guide of above steps here. Besides, API Monetization is enabled in WSO2 API Cloud which is the public hosted version of WSO2 API Manager.

Figure 1: WSO2 API Store (API Monetization Category Labels)

In addition to API monetization, WSO2 API Management provides analytics to track their usage through extension points and custom implementation provides ways to edit payment methods, see invoices, and so on.


Conclusion

This article points out the increasing demand for API Monetization feature in API Management space and what are the different interpretations of their requirements from various customers. Then we discussed why businesses need API Monetization and how it can be enabled with WSO2 API Manager. WSO2 API Cloud also provides API Monetization out of the box. In addition, customized data and invoices can be generated using extension points available in WSO2 API Manager.