Knowing the Value of Your API
All APIs are not created equal
Introduction
In 2002, Jeff Bezos sent all Amazon employees an email that mandated all teams expose their data and functionality through service interfaces. In this email, his closing sentence said “ Anyone who doesn’t do this will be fired. Thank you; have a nice day! ” Fast forward 17 years, and the API (Application Programming Interface) economy is now in full force, with companies like Amazon, Alibaba, Facebook, Google and Expedia making new business opportunities off these capabilities. But not all API’s are created equal, delivering varying benefits and value to different consumers. In this blog I aim to help readers understand the value of each API they develop or consume.
Know your API’s value
One technique to quickly gauge the value of your API is to think of it in two dimensions. The benefit your type of API brings to the consumer, and the potential leverage/adoption of your API.
The benefits of your API
When thinking about the benefit your API delivers to the consumer, try breaking it down into one of these three categories. Does it deliver consumer value via:
- Integration — operational efficiency through automation
- Transactional — each execution brings value add
- Data — the value add is in the data returned
APIs that perform integration, benefit the consumer by delivering automation and operational efficiency gains. APIs that deliver value with each transaction or the data returned, deliver business benefits and capabilities to the consumer. A good example of a transactional API is payments, each execution delivers value to the consumer. Revenue Management is an example of an API that delivers value via insights from the data returned. Generally a consumer has a higher willingness to pay for a value add API, that delivers new benefits and capabilities.
Your APIs adoption
Do you know who the potential users are, and what the Total Addressable Market (TAM) is for of your API? Is it for internal use only, or for third parties to integrate to your software? What if an API delivers value outside its intended usage, in a more generic, widespread usage? The more widespread your API can be leveraged, it increases in adoption and hence value:
- Specific use only — impacts only your own applications, product or company.
- Widespread use — platform with potential to impact an entire industry with more generic capability.
Many APIs have the potential to become capabilities that others may want to consume. Could developers build apps, services and even companies, by leveraging your APIs capabilities? Potentially creating network affects from your APIs.
NOTE: If you build an API that is complex and trying to do too much, your adoption potential may be reduced. It must be simple for developers willingness to adopt.
API Value Matrix
To help simplify and visualize your API’s potential value, I have created a simple API value matrix based on the benefits to the consumer, and its adoption potential. Specific use, integration APIs deliver value in the form of efficiency gains and automation to the consumer, and are placed in the bottom left quadrant. Widespread use APIs that expose transactional and data capabilities with each call have a higher value add. In the API value matrix below, the potential value of an API increases as it moves up and to the right quadrant or when it benefits the consumer, combined with widespread adoption.
Conclusion
The API Economy is in full force, creating new capabilities, opportunities and companies over the last two decades. Now is the time to understand the value in every API we develop, expose or consume. Benefit and adoption are two dimensions that can be used to measure the potential value of any API. APIs that benefit the consumer with each transaction and the data returned, have higher value add than integration and configuration APIs. The adoption and leverage of an API increases to you or your company with widespread usage.
Try using the API value matrix shared in this blog, and see if you can understand the value of your API? FYI, no one is getting fired, but building valuable APIs might get you hired!!
