API Economy: The Digital Value Chain
“He who has a why to live for can bear almost any how.” — Friedrich Nietzsche
Did you know that a company that worth $95 billion is an API company? And the richest man in the world rules an API empire? Knowing what APIs are and how they work is thoughtful. But knowing “why” APIs are important is crucial.
Explaining APIs in Simple Terms
Make a test… Ask some developer about a random subject. S-he will probably explain it from a technical perspective and describe all details about how it works accurately. But probably will not explain why it matters. This is because developers, me including, value technical knowledge. After all, it is how we make money. While “How” focuses on how things work, “Why” refers to the value that something brings to our lives. Asking “how” is relevant, but asking “why” is crucial.
API stands for Application Programming Interface . APIS is how an application or program exposes its functionalities to other applications. But why do we need APIs?
The API history starts with the need of connecting applications running in different processes. An App A needs something from App B. Then App B exposes its functionality through its API. App A doesn’t need or care to know how application B works in its internals. It is only interested in its functionalities. It is like us as consumers when we go to a baker shop. We don’t want to see the oven, we only get the bread from the counter.
We don’t want to see the oven, we only get the bread from the counter.
APIs and the Internet
With the Internet, applications spread around the globe. At this exact moment, applications running in Japan are interacting with applications running in Brazil. To make all this possible, protocols like SOAP  and REST  were created.
The first APIs were known as “Web Services” and were based on SOAP. The mobile revolution demanded lighter protocols and as time passed REST gradually replaced SOAP. Now, we are at the age of the RESTful APIS.
REST vs SOAP
One common misconception to clarify here: SOAP and REST are not the same as APIs. SOAP and REST are high-level protocols describing how to expose an application API. An app can expose its API using REST or/and SOAP or any other protocol.
Web APIs == Web Services
As said, REST and SOAP are protocols. REST APIs have become known as “Web APIs” and SOAP APIs as “Web Services”. Despite the names by which are known, both relate to “how” and not to “why”. Just for curiosity, AWS, the big Cloud company, started by using SOAP and migrated to REST some years later. This makes me wonder if they had started nowadays, they probably would be called AWA (Amazon Web APIs) instead of AWS (Amazon Web Services) 😆.
“How” vs “Why” — Talking about value
AWS provided SOAP API for its functionalities using SOAP. Then, the same functionalities were provided using REST. The most important in this case was not “how” (REST or SOAP) but the value being delivered, or “Why”. Of course, how we deliver has some importance. But, in the end, what matters is the value the API brings.
Let’s pick two APIs as examples: Google Maps Roads API  and Amazon Polly API . The first is valuable for truck drivers and travelers. The second, by translating text to speech, can be priceless for blind people improving their lives.
APIS Economy— The Digital value chain
When we talk about APIs we can talk about the technical aspects “How” and the business aspects “Why”.
If one isolated API can create value imagine those combined. Most parts of modern applications create value not only by exposing their APIs but by at the same time consuming other APIs. They aggregate pre-existent value and deliver it to the next link in the value chain in a new shape.
It is like a cascade effect. As a river flows into the sea, each link in this digital value chain adds value until reaching the end-user adding the maximum value.
Why APIs are Important?
That brings us back to the headline question: Why APIs are Important? Well, we have two valid answers, being the second the fundamental:
- APIs are how App A expose its functionalities to App B
- APIs are the links of the digital value-chain
API Economy is a multi-billion dollar market on the rise . The company I mentioned in the first paragraph that worth $95 billion is Stripe and its core business is payment APIs. And it wasn’t by mistake that AWS, another API company focused on Cloud computing, made Jeff Besos the richest man in the world .
We can see APIs from different angles. We usually only focus on the technical aspects of APIs. Technically, APIs are how applications expose their functionalities to other applications. SOAP and REST are not the same as APIs but protocols that make possible application expose their functionalities through the Internet. The value that APIs bring is far more important than how they are made. API Economy is a multi-billion dollar market and we have multi-billion companies that have APIs at the core. APIs are the links of the digital value chain.
To Know more
To know more about the APIs, I suggest visiting the APIs Landscape. The landscape is the result of the API Days conference. During the conference, providers and implementers share their experiences and discuss this amazing topic ❤️.
-  APIs — https://en.wikipedia.org/wiki/API
-  SOAP — https://en.wikipedia.org/wiki/SOAP
-  REST — https://pt.wikipedia.org/wiki/REST
-  Google Maps Roads API — https://developers.google.com/maps/documentation/roads/overview
-  Amazon Polly — https://docs.aws.amazon.com/polly/latest/dg/what-is.html
-  API Economy: Is It The Next Big Thing? https://www.forbes.com/sites/tomtaulli/2020/01/18/api-economy--is-it-the-next-big-thing/?sh=73b7da7042ff
-  Stripe valued at $95 billion in $600 million funding round — https://www.cnbc.com/2021/03/14/stripe-valued-at-95-billion-in-600-million-funding-round.html
-  The Richest People in the World in 2021 — https://www.visualcapitalist.com/richest-people-in-the-world-2021/