API monetization

Just like online memes that started out as a weird trend in small parts of the internet and grew to be mainstream tools to communicate various messages between different audiences, APIs have grown from “stuff that IT people like to talk about” to important revenue streams. API monetization has become a burning topic among many leaders. With the growing number of API monetization implementation strategies, the number of failed attempts is increasing and many enterprises struggle to see positive ROI from these projects.

API monetization is a hot topic as there are many models and approaches that can be used. Still, due to its complexity, the success depends on many factors like provided services, monetization strategy, technological opportunities, and in some cases – available funds to support the initial market breach. There is no silver bullet so any leader must evaluate their capabilities and possible strategies. 

What is API monetization?

API monetization is a process that enables enterprises to generate revenue from their APIs. A variety of different strategies exist like subscriptions, affiliates, or paying per transaction. API monetization in essence is a strategy to deliver income using your company’s APIs. Just like any other metric API revenue can be forecasted based on potential user count, use cases, and API popularity in developer ecosystems (API developer portal). Business is the one defining the requirements while at the end of the day developers will be the ones suggesting the best API to use. If your API provides value, is easily discoverable, 

has good user manuals and support, and is easy to use, developers will recommend it to others that need to solve similar business problems. 

Often APIs are viewed as an outcome of the IT development process instead as a product or digital asset. APIs must be considered (and promoted) both as a building block in the API economy (which should be one of the digital transformation’s outcomes) and as a digital product that should undergo the same lifecycle management as any other, physical product. Once APIs are considered digital products companies can make targeted investments to improve general business value and revenue. Any changes are no longer part of maintenance, refactoring, or technical debt (if you have been working in IT, you will know that these categories play an extremely important role in any software, but funding for these items is impossible to get). As an example: if API is considered to be a product then building many reusable development objects becomes a business effort to decrease time-to-market time and delivery costs instead of “that’s just something developers want to do because of some best practices and we don’t have funding for that”.

Your APIs should be organized with API Dev portals like physical products on the shelves in a store as well as their lifecycle needs to be managed (delivery, user and access maintenance, security, monetization, logging, and replacement with the next version).

API monetization models

API monetization depends on your organization, your business strategy, the goals that must be reached, and the general market you are operating in. There are many strategies one could take. Some of the most common strategies you can use as a starting point:

• Free: you give your API away for free.
• Pay-per-use: Revenue from APIs is calculated on API call statistics. It can be the number of calls, measured by content, data amount, or any other clear metric.
• Subscription: Flat subscription fee based on the provided or available services. 
• Indirect: Decreased development time inside your enterprise, opened new markets, possibility to innovate new products, etc. 

What next?

Once your organization has decided to prioritize APIs as products and create an “Internal API market” or sell the services you should start with an API future vision and current state evaluation. Talk with your current API users, and check with your affiliates, partners, and potential clients. You can also use API portals and other platforms. At this stage, it’s important to understand the market’s needs. It’s important to understand what functionality is valued most and what causes caution for them or even leads to not trusting a provider.

Once you have your vision in place, it’s crucial to understand the current state of your APIs (if any). Most of the time it will require setting up an API developer portal as you need to be sure you can handle a full API lifecycle from a-z. It causes extreme overhead and extra costs to “let them be” – each team usually has its limitations, naming conventions, approaches, etc. You can’t expose an unstable API to your clients (and what’s more, maybe even worse: if the APIs are unstable due to the team not because of technical reasons). You must also make sure your APIs are scalable both from an API performance perspective (API knows equally good how to handle 1 and 1 000 000 requests) and the underlying cloud platform’s perspective (you have the possibility to scale performance based on usage as well as have circuit breakers developed).

Then continue with selecting the right approach to monetize your APIs and continue to use your API platform to enable new functionality, maintain existing ones and administrate all your APIs (including having the dev portal for easy API exchange).

What to choose?

We suggest WebMethods API platform which we also implement. It provides a powerful solution to monetize your APIs, manage the API lifecycle and simply integrate with surrounding systems to support your process. API architecture should look as your business processes are made and IT should reflect your business. API Platform can help you do that. You should never be in a situation where you have to adapt your business process because of technical limitations caused by the new system. 

With webMethods, you can: 

• Manage the process of designing, developing, deploying, versioning, and retiring APIs and services 
• Securely provision APIs, providing authentication, mediation, payload transformation, and API monetization 
• Analyze usage of APIs, collecting metrics for performance dashboards, SLA violations and invoicing for API monetization 
• Gain real-time visibility into the status of service transactions as they flow across heterogeneous architecture 
• Get notification of events and alerts so you can take immediate action to address problems 
• Enable process automation and automatically create API documentation and provision policies 
• Integrate easily with back-end systems and applications 

webMethods also includes an API portal available in the cloud, providing developers with easier access to your APIs.

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