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- Business Models
API monetization has been growing at a meteoric rate. Analysts predict API monetization to grow at a CAGR of 28.1% between 2023 and 2033. The API industry is currently valued at $6.1 billion and is projected to reach $72.6 billion in ten years.
It’s no surprise the API industry is snowballing. As business owners and developers, it’s our job to make use of every asset at our disposal. We also need to maintain a growth mindset, as the tech industry is particularly volatile, and we need to be ready for anything. APIs are also a cornerstone of many aspects of today’s tech industry. Over 90% of developers use some sort of API, according to Slashdata’s 19th Developer Economics Survey.
Building an API monetization strategy isn’t always easy or apparent, though. To help you get started with API monetization or further refine your process, we’ve put together some tips for API monetization to help you transform your APIs into a profitable product.
8 Tips for API Monetization
1. Charge for API Access
Charging for API access is one of the most common ways to implement API monetization. You can charge for API access in numerous ways, but each requires a unique technical implementation.
A freemium plan is an incredibly common way to charge for API access. This lets users try out your API and see if it’s worth paying for. Offering a certain amount of free calls per month is a popular form of freemium, especially for newer APIs still building their reputation. Monthly or yearly subscriptions are also popular ways to set up charging for API access.
Each of these methods requires keeping track of individual users and their API usage. If you charge per call, you must monitor individual users on your backend and their API usage. And you’ll need to track when accounts signed up for the subscription service, for monthly or subscription services. Neither is particularly hard to set up, but it’s something you’ll need to consider.
2. Provide Services Through Your APIs
Some platforms create APIs on top of their existing products. Offering your usual services to third-party developers via an API is another easy and popular way to monetize your APIs. For example, Sendgrid’s API allows users to send emails for a fee. Twilio SMS does the same thing for sending texts.
3. Drive Traffic To Your Site
APIs can be an excellent source of internet traffic, as well. Some APIs deliver content from a website along with an internet address. Imgur API delivers images from the popular image-sharing site, which can then be clicked to open in a browser. From there, you can use traditional models to generate revenue online, from advertisem*nt to selling products or services.
4. Create an API For A Non-API Site or Service
You can also create APIs specifically to generate revenue. Not every site, product, or service has an API. Delivering content or valuable data can be its own profitable source of revenue. For example, you might create an API to deliver results from local booksellers via a site like Indiebound. You might then propose a partnership with the business once it’s generating traffic and creating revenue. You might be able to create an API for a business, product, or service with an affiliate program. You’ll need to check with the affiliate provider about their specific TOS, though.
6. API Exposure Through Business Partners
Many B2B and B2C businesses expose their APIs for business partners or third-party businesses to use. Providing quotes, estimates, or pricing are some examples of businesses providing their APIs for third-party applications to use. You see this frequently in the insurance, banking, retail, travel, hotels, real estate, or software industries.
An insurance company might offer a tool with a free valuation estimator for potential claims, for example. For the insurance company, this tool could be a source for creating new leads or valuable business data. Real estate companies might create a local listings API to help their listings get picked up by real estate directories or websites, for another example.
Allowing third-party apps and websites to use your APIs can have the same result as some of the other API monetization tips we’ve already mentioned.
7. Create Actionable Goals and Metrics
If you’re serious about API monetization, you need to know that your offering has a market demand. You also need to understand the worth of your services. Detailed goals and metrics are crucial to delivering these API monetization goals. For instance, analytics can provide profound, profitable insights into user activity and behavior. They can alert you to features and services that are particularly useful for your users, which could be turned into premium features.
Clear goals and actionable metrics are also essential for your investors and your C-suite. You’ll need to justify any additional expense for developing or monetizing your API using actual data. You’ll need to provide ongoing reports, as well, to demonstrate your API’s performance over time.
Product managers are also suggested to make their goals and metrics as clear and actionable as possible. Doing A/B testing will make your data and analytics even more convincing to internal stakeholders. Accurate analytics aren’t just for creating reports, either. Using the right metrics lets you know how your API is performing so you can spot errors, discontinue underperforming features, and dedicate additional resources to those that are popular.
8. Think Of It As A New Product Launch
Even if you’re offering an API for an existing service, it’s still a new product. Following the established strategies for building, launching, and promoting a new product will help make your API monetization as effective as possible.
To start, you’ll want to create a press release and post it to public PR directories like PR Newswire or Issuewire. Try to get your API listed on sites like Product Hunt, Trendhunter, or Cool Hunting. Getting noticed on one of these sites can be just the break your API needs for widespread adoption.
You may want to learn some marketing tactics while brushing up on your business basics, as well. Just writing a press release isn’t enough to get your API noticed enough to make it a profitable product. Producing relevant content and learning how to conduct an outreach campaign are well worth the investment in the long run.
Final Thoughts On API Monetization
It’s often said that data is the new oil. This makes APIs the new petroleum industry, channeling and funneling that precious resource wherever it needs to go. Just as importantly, APIs require resources to develop — this includes time, energy, focus, and payroll hours just for starters.
As API developers and enthusiasts, we don’t have the luxury of dedicating resources towards API development with no clear goal in mind. Adding an API monetization strategy is one way to fund the rest of your research and development. It’s also a way to justify the expenditure to your investors and business partners. API monetization, when handled correctly, is the next step in realizing that goal of allowing your API to take your company to the next level.
