Developers Corner

The Basics of Monetizing APIs

Jun. 4 2018
Ian Cassidy
Marketing Manager

Where to start?

The power of APIs is clear. Their ability to make design and development easier has transformed digital ecosystems across every industry.  As the use of APIs continues to grow, we see brands, mobile platforms, and SaaS companies become reliant on their capabilities. Not only are they used to expand partnering, but the revenue-driving power continues to increase.

In developing your API strategy, the monetization of the API will rise as a topic. Below we will compare and contrast some different API business models and we will outline some of the basic ways to monetize an API.

The Encouragement Strategy

With this strategy, access to the API is free. However, the goal is to encourage end users into distributing more resources from your application which are tied to paid plans.  If they are currently operating in a free plan and are successful with your digital offering, they are encouraged to move to a paid plan and possibly support and maintenance plans.

This is a simple model to follow and implement. The access to the API is simply offered for free. It is the subsequent use, the adaptation in the market and the targeted follow-up by sales, that is crucial. Treating the API as another way of consuming your brand's application and the features surrounding it, is a great way to incentivise developers to build apps and integrations on top of the API. The increased usage will lead to purchasing a paid plan and low cost distribution of your brand’s assets and data.

Selling Access to the API

Although this model has not be as prevalent as other models, this strategy is growing as API use enters new markets. Selling the license to use the API with unlimited usage can simplify the tracking and is often included with a larger product offering. 

Salesforce is a good example of this strategy in action. They don’t offer access to their API as an individual feature. The API is bundled with other Salesforce offerings and billed as part of the program purchased. Access to the API is granted based on a contractual event with the customer. This works well in an enterprise product line.

Distribute through Strategic Partnerships

Getting an API in front of a broader audience is always the key objective for a business. Therefore, integrating the API with a strategic partner may provide the potential to expose your API to a more developed and established market. This strategy can also help in retention of users. If customers have a subscription to your strategic integration partners, they are less likely to disrupt their workflow by leaving either of you. The value of these partnerships is clear for the end user, since their workflow relies heavily on both your offerings. 

In strategic partnerships, it is important to create a mutually beneficial agreement that is transparent and detailed. You want to know exactly how much your API is helping their business, and similarly they want to know the effect of their product on yours.

Conclusion

There are a number of ways to monetize an API. Pricing strategies allow direct influence on the monetary value of the API. One, allowing free access with the intention to encourage users into paid plans will influence further engagement. Two, offering access to the API as part of a more comprehensive product line strategy can provide simplicity to users. Finally recognizing where partnerships can have an impact on your APIs, how they can be of benefit in regards to promoting, and exposure of your APIs can also show success.

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