APIs Reshape Business Models

APIs for Biz Dev 2.0
Which Business Model?
Guillaume Balas
http://www.3scalet.net - @3scale
guillaume@3scale.net - @guillaumebalas

The Plug & Play Cloud API Management
Platform & Infrastructure
2
Application Programming Interface
Definition
“A particular set of rules and specifications that a
software program
can follow to access and make use of the services and resources
provided by another particular software program that implements
that API.
It serves as an interface between different software
programs
and facilitates their interaction, similar to the way the user
interface facilitates interaction between humans and computers.”

Application Programming Interface
Alternatives
“We are nearing the time when
opening our supply chains
across the Web isn‟t just a
good idea, it will be essential
for competitive survival.
Dion Hinchcliffe, ZDNet
“APIs provide a scalable way to
do business development and
create partnerships. “BizDev
2.0. I call it”.
Caterina Fake, Flickr
P
A
I
pps
artners
ncome
Adam DuVander,
3

Web sites are local
There was 645 Million Web sites as of March 2012
Disadvantages:
Limited reach
Lost business
opportunities
Very Limited brand
awareness
Significant SEO and SEM
costs
Web scraping risksSource: Dion Hinchcliffe, http://blogs.zdnet.con/Hinchcliffe
4

APIs help you grow your business
APIs – The first paradigm shift
Advantages:
APIs unlock new distribution
channels & enable the expansion
of your business beyond the limits
of your web site.
Source: Dion Hinchcliffe, http://blogs.zdnet.con/Hinchcliffe
51%
11%
38%
API Deployment Focus
Multi-Channel
Mobile Apps
Non-Mobile
5

Create New
Distribution
Channels
APIs Deliver Raw Data, Content and Services
Allowing you to…
Partner Up
Power Mobile
Apps
Build an
Ecosystem
Protect IPR
Decrease your
cost of serving
your customer
Serve any type
of
device, software
, anywhere
“Externalize”
your R&D.
Foster
Innovation
Lower Barriers
to Integration
Create New
Business
Models
Rationalize &
Control access
to your
resources
Reach More
Customers
6

APIs Deliver Raw Data, Content and Services
Strategic Advantage
New Revenue Streams
Business Advantage
Generating
7

1.1B / Day (April „11)
3B / Day (March „09)
APIs are growing & reshaping the new Web
This is not a trend, this is a fact
5B / Day (April „10)
5B / Day (Oct „09)
13B / Day (May „11)
1B / Day (Q1 „12)
50% Traffic (March „08)
Success for these businesses is
heavily relying on their API(s)
9,000 APIs
8

Interest is broad and deep. APIs are currently reshaping the web, and
disrupting some industries: telecoms, payments, etc!
APIs are everywhere
Examples
Media & Content
Social & e-Commerce Others
SaaS Integration
9

9,000 APIs: that’s just the tip of the Iceberg
Private for Partners
Private (for Now)
Truly Private
At 3scale we actually
believes that there is
5x to 10x this number out
there.
With an approximated
100% annual growth, that
would mean around 1
Million APIs by 2017
10

SO WHAT NOW?
An API?
11

The API is “just” the channel into
this.
12
It is the organization‟s core
business which
is valuable.

What API for my Business
Model?
Therefore the question is…
13

API business strategy
Get the most from your API
APIs enable cloud scale MVC,
dematerializing distribution
channels,
and allowing you to focus on your
core asset.
14

API business strategy
Get the most from your API
① Identify your core
asset
② Choose the
complementary
asset which will
deliver most value
③ Define the strategy
to capture the
value most
effectively
Examples of API Business Strategy
Pres. Logic Data Mission
✓
Simplify the world
of telecom by
providing
simple, powerful, p
ay-as-you-go IaaS
✓
Increase the world's
access to music
lyrics.
✓
Revolutionize the
way people watch
movies
15

API openness cycle
Concept
CORE
ASSET
S
Raw
Service
Mesure, Collect, Analyze
Internal Re-
Use
Inter
Depts, Dashboards, Processes
Customer
Re-Use
Apps, Integration
Partners &
Distribution
New Revenue, New
Reach, Ecosystem
Open to
Anybody
1000 Flowers, Market Extension
16

API business model
Another paradigm shift
Source: John Musser, ProgrammableWeb.com
17

API delivery
How?
Partners
Affiliates
Mobile Users
Internal
Projects
Developers
Customers
Your core
assets
Your
API
18

API delivery
How?
Partners
Affiliates
Mobile Users
Internal
Projects
Developers
Customers
Your content &
services
Your
API
Security?
Monitoring?
Access Control?
User Experience?
Monetizing ?
Scalability?
Flexibility?
Reach?
19

API Management
“Managing” your API operations
Partners
Affiliates
Mobile Users
Internal
Projects
Developers
Customers
Your content &
services
Your
API
APIBusiness
Engine
Access Control
& Security
Analytics &
Reporting
Developer &
Partner Portal
Billing &
Payments
API Management Solution
20

Don‟t just build it and think
they will come…
You might wait very
long…
API Promotion
21

APIS TYPOLOGY
Business Opportunities
22

4 types of business APIs
First it’s worth thinking about the different functional roles of an API
e.g
The API is the product1
The API projects the product2
The API powers and feeds the product4
The API promotes the product3
23

Is the product
• Direct revenue
• Utility / Pay per
transaction
• Tiered pricing
bands
Projects the
product
• Reach more
places
• Provides more
utility
• Enable mobile
• Allow deeper
integration
Promotes the
product
• Biz Dev / Lead
Gen
• User acquisition
• Advertising
• Brand promotion
• Affiliate
programs
Powers and
feeds the
product
• Content
acquisition
• Partner tie-in
• Internal
innovation
1 2 3 4
Digging deeper
Each type of API has different potential business value associated with it
24

is the product
projects the
product
The only customer experience may be
via the API or via a 3rd party using the
API.
Billing relationship may be to the end
user or the partner / distributor.
Whitelabel Channel
“Sell Through” Channel
e.g
Direct Revenues
The API as a direct revenue driver
Is the product Enable mobile
• Allow deeper
integration
Promotes the
product
• Biz Dev / Lead
Gen
• Advertising
• Brand promotion
• Affiliate programs
Powers and feeds
the product
• Content
acquisition
• Partner tie-in
• Internal
innovation
1 2 3 4
25

promotes the
product
feeds the
product
The API plays a supporting role – the
product is the main event. The billing
relationship is unlikely to be tied to the
API.
API ROI needs to be measured by
product metrics.
“Free” Modality
“Affiliate” Modality
e.g
Indirect Revenues
The API as a indirect revenue driver
Is the product
• Direct revenue
• Utility / Pay per
transaction
• Tiered pricing
bands
Projects the
product
• Reach more
places
• Provides more
utility
• Enable mobile
• Allow deeper
integration
Promotes the
product
• Biz Dev / Lead
Gen
• Advertising
• Brand promotion
• Affiliate programs
Powers and feeds
the product
• Content
acquisition
• Partner tie-in
• Internal
innovation
1 2 3 4
26

APIS & BUSINESS MODELS EXAMPLES
Business Opportunities
27

Others
Brings easy access
to complex Telecom
technologies
e.g
Ecosystem
Strategy
Direct customer usage
Encourage resellers
Build tech knowledge
Encourage 3rd party tools
Enable new services
$ If Core service sees usage growth.
API
API is Core Value
The API Is the product
Core value is tied up in the API
28

1,700+ Apps on
Force.com
50k+ Developers
e.g
Ecosystem
Strategy
Cultivate partner ecosystem
Innovation opportunities
Build switching costs
Enables new services
Encourage 3rd party tools
$ If
Increasing customer spend (primary) and
number of customers (secondary) for core
product
The API Projects the product
Extends availability of functionalities to new places
Others
Mobile apps
3rd Parties integration
Added utility
Added to a product
API
29

Ecosystem
Strategy
Distribute “Teaser” information
Brand Diffusion
Promote to niches
Improve partners Impact
Cultivate partners
10‟s 1000‟s of affiliates
Widgets to
Whole sites powered
e.g
Others
$ If Increasing customer number (primary) and
spend (secondary) on core product
API
Secondary (non core) service
Designed to drive leads/traffic
Widge
t
The API Promotes the product
Secondary function and indirect revenue impact
30

13 Billion calls/day on API
>75% of traffic by API
250,000 Apps (probably less
now…)
e.g
Others
Ecosystem
Strategy
Leverage social networks
Brand Diffusion
Facilitate Access
Improve partners & businesses
Impact
Virtuous circle data in/out
$ If
when UGC (user generated content) brings
appreciable value to the central product
API
Content, User
information,
Ratings, comments
Etc. into the service
The API Powers & Feeds the product
Content acquisition via the API
31

Conclusion
What API(s) for my Business
Model?
 What are my core assets?
 Who will use my API(s) and for what
purpose?
 How will I make available my
API(s)?
23.60
%
26.30
%
20.10
%
7.20%
12.50
%
10.40
%
Business Models
Diversity
API is the Product
Product Addition
It is the organization’s core
business which is valuable and
the API is just the channel into
this.
32

ThePlug&PlayCloudAPIManagement
Platform&Infrastructure
Your API is the product?
Extends the reach of your
product?
Promotes your product?
Makes your product better, richer?
Business Partners?
Customers?
Developers?
Your Company?
User Experience?
Business Model?
Marketing, Promotion?
Technology choice?
WHAT
What is your API?
WHO
Who will use your
API?
HOW
How do you offer
your API?
Facilitate the integration of your product
in as many devices, services or software
provided by your business partners
(e.g. Samsung & Skype, Spotify &
7Digital)
Sell your product (content, data or
services) directly to clients through your
API
(e.g. Twilio, Daily Telegraph, LiveOps)
“Outsource” your R&D to Developers.
Tap into their fantastic creativity and
innovation skills to evolve your product
(e.g. Twilio, Salesforce)
Make it easier, faster and more flexible to
use/access your assets. Homogenize
and centralize access to your data.
(e.g. Netflix, Seevl, The Guardian, NPR)
SDK? Widget? Interaction and Support?
T&C and SLAs proposed? Blogs?
Forum? Documentation?
Direct/Indirect? Tiered/Freemium?
Revenue sharing? White labeling?
Partnerships?
(e.g. Bluevia, Wine.com, PeopleBrowsr)
Hackathons, Dev. Challenges? Private
Beta, Public Beta? Use cases?
(e.g. Viadeo Dev Challenge)
Authorization, provisioning and control of
accesses? Usage Tracking?
Proxy versus Plugin API Management
solution?
Calls/requests to your API are the
primary (only?) way to interact with your
technology, data, content
(e.g. Twillio, Amazon
AWS, SImpleGeo, Musixmatch )
Your API is a way for your partners to
make their customers experience your
product via their own
apps, devices, solution or service
(e.g. Skype, Maxdome, 7Digital)
Advertise your product in different ways -
such as via an affiliate program.
(e.g. Wine.com, Oodle.com)
Your API is a channel to get new
content/value "into” your business that
goes to make up part of the service.
(e.g. Twitter, eBay, Facebook)
33

34
3scale SPAIN
Calle Llacuna 162-164
08018 Barcelona
Spain
+34 933 092 786
3scale USA
450 Townsend Street
San Francisco, CA 94107
USA
+1 (408) 524 1503
Thank you !
guillaume@3scale.net
@guillaumebalas, @3scale
We make awesome API Management
solutions
http://www.3scale.net

Resources
• http://www.3scale.net/wp-content/uploads/2012/06/What-is-an-API-1.0.pdf
• http://www.youtube.com/watch?feature=player_embedded&v=7r7QpIDEI_o
• http://www.slideshare.net/3scale/apis-the-glue-of-cloud-computing
• http://blog.programmableweb.com/2012/06/13/the-new-api-apps-partners-income/
• http://www.youtube.com/watch?v=lFv5lH7nNX8
• http://www.slideshare.net/3scale/more-than-the-sum-of-its-parts-the-apis-whole
• http://blog.programmableweb.com/2011/11/03/private-api/
• http://www.slideshare.net/3scale/reaching-1-million-apis-and-what-to-do-when-we-
get-there
• http://blog.apievangelist.com/2011/02/28/if-you-build-it-they-will-come/
• http://www.slideshare.net/jmusser/j-musser-apishotnotgluecon2012
• http://www.3scale.net/2012/11/building-great-apis-the-api-gold-standard-part-i/
• http://www.slideshare.net/3scale/the-api-economy-api-provider-perspective-
european-identity-summit-2012
35

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