APIs (Application Programming Interfaces) are becoming an increasingly important asset on which businesses of all sizes can capitalize. In short, APIs are eating software. With the data market expected to experience ten-fold growth before 2031, virtually every company holding data has a business in waiting. APIs bring numerous business advantages in a competitive market: facilitating access to said data, helping data integration from multiple sources, and creating a more unified customer experience. But understanding where the value lies and how to capture it can be more complex. This article will help you determine the right value for your API.
How can your API product respond to a requirement?
Understanding the value of your data
Before asking yourself about the value, the first thing to figure out is what requirements your API can meet. Or, in more simple terms, how you can turn your data into gold? The thing is, if you simply treat your future API as pipes for channeling your data to your future API consumers, it won’t work. What you need to assess is how to put together a workable product that will be your API.
Electricity Maps combine scores of data from multiple electricity suppliers around the world. Making an API to merge and provide this data wouldn’t have much value. What creates value here is how they use this data to calculate carbon intensity and 24H forecasts, through ML models. Their clients can use this data to optimize their electricity consumption and carbon emissions, when carbon-neutral electricity sources are more likely to be used, for example.
This, of course, is a special case: Electricity Map is a start-up and an API-First. But if you work in a larger corporation which doesn’t have APIs as its core business, you may already have everything required at your fingertips to make your data work for you. Ask yourself how your large sets of data can be leveraged to create new value.
For example, you may be a car manufacturer, and still have room to grow an API business—data collected by your cars can be monetized to feed the third-party apps of various businesses. Almost all industries can work their way into building an API business!
How to evaluate the value of your data?
This brings us to how you assess the value of your data. Is it real-time? Unique? Is it easy to access the same kind of data elsewhere? And if so, is yours more accurate? Here is a tip on how to answer these questions: make a comparison between your data and skills-or put differently, compare your data to the value brought by a person with a specific skill set.
The perceived value of data varies a lot from one customer to another. If you cannot measure and understand the value you provide a buyer, you cannot monetize it well and you will not capture a fair share of that value. If the link between results, value, and price is not well articulated and communicated, it creates a risk for buyers. The risk they perceive will influence the price they are willing to pay.
Before selling APIs, you need to understand data value, and prepare, analyze, and deduce the insights your datasets provide customers. It requires specific practice to capture the most value provided for each customer.
How to outline your first API product?
You have now identified the value of your data and where the salient points of this value lie. In doing this work, you may already have identified product ideas for your future API. For further guidance on how to design your API business, we will use the Design Thinking method developed by Mathias Biehl to help you iterate and find the perfect formula.
API Design Thinking is a method designed to help businesses create successful APIs. It's based on the idea that any profitable API must be designed with a specific purpose in mind. Biehl's method focuses on four key areas of API design—purpose, consumer, experience, and technology.
The four steps of API Design Thinking
First, it's important to determine the purpose of the API. What are the desired outcomes of this API, and how will it add value to the business of your API consumers? Knowing the purpose of the API will help the designer determine what information should be included in the API and how it should be formatted.
This added value that will transform your data into a successful API product will not be easy to find: it will probably require iterations and some pivoting. The easiest way to spark your imagination is to start from an identified pain point, which won’t in itself provide the solution but will set you on track. Remember car manufacturers? An API product bundling mileage and speed data will probably sound right for Insurance businesses.
Second, it's important to consider the technology. What kind of technologies will be used to develop the API? Understanding the technology will help the designer create an API that is secure, efficient, and scalable.
REST API using OpenAPI specification is the most widely used technology, but others are sometimes better adapted to the profile of your product, like GraphQL or AsyncAPI.
Third, it's important to consider the API consumer. Who will be using the API and what do they need from it? Knowing the consumer will help the designer determine the best way to design an API that is user-friendly.
To deliver this requires crystal clear documentation. The documentation must be straightforward and concise, and include use cases, rate limits, and error codes. Add code snippets and a “Try out” button to test the endpoints and you will have provided the documentation every developer dreams of.For example, the “Try out” option is important for API consumers who do not speak good English, adding a visual means for them to see for themselves what the endpoints can achieve.
Finally, it's important to consider the experience. How will users interact with the API? What kind of user interface should be used? Knowing what kind of experience users will have will help the designer create an interface that is intuitive and easy to use.
Your API will probably end up being quite large, with a dozen endpoints. This is why API Products are so important for the API consumer experience. By breaking your API into use case-based API products, you will facilitate the integration work. Choosing the right way to display your APIs is also key: a sleek API store will attract product and developer profiles alike, thereby increasing your chances of making a success story out of your API business.
By following the API Design Thinking methodology, businesses can create APIs that are powerful, intuitive, and designed with a specific purpose in mind; and by understanding the purpose, consumer, experience, and technology of the API, businesses can build a successful API which adds value to their business and makes life easier for their customers.
You are on track to create a thriving API business. But there’s still some way to go! The next steps include finding the right API business model and the right pricing. To help in this matter, we have drawn up this comprehensive API monetization guide. And there’ll be more coming soon on this blog to help you fulfill the potential of your future API business.
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