One Approach To Consider When Crafting Your Pricing As An API Service Provider
13 Aug 2015
One of the areas I focus on in the API space, is the business of APIs, and how companies actually make the rubber meet the road when it comes to pricing the API resources they are serving up, as well as the price that API service providers offer up to their customers. After security, monetization is the top question I get from the folks i am talking to about their API strategy.
I've been watching the SDK service provider APIMATIC move from a company in beta, to announcing pricing for the valuable API service this last week. I love watching any company break up their valuable resources and services, but feel APIMATICs pricing announcement is interesting enough to warrant a story, because it provides other API service providers with one possible blueprint they can use.
APIMATIC is somewhat unique, because they generate SDKs for your APIs, but the way they define their service and broke it up into units of measure valuable, can be universally applied. APIMATIC distilled their service down to a basic unit of value--line of code, or LOC:
LOC stands for lines of code. KLOC is a short form for 1000 (1K) lines of code. We use KLOC to estimate the size of an API and charge accordingly. An average API would consume about 1 KLOC.
You get different amounts of KLOC, depending on what tier you are in, with a free, professional, and commercial levels of access, as well as a pay as you go option at each level. Even though APIMATIC are an API service provider, who provides services to API providers, APIMATIC's pricing reflects an API way of thinking.
The lessons here for other API service providers is not necessarily about a KLOC, but about the process of distilling down your service to its smallest possible unit of value. Then you attach a freemium doorway to the front, break down into reasonable priced, evenly scaled service tiers, with a pay as you go option along the way. The cherry on top, is provide spending calculator--which APIMATIC rocked.
This provides us with a model that other API service providers should be looking at. You can apply this thinking to multiple service area, and aren't limited to a single unit of value like KLOC, you can have an ala carte buffet of services, with different pricing levels, depending on where you are at in the service tiers. Think of it as a monetization framework for API service providers that also reflects how APIs are priced.
While the services you are offering to the space may be different than APIMATIC, the model is something you should think about as you craft your monetization strategy. I see many companies fail because they don't offer the freemium portion, don't have evenly spaced service tiers, or haven't actually distilled their service down into a meaningful unit of value. Hopefully the APIMATIC story can help you avoid stumbling blocks in your own monetization journey--which is what API Evangelist is all about.