Adding A 3rd Dimension To My API Monetization Thinking
15 Sep 2015
When it comes to the API space, it always takes numerous conversations with API providers and practitioners, before something comes into focus for me. I've spent five years having API management conversations, an area that is very much in focus for me when it comes to my own infrastructure, as well as using as a metric for reviewing the other public and private APIs that I review regularly.
While I have been paying attention to API monetization for a couple years now (thank you @johnmusser), in 2015 I find myself involved in 20+ conversations, forcing the topic to slowly come into focus for me, whether I like it or not. When talking to companies and organizations about how they can generate revenue from their APIs, I generally find the conversation going in one of two directions:
- Resource - We will be directly monetizing whatever resource we are making available via the API. Charging for access to the resource, and composing of multiple access tiers depending on volume, and partnerships.
- Technology - We believe the technology behind the API platform is where the money is, and will be charging for others to use this technology. Resulting in a growing wholesale / private label layer to the API economy.
90% of the conversation I engage in are focused in the first area, and how to make money off API access to a resource. The discussion is almost always about what someone will pay for a resource, something that is more art than science--even in 2015. The answer is, we don't know until there is a precedent, resulting in an imbalance where developers expect things for free, and providers freak the fuck out--then call me. ;-)
As more of my thoughts around API monetization solidfy, a third dimension is slowly coming into focus, one that won't exist for all API providers (especially those without consumers), but is something I think should be considered as part of a long term roadmap.
- Exhaust - Capture, and make accessible the logs, usage, tooling, and other resources that are developed and captured through the course of API operations, and make available in a self-service, pay as you go approach.
There are many ways you can capture the exhaust around API operations, and sell access to it. This is where the ethics of APIs come into play--you either do this right, or you do it in a way that exploits everything along the way. This could be as simple as providing an API endpoint for accessing search terms executed against an API, all the way to providing a franchise model around the underlying technology behind an API, with all the resources someone needs to get up and running with their own version of an API. If you are very short-sighted this could be just about selling all your exhaust, behind the scenes to your partners and investors.
To me this is all about stepping back, and looking at the big picture. If you can't figure out a theoretical, 3rd dimension strategy for making money off the exhaust generated by the resource you are making available via an API, and the underlying technology used to do so---there probably isn't a thing there to begin with. Well, if you can't do this in an ethical way, that you will want to talk about publicly, and with your grandmother, you probably shouldn't be doing it in the first place. I'm not saying there isn't money to be made, I'm say there isn't real value, and money to be made that also lets you also sleep at night.
This opens up a number of ethical benchmarks for me. If you are looking at selling the exhaust from everything to your VC partners, and never open it up via your public APIs, you probably are going to do very well in the current venture capital (VC) driven climate. What I'm talking about, is how do you generate a new layer of revenue based upon the legitimate exhaust, that is generate from the valuable resource you are making available, and the solid technological approach that is behind it. If there is really something there, and you are willing to talk about it, and share publicly, the chances I'm going to care and talk about on my blog increases dramatically.
If you do not have a clue what I'm talking about, you probably aren't that far along in your API journey. That is fine. This isn't a negative. Just get going as soon as you can. If you are further along, and have people and companies actually using your API, there is ap robably a lot of value already being generated. If you partner with your ecosystem, and educate, as well as communicate with end-users properly--I am just highlight that there is a lot of opportunity to be captured in this 3rd dimension.