Business with API For Dummies

If you are not living under a rock, most probably you have been using at least few online services (Google services, Facebook, Instagram, etc.) to make your day.

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For example, if you are using Instagram for picture sharing, you can also share the same photo on your Facebook, Twitter, (by) Email, Tumblr, Flicker and few other services at the same time. Simply tap on the service you want to share your picture, authenticate (login to that account once) then press share. Done.

To communicate with outer services, these services must be binded somehow. Connection between services are done by API‘s (application programming interface). Each induvidual service needs an API to communicate with external services. You can think an API as a gate of the service.

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When you want to publish your picture on Facebook via Instagram, Instagram triggers its API to knock the Facebook API’s “door” with your username, password and image data. API‘s mostly “talk” to each other by JSON and XML. When Facebook API approves your credentials, your post will be published on your Facebook account. Almost all API’s for sharing content works this way.

API’s are being developed and used since beginning of 2000According to the ProgrammableWeb’s API Growth graph provided above, number of API’s developed have been increased exponentially since 2010. So, API technology promises good business.

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Seeing the potential for API technologies, many companies supported developers to work on their API’s by sharing their specifications and making them free to spread usage.

Ironically, there are so many business people, who has been”marketing” their own API and services, without having any clue about what they really do.

In the nutshell, it’d better if we know what can be done in API business. Following business models are applicable for API’s, stated below by examples:

  1. Affiliate Channels: Affiliate channels is a type of performance marketing, based on criteria’s including CTR, CPA, CPC, CPI, signup referrals, convergence, etc. The host site is called as affiliate. Affiliates are paid mostly when traffic is converged by users regarding with third party products on their site. For example, Skyscanner is a big affiliate channel, selling airline tickets from different providers and gaining commissions from landing to product page and purchase of the product.
  2. Customer Acquirance: By using Spotify, you can acquire more customers according to their music delight. With this API, you can fetch client music lists and gather more insight, having more accurate targeting on customers.
  3. Customer Retention: Having a freemium model, Evernote bind clients with nice features so that they can’t make with any other noting service, mostly saving free customers and encouraging them to upgrade. It is a good example of increasing customer retention. According to usertesting.com, stating Evernote increased their user retention by 15%.
  4. Product Distribution: You can distribute your product (software, a tangible thing, even a hotel room) by one of these API’s to the world easily. Using Booking.com, if a hotelier (also providers, group hotels, chains etc.) can distribute their rooms all around the world, using their API. Here is my another article talking about how online hotel accomodation systems work to understand further.

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Above mindmap provides a summary about API business and several examples. Here is the glossary of some terms stated in the mind map:

Pay as you go: You’ll be charged as you use the service(s). There can be many different service packages might suit you. Amazon Web services is a good example of this.

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Tiered: Use of service is free up to a certain limitation (user count, bandwidth, disk capacity, etc.). Then you are asked to buy a tier from the options. You can see example tiers above. If you pass the package limit, you’ll be extra-charged.

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Freemium
: This is one of the most popular options provided over the web. It is popular because of giving the free‘dom to the users to use the apps without day restriction. Beside free option can be used, there are also premium options offered for people who is asking more. Pushbullet is one example, its free vs pro comparison is provided above.

Unit Based: Every use of API is based on “credits”. You buy “credits” to use their services. Google Adwords is one example.

Transaction fee: You are charged (a commission fee) per each transaction by an intermidiary service. You can think like a virtual payment gateway (think like POS machines) as an example or Paypal in this category.

Cost Per Action: In many online stores, like Amazon and Code Canyon, if you sell your items there, they charge you a fee per each purchase made or you can share the revenue. In this senario, only clicking is not enough, optimized convergence (purchasing an item, completion of a funnel, etc.) is essential.

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Cost Per Click: Facebook display ads to millions of people every day (depends on your target and budget). If you state that you’ll pay according to CPC, they charge you for each click you receive on your ad. There is also an CPM option as can be seen above, but it’ll most likely run out your budget with just showing your ad (it depends, actually). As another example, Trivago gets the commission when a search result is being clicked.

Content Acquisition: This term means that data content is provided by external sources. For example, Twitter’s tweets are mostly (60%) coming from other integrated services, or bots.

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Signup referral: Many services provide signup referral discounts. For example, Digital Ocean, where many developers use it for hosting their services, offers a referral system, as you can see above sharky image.

SaaS: This is the abbreviation of software as a service. This means that a service can be used by different clients on different hosts. For example, if you need a customer service product, you can buy Kayako as a package and use it as it is your product.

Upsell: Normally, upselling is sales technique that inducing the customer to buy more expensive services than they usually do. For example, on some API’s like there are “upgrade” options, providing more options to the clients.

Content Syndication: Normally newspaper or similar content based networks use such services. As a popular newspaper, The New York Times, use such service to publish journals, articles, images, multimedia to thousands of clients.

So there you have it. Please let me know if there are any problems with this article and share your experiences via commenting below.

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