Show me the money: API Monetization »

(Next in our series on API roadmap considerations and following our last entry on "API business models")

At some point most API product managers are on the hook to demonstrate how the API results in downstream revenue.

And even if you never intend to charge for your API, you may be surprised by unexpected opportunities.

I used to be responsible for a number of ‘free open, take-it-or-leave-it APIs’ at a large Web portal. After a few months, the team was surprised to get a ton of calls from big companies that wanted to pay (a lot) for use of the API within their commercial products. 

One small detail -  they expected that the API could support some of the basic business terms of any commercial deal.  For example – could we:

• Meter service and give them a bill every month?
• Enforce a special rate limit give them an “SLA” (service level agreement)?
• Insert extra data fields if they were willing to pay for more licensed content?

We also needed some other basics:

• SOX compliant audit logs for each deal.
• Reporting on the cost of the data served by the API. (because we were licensing it from another company)
• The means to enforce similar terms on a ‘package’ of multiple APIs together in one deal

Unfortunately, all of these needed to be coded as they came up, so it was a big strain on development, PM and BD to tough to lock down and execute deals in time.

So – even if your API business model is already covered and baked in your API – you may want at least the option to support a slightly tailored or customized relationship.   You may need to quickly tailor the APIs syntax, protocol, priority, or content to a specific opportunity.

Once you have partners using an API, your business managers and partners will put your team under a lot of pressure - dollars are lost each day a business policy change takes to make.

So consider if you’ll ever need to abstract these policies – the difference between the API content and features that and the commercial business and operational terms of each deal – in an a separate API policy layer that you can manage quickly and independently of development cycles.  Or to make a single change across multiple APIs. (here's a case study on an API policy layer.)

Therefore, some questions to ask for your API roadmap might include:

General business and partner model questions:

• How is your business and revenue model supported by your API?  (are you looking for distribution and awareness only? Does the API drive a monetized transaction?  Will you ever charge for ‘pay by the API drink’?)
• How are your costs reflected in your API?  Do you pay for any of the data you are serving up?  If so, how do you keep track of this for the business and partner?
• Will large partners or deals surface where your team will need to change the API content, SLA, protocol or content?   Is there a partner that might want to pay enough and who is large enough to drive your team to move a way from “one size fits all?”
• Will you need to create ‘service tiers”?

Enforcing unique business and operational terms

• How will you meter service like a utility, so that you can bill partners and report data costs?
• What regulatory compliance will you need to support?  Do you need SOX-compliant audit trails by partner?  HIPPA?  PCI?
• How would you create and enforce a partner specific SLA, rate limit, or offer ‘priority access’ to a priority partner?
• If the partner wants any change in the API protocol or content – do you need to support a different API code-base?   Is there a way to create a transformation layer to handle and scale this?
• Do you need to buffer up or queue incoming requests?

Next time: API User management and onboarding

(and thanks to unhinderedbytalent for the photo - check out the detail on the full pic..)