Monetizing APIs

Publishing open APIs is one thing, monetizing them is another thing altogether. So how can you make money by publishing APIs?

Adam DuVander of ProgrammableWeb published an excellent blog post on exactly this subject. The Intuit – Twilio story is a great example of how a new economy is evolving around this concept. While Twilio have based their entire model on usage-based charges on open APIs, Intuit has used APIs to enhance their existing services.

“So the story goes, an Intuit employee was checking out the Twilio API documentation on a Friday afternoon. Intuit is a large payroll and accounting software company that wouldn’t have been on Twilio business development’s radar, at least not back then. The Intuit employee looked at the public docs, signed up for a trial account and spend the weekend creating a prototype. On Monday she shared a system that now performs payee verification for the millions of employees processed by Intuit’s systems. All while the team from Twilio was none-the-wiser.”

Though Adam raises multiple other models for monetizing APIs, I think these two will be the predominant models in the market for some time. However, some experts predict that this economy will quickly become much  more dynamic.

Kin Lane posted his presentation from Gluecon that suggests the API economy will change much more dramatically, including the emergence of developer unions and social coding models. There are some really interesting thoughts here, so I suggest you take a look.

Amongst other things, Kin notes that SaaS and PaaS models will emerge that focus specifically on APIs, and that open source tools will emerge for publishing APIs and embeddable widgets. Some of this is already happening, but the possibilities are pretty exciting.

One of the amazing things that Kin points out is how far the API publishing world is ahead of the governance model that typically controls these things. Unlike Web Services, that for years was gated by standards emergence, APIs have flourished in a “Wild West” setting that has encouraged rapid evolution and proliferation, but left gaping holes in some areas. Specifically he notes that service and structure standards have yet to emerge, and that privacy and security are trailing current implementations.

That said, the API Management offerings in the market provide answers to many of these holes, which I believe is facilitating adoption by many large enterprises that would otherwise shy away from the risk.

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