Your API monetization strategy should accelerate revenue. But when it comes to API monetization strategy, even some of the most advanced digital transformation leaders often come up short.
What is it about monetization that proves so challenging? API monetization is difficult to scale because of the complexity and customization required. No two companies will take the exact same approach. And your monetization strategy will depend heavily upon whether you have the tools and talent to take APIs to market using a product lifecycle mindset.
To simplify your journey, we will explore best practices for monetizing your APIs in this blog post. While no two companies will have the exact same approach, there are certainly some fundamentals that every API strategy can benefit from.
4 Steps to Building an API Monetization Strategy
In order to find success, every organization must step back and assess the opportunity using a revenue mindset. A plug-and-play approach will not yield long-term results. Many organizations create small API monetization teams, or hire a dedicated product manager to manage the product lifecycle end-to-end.
Your API monetization strategy should include the following steps:
- Assess the API Revenue Opportunity
- Select an Appropriate API Monetization Model
- Scale Full Lifecycle API Management
- Optimize API Monetization Around a Developer Community
With that in mind, let’s dive in.
1. Assess The API Revenue Opportunity
The first step to build your strategy is to assess the revenue opportunity.
API revenue is simply the direct or indirect potential revenue available to your organization through APIs. Direct API revenue involves making money through the direct sale of an API. Indirect revenue means you will generate revenue through the exposure, usefulness, or repurposing of your API. This results in customer acquisition, retention, or channel exposure. This approach is far more common. Finally, indirect API monetization includes revenue generated through advertisements. An ad-based model is typically used in B2C scenarios.
Here’s how you can assess the opportunity.
Audit Your API Management Capabilities
First, you need to know your strengths and weaknesses. Are you scaling dozens of APIs across your enterprise or just dipping a toe in the water around select digital properties and capabilities? If you are still in the process of building APIs around core digital offerings and products, you may need to hold off on monetizing until you have a full lifecycle API management program in place.
Define The Target Audience For Your APIs
The value of your APIs will be decided by the developer community. Before monetizing, you must get a handle on the specific use cases and developers who will benefit from consuming your APIs. Without a sense of who will use your APIs, and how they will use them, you simply can’t monetize.
Bookend the Low and High Estimates of Your Potential Reach and Developer Audience
General forecasting can help you decide how much to invest in your monetization strategy and APIs in general. Perform some competitor research and create book ends for the size of your potential audience and developer community. Use web analytics to discover how large the communities, threads, and API marketplaces are where your APIs will find a home.
Calculate Potential API Revenue
Even with a general estimate of your potential developer community and reach, you can quickly calculate your potential API revenue.
Do you expect to gain 5%, 20%, or 50% API adoption? If that number of developers incorporates your API, what will the specific revenue target be?
This is not rocket science. You want a general sense of the kind of traffic, exposure, and adoption you can expect to receive. If you do receive your target adoption, sketch out the potential business outcomes, even if these provide indirect benefit to your organization. Even an internal API that can streamline IT processes stands to offset costs. It’s good to know what those costs are.
2. Select Your API Monetization Model
Like we mentioned above, your API monetization will rely on your industry, digital footprint, and specific offerings. Explore the various API monetization models available to you and decide which fits best in your industry.
In our recent webinar, Forrester analyst Randy Heffner shared guidance on the types of API monetization. Watch the webinar below, or keep reading to dive deeper into API monetization models.
These options include the following.
API Exposure Via Business Partners
Expose APIs for business partners or outside organizations to use within their digital footprint. This is common across banking, retail, travel, hotels, real estate, and in some cases software.
Indirect Content Monetization
Deliver or syndicate content via APIs in order to generate advertising or exposure-driven revenue. This is common across digital commerce, B2C entertainment platforms, review and news applications, and social media.
Internal Closed API Monetization
Create business value and revenue by making APIs available to internal developers. This has become increasingly common in a variety of industries as organizations begin to appreciate the speed and flexibility of APIs. When an organization allows their developers to improve internal systems and processes, greater savings and revenue are the result.
B2B API Monetization
Offer a unique service or value via APIs that B2B customers and partners can leverage. This is common across insurance, banking, real estate, or nearly any B2B organization which has a sales force, or broker component. When you make it easier to tap into your organization across a variety of channels, you will be more likely to retain your B2B partners and customers.
Channel Expansion API Monetization
Develop an API on top of a toolset, software, or service that will benefit from greater marketplace adoption. These are applications designed for adoption at scale and the API monetization approach is all about greater channel exposure. This is common across weather apps, streaming music services, food delivery applications, travel applications, and enterprise or consumer messaging applications.
3. Scale Full Lifecycle API Management
If you wish to monetize your APIs, your approach to API management will need to be advanced. Simply developing and making APIs available is just the first step. Full lifecycle API management involves the development, deployment, security, management, and retirement of all APIs. From scaling a developer portal and API marketplace, to monitoring API analytics and overall performance, this is about end-to-end control of APIs.
Full lifecycle API management enables API monetization in three critical ways.
Creating API Scalability
Full lifecycle API management offers a systematic approach to launching and maintaining your APIs. As APIs gain adoption, full lifecycle management allows for greater insight and control over API performance. This is just one type of lifecycle management.
For example, Akana’s full lifecycle API management platform allows users to automate API and app provisioning. In addition, it allows for the management of all APIs from a single interface. The results are greater efficiency at scale. As your APIs gain adoption, managing them remains easy. When managing APIs in a distributed fashion, gaining insights into their functioning can often take days. And making changes likewise takes weeks, as decision makers and developers are spread across the enterprise. With Akana, you can scale up or down in minutes.
Enabling Greater Security
Likewise, using a consolidated full lifecycle management approach will enable greater security as you monetize your APIs. Akana’s software comes out of the box with advanced security features. When managing your APIs using a full lifecycle approach, you can build security into your entire API approach, as opposed to merely appending security after the fact.
When working with one-off APIs, developers will often only consider the security of the API. When using a full lifecycle approach, the enterprise takes a broader view. Security is at every layer of the API lifecycle from developer portal, to marketplace, with APIs and beyond.
Improving API Governance and Versioning
API governance is critical for organizations who must prioritize risk mitigation. Yet, this is no longer just a subject for the large enterprise. Small and large organizations alike are bombarded with more security threats with each passing year.
When you manage APIs using a full lifecycle approach, governance becomes consolidated and simplified. Again, when your API management is distributed across organizational silos, different busines groups will take different approaches. This opens up the enterprise to risk and governance challenges.
4. Optimize API Monetization Around a Developer Community
Building and nurturing a developer community are both critical to the success or failure of your API monetization strategy. After forecasting the size and needs of your developer community, selecting a monetization model, and scaling full lifecycle management, it’s time to focus on your developer community.
The central tasks in this step are creating a developer portal and marketplace. Scaling an API marketplace and developer portal both require a keen understanding of usability, design, and functionality. When you use an API management software like Akana, your developer portal and API marketplace come out of the box ready to use. With Akana, you can easily customize your API marketplace using your brand’s look and feel.
There are a few key factors to success in optimizing your API marketplace and portal.
Promote Your API Marketplace
You want to show up wherever your target developer audience spends time on the internet. Find ways to enter conversations across social media, forums, and other app marketplaces. Your API marketplace is a product. You should promote it using many of the same tactics you would use with any other digital product.
Scale API Analytics
Unfortunately, API analytics are overlooked by many organizations. Focus on usage analytics, performance analytics, and marketplace platform analytics. While you should track the healthy functioning of your APIs, you should also keep an eye on the web analytics of your public marketplace.
Is your developer audience able to easily find what they are looking for? Are they submitting reviews, downloading documentation, and suggesting bug fixes? Interactivity is the hallmark of a thriving marketplace.
Thorough Documentation
You can offer the best API on the planet, but without documentation no one will adopt it. Spend ample time building and updating your documentation so that your developer audience can easily adopt and work with your APIs. Akana’s platform offers native documentation features. This allows for automatically generated documentation, with minimal customization required on your part.
👉 Become an Expert
API Monetization Platform With Akana
With Akana’s out-of-the-box features, you can have your APIs, developer portal, and marketplace up and running in minutes. We offer end-to-end security and full lifecycle API management.
In addition, we can support your API monetization strategy no matter your industry or size. We have enabled a variety of clients across dozens of industries to gain efficiency in their API management. This includes everyone from large global banks monetizing OAuth-secure APIs to farm equipment manufacturers monetizing vehicle APIs to collect crop data.
Whether travel company, seed developer, financial institution, or government agency, Akana can partner with you to develop a scalable API monetization program.
Sign up to find out if you qualify for a free 6-month trial, or watch our on-demand demo to see Akana in action.