The 5 API Monetization Models and How to Measure Their Success
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An API program is only as successful as its ability to move the business toward its goals. Applying one or more of these five monetization models can help your API achieve measurable, reproducible success.
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The 5 API Monetization Models and How to Measure Their Success
- 1. The Five API Monetization Models Rob Zazueta Director, Platform Strategy Intel Services – Mashery @rzazueta Intel Confidential — Do Not Forward
- 2. The success of an API program is measured by how well it moves a business toward its goals.
- 4. 1. Charge Directly For Your API – Either By Call Volume or Subscription
- 7. Measure the Average Revenue Per API User ARPU = Total Revenue ------------------------ Number of Users
- 8. 2. Use API Access As An Upsell Opportunity
- 10. How to Measure Success • Compare sales of packages including the API against sales of other packages without the API. • Ensure the sales person marks the customer’s level of interest in the API at the time of sale. • Measure the number of calls made by API enabled packages to determine whether it’s a factor in the sale of that package. • Measure ARPU of active API customers against non-active API customers.
- 11. 3. Drive Revenue-Generating Activities Through Your API
- 13. How to Measure Success • Properly attribute revenue generating activities to the apps that drove them using API keys. • Follow the complete chain of application usage – many apps may lead to a single revenue recognition. • Not all calls directly lead to revenue – measure ARPU against API usage.
- 14. 4. Generate Revenue and Increase Distribution Through Strategic Partners / Affiliates
- 16. How to Measure Success • Carefully plan with your partners how success will be measured. • For affiliates – pay only for directly-related revenue generating activities. • Measure new customers brought in through partners / affiliates. • Measure the ARPU of new customers brought in through partners / affiliates vs. ARPU of other customers and total ARPU.
- 17. 5. Improve Operational Efficiency and Decrease Time to Market For Internal Projects
- 18. “Comcast went from about four weeks’ lead time to just a few hours to onboard partners.” - Hai Thai Senior Engineer, Comcast
- 19. How to Measure Success • Review old project plans – measure average time from inception to completion. • Review existing provisioning processes. Measure the amount of employee time and actual time taken to completion. • Seek new ways to decrease these numbers not only through APIs, but through other efficient processes.
- 20. Flickr Image “Lego Bricks” by Benjamin Esham
- 21. Thank You! Rob Zazueta @rzazueta http://apistrategy.tumblr.com http://www.mashery.com/blog Intel Confidential — Do Not Forward
Editor's Notes
- And what is a business’s primary goal?
- To make money, of course. Successful API programs all have one thing in common – their success can be measured and tracked against the revenue goals of the business. If your API is not helping the business generate revenue – directly or indirectly – it is living on borrowed time.
- The first model is also the most direct. This is where most people start when considering how to make money from their APIs. It’s the most direct way to earn money, but it’s also the most difficult to implement and make successful.
- APIs that provide data with a clear value tied to it are most successful using this model. But that value must be made clear to the developers consuming it – they need to be able and easily turn around and generate the revenue they’ll need to pay for access to your APIs. It’s wise to offer some level of access for free to allow developers to integrate with your API without oulaying a lot of upfront cash. It also gives you a chance to clearly demonstrate the value you’re providing and making the case that it’s worth what you’re asking for.
- How do you measure success in this model? Mad stacks of cash, yo. This is the easiest way to track how much revenue your APIs are generating – just look at your paid API usage numbers.
- Another metric to consider is ARPU – the Average Revenue Per User. You’ll see this term pop up a lot in these slides because it’s a great way to normalize your revenue over the number of users you’ve attracted. It’s the easiest way to see how well your growth strategies are working – if revenue increases but ARPU goes down, you may want to check your strategy.
- The second model is less direct, but still sees customers paying for access to your API. In this case, you may offer API access as one of many features to a higher tier of product access.
- Salesforce is a classic example. The Enterprise tier includes API access so customers can create custom, private integrations with their existing systems. There is inherent value in providing that level of access, so it comes at a premium along with several other nice features.
- The third model is focused on driving revenue generating activities– lead generation, revenue recognizing actions, etc. – through your API.
- Email marketing companies often follow this model. They recognize revenue either through monthly subscriptions or when emails are actually sent. However, many integrations use the API solely to automatically import contacts, leaving the actual sending of the email to the web interface. Importing contacts does not directly generate revenue for the email marketing company, but it makes it easier for their customers to use their system to send emails.
- The trick in this model is that you need to clearly and carefully track the workflow that leads to revenue.
- Strategic partnerships can have many goals – increasing distribution by accessing each partners customers, sharing revenue by reselling each others’ services, etc.
- Companies that integrate with several larger third party apps follow this model. These integrations should lead to additional value for the customers of both partners.
- The metrics for each partnership depend on the goals of the partnership. Make sure you consider these goals and get these metrics in place as early into the partnership as possible.
- APIs aren’t just for external integrations – they can also dramatically improve your internal development and innovation.
- Companies that implement well-designed, well-built internal APIs consistently see dramatically improved time to market and reduced onboarding time for new projects. This leads to cheaper, lower risk projects that help your team exploit new markets faster.
- Perhaps the most important thing to note about these five models is that you’re not tied to just one. Your API can provide value through one, a few or all of these. Properly measuring how each model contributes to the success of your API can help you determine where to spend your energy as you make improvements and grow your program. Flickr Image “Lego Bricks” by Benjamin Esham https://www.flickr.com/photos/bdesham/2432400623/in/photolist-4GWFXM-bN8fiD-bxTeiW-nSfShi-a1gXu6-7EoLZF-cD7Gsy-bnnin4-biKE3B-6N44Ay-bQvggp-nUiZpi-9ff7LL-7FK1bV-7ZYuSQ-bPvScR-67rTzo-bPvSbv-9KCchQ-4JwoVJ-biKDq8-bod1S7-av4ne5-ptWbJU-bQc1fK-bvSHai-8VGBoG-ddarfm-AoFtn-pdBRWJ-jk5dq-9r5U1V-bBhm5G-9r7zfL-9r9m93-91GcYS-5UnNBn-a1jJsA-cgCuuh-bBhkMJ-8Vsd5C-bwsn5n-8iJLLV-aQvnMg-7ZYuZ7-dSLmSx-dgLmhm-bBzpaL-aLHKDR-btsp9A