Building Effective API Programs: API Business Models

[This article was written by Manfred Bortenschlager.]

What is the Right API for the Business Model?

As discussed in the previous post, an API program must be embedded in the overarching business strategy and aligned with business goals. The business model is where the rubber meets the road here — how this API, or these APIs, will interact with existing resources, activities, and partnerships as well the the required cost structure.

Make sure you’re asking the right questions. A common mistake when discussing API business models is to think of the API first. What business model should I adopt for my API? Instead, focus on how an API can be applied to support existing business. What is the right API for my business model? Even in cases where APIs lead to entirely new business opportunities, they generally do so by leveraging existing assets or expertise in new ways.

It’s important to be very clear about how an API will interact with a business model in order to:

1. Bring an API’s value to the organization into focus, which drives decisions to make long term commitments and allocate sufficient resources to the API program,
2. Define an API’s functionality on the product, and
3. Force the conversation about roles and responsibilities within an organization — Who retains which parts of the value generated by the API? What do users of the APIs gain? How does that balance with what the API provider gains?

As APIs can span several departments within an organization, they can also span multiple parts of the business model. There may be more relevant to particular areas, but it is crucial to explore all possibilities. There must be a holistic vision.

It can be helpful to map out the relationships to make sure you’re looking at the whole picture. Alex Osterwalder’s Business Model Canvas is a helpful tool to think about the core elements of the business model and their relationships in a visual way.

It can help to provide structure to make you’re taking all elements of the business model into consideration when thinking about your API program.

We recommend communicating these high level decisions internally, as well as to customers and partners. This will show key players the depth of the commitment to the API in addition to what may be “out of bounds” for third parties.

Example: Senzari MusicGraph API

The MusicGraph API is an adaptive recommendation and personalization engine delivered via a simple graph API that allows you to search through more than 7 billion music facts and connections.

Senzari offers significantly more cost effective plans for companies of any size and budget to start building creative products and services powered by an intelligent, scalable and context-aware music recommendation engine. They use a graph model to semantically connect the data (user and music data) and offer unparalleled flexibility and personalization capabilities for their customers.

The MusicGraph API offers:

• Context: MusicGraph integrates with a wide range of sources — social media, peer-to-peer, Wikipedia, Spotify, MusicBrainz, taking into account what is popular locally, etc. This provides rich contextual data for a significantly improved personalization and recommendation experience.
• Cost: Senzari offers the most cost effective music recommendation and intelligence solution in the market today. Starting at $1000 per month, the barrier to entry is much lower than the competition.
• Music Intelligence: Senzari offers the only music-specific analytics and intelligence (machine learning) platform, MusicGraph.AI, allowing customers to derive critical insight from the massive volumes of user and musical data stored in their semantic graph.

The API is at the core of Senzari’s business vision and development efforts, using the company’s core assets to offer key services such as Graph Search, Playlisting, Musical Data and Social Signals.

You can read more about MusicGraph in our previous post, or check out their developer portal.

Checklist

• What is the role of the API program and its contribution to the organization’s overarching business strategy? Define the value proposition of the API. Define the tactics to deliver and capture that value, which customers you want to address, via which channels.
• Which key activities are necessary? Have agreements in place for all resources required.
• Define clear roles and responsibilities within the organization.
• Think about and arrange necessary strategic partnerships external to the organization.
• Understand how the API program is embedded into the organization, which dependencies result from it, and how to handle them.
• Make sure you are fully aware of the cost and financing.
• Make sure you clearly communicate the value and implications of the API program internally and externally.

In the next part of this series we’ll cover API design and implementation.