A Quick Guide to Monetizing your APIs

Gozde Orgun
Gozde Orgun 23 September 2020
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You are sure about the potential of your API but don’t know how to earn revenue out of it. Here is a brief guideline on API monetization.

API monetization

APIs are greatly used in the current business environment with a bunch of potential benefits. They are used to expand businesses with potential partners or used as a marketing channel to acquire new customers and users. Moreover, they enhance the audience and the atmosphere of the product and improve integration of separate services of different systems and devices.

API monetization, on the other hand, is the process in which the provider earns revenue from their APIs. Since APIs provide an environment for both the provider and the customer, it is quite important to have a dynamic and informative relationship between them, namely, to have a common agenda. It is not just about the profit, so maintaining the operations and relationship with the customers is also vital in the API monetization strategies.

Different types of APIs offer both direct and indirect values, and it is crucial to be aware of such opportunities before employing a monetization strategy for your APIs.

Indirect Values

Many companies prioritize indirect values of an API when planning their API strategies in order to develop better and more comprehensive monetization strategies in the future. So, before mentioning certain methods on increasing direct values of an API, it is important to point out potential indirect ones.

An API may serve as a marketing vehicle and enhance the online presence of a company. It may increase the traffic of a particular website or application by providing an integration with the service. It may increase brand awareness by increasing the exposure and interaction with the audience through well-designed marketing strategies. Moreover, certain APIs provide content acquisition, which again would be beneficial in value creation for the company. Furthermore, by complementing a core SaaS (Software-as-a-Service), an API may provide additional value for the users.

Direct Values

After considering potential indirect values and monitoring the process, now it is time to set up a monetization strategy for your API. You must carefully consider the value that your API provides. Do you provide a value? Is there a market for that? Is it in demand? If so, are there any competitors? Additionally, do you track the data of your API and customer? Are you able to adopt yourself with the changes in the market or in the customer behavior?

Monetize your API on Prompt API

Here are some methods to employ a monetization strategy for your API and increase your revenue.

1. When Consumer pays

The obvious strategy in API monetization is to set a price to the customers for the services and resources that the API offers.

There are three different payout approaches:

  • Tiered – In some cases, API providers offer different tiers of access for the customers. Each tier has a particular price in accordance with the benefits and facilities that each has offered.
  • Pay-as-you-go – In this strategy, the consumer pays for every single use. The provider determines the price by taking into account the offerings, resources, and related costs of the API.
  • Unit based – The last strategy is to define units for the API and set a price for each unit. Therefore, the consumers pay for the number of units they use.

2. When Consumer Gets Paid

In some particular contexts, it is possible to share the revenue with your customers as well. In such cases, both the provider and customer of the API, concertedly, have certain motivations to increase the revenue and total benefit.

There are three models:

  • Ad revenue share – Some APIs provide an advertising opportunity through their services. In such cases, the customer, the user of the API, increases the advertisement revenue of the developer by using the product and publishing ads. Then, the provider pays back certain portions of its revenue to the customer to reward its customer for what it provided.
  • Affiliate – Certain strategies used in monetization of websites are also applicable in monetization of APIs. Cost per acquisition (CPA), cost per click (CPC) and single time or ongoing revenue-sharing are examples of such strategies.
  • Credits to bill – In this strategy, the API provider monitors the customer on shared advertisement or affiliate revenue and credits them based on that, to ease the integration and reduce general expenses.

As a provider, you are not forced to employ a single strategy. It’s always reasonable to combine them in accordance with your API and the market you are planning to get into. Moreover, it would be smart to adapt your prices to the changes in the market, your API and the strategies of your competitors.

Final Checklist

Before going any further with the monetization strategy for your API, here are some beneficial points to consider.

  1. Is it possible/reasonable to charge your customers directly? If so, how much? How about the competitors? How about dynamic pricing?
  2. Can you develop further strategies to enhance upselling?
  3. Are indirect revenues an option for you?
  4. How about strategic partnerships? Is it possible to benefit from pre-established markets and audiences of potential partners?
Last Words

Prompt API is a marketplace, where high quality and curated APIs take place. If you wish to work with us monetizing your APIs, check our Providers page for our unbeatable revenue sharing models.

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Gozde Orgun
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Gozde Orgun

Passionate about leveraging data to improve business strategies.