Ian Goldsmith

Here’s a question that we find compelling: If you’re an app developer, would you pay to use an API?

Maybe you have an API that fits your use perfectly. Even in that case, though, would your commitment change if you had to pay to use it?

APIs expose existing business capabilities to a whole new set of channels, in the process delivering some real value to developers building apps. It might seem tempting to monetize APIs directly, but we don’t think that would be a good idea at all. Enterprises need to derive value from their API as a new channel for their business, and asking developers to pay sours that arrangement. We’re not convinced that many developers would do it anyway, given the current API scene.

Let’s take PayPal as an example. PayPal is a payments company that increases its reach by getting developers to embed the PayPal web checkout API in their sites, with no charge for using the API. If PayPal started charging developers to embed the API, we believe those developers would look elsewhere.

Trying to monetize an API would be like Facebook suddenly deciding to charge a fee for every status update, or even for being a member on the site. There may be some hardcore fans who might pay, but millions would drift to other free sites instead. Why should APIs be any different?

We understand that the API is a distribution channel, and when that phrase comes up, then “revenue opportunities” doesn’t follow far behind. But APIs require a different mindset — one that emphasizes value creation instead of a more traditional ROI calculation. Aligning APIs with business goals will spur innovation, and create powerful momentum that shouldn’t screech to a halt because of monetization.

What do you think? Is there an API you’d pay to use, or should monetization never enter the conversation as a real possibility?

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2 Comments

  1. Facebook takes a 30% commission on purchases made via their payments API. That would be a viable use case for charging for an API. Apple also charges developers to become members of their developer network before they can develop for iOS.

    I think a pay-to-play model for an API would be a non-starter for me, but payment taken out of something that directly monetizes for the developer or an up-front subscription fee could work. As in all things, there would have to be a compelling business reason for a developer to give up some of their cash as well as a way for the API publisher to exert enough controller over the space.

    Facebook offers the reach and are mandating adoption of their credits system for games running on their platform. They also have 500M+ users. Apple controls iOS, so they can levy a cover charge in exchange for support and development tools.

    -Erik

  2. Thanks for your comment Erik. I think that Facebook’s commission is a perfect example. They aren’t charging developers to use their API, they are charging a commission on the business service that is enabled through the API. 30% seems a bit steep to me, but if it makes it possible for the App owner to make more money by providing another channel, then it’s probably worth it….no?

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