Aligning your API business model to your company strategy
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Most businesses that start building APIs do so to support their existing company strategy. This presentation covers how to align your API business model to this strategy drawing on my experience at MYOB and presented at APIDays Sydney 2015
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Aligning your API business model to your company strategy
- 1. Matching your API Business Model to your Company Strategy Paul Greenwell Platform Strategy Manager, MYOB 10.02.2015
- 3. Why do we want to have an API?
- 5. API Objectives 1. Increase number of Online subscriptions 2. Increase retention of Online subscriptions 3. Develop new market opportunities through increased innovation
- 6. Who is the customer?
- 7. What is the service or products we are offering?
- 8. APIs only succeed if they offer something of “value” Service Data Function Audience Marketplace Access
- 9. Service Data Function Audience Marketplace Access APIs only succeed if they offer something of “value”
- 10. What are the revenue sources from the API program?
- 12. API revenue models Primary focus of developer program (↑ Subscriptions, ↑ Retention) API User pays Subscription (Content or Service) Transaction costs (value based) Developer pays Subscription (Content or Service) Transaction costs Access to market Pay for add-on Products & services Business pays Referral/Sales Transaction revenue share 3rd party pays Access to market/data Future: i.e. payments, bank feeds Does not support program goals & different competitive environment. Bundling developer solutions Product entitlements, support, events & marketing Pay for partner referrals Future: i.e. 3rd party APIs like logistics Future: i.e. consolidated / big data Developer Program Does not support program goals & different competitive environment.
- 15. Paul Greenwell Platform Strategy Manager, MYOB paul@greenwell.id.au @PaulGreenwell
- 16. Acknowledgements and Inspiration • Mashery strategy services, Devon Biondi & Chuck Freeman • “API Business Models, 20 models in 20 minutes” John Musser, Programmable Web http://www.slideshare.net/jmusser/j-musser-apibizmodels2013 • “Why you probably don’t need an API strategy” Daniel Jacobson, Netflix http://thenextweb.com/entrepreneur/2013/09/15/why-you-probably-dont-need-an-api- strategy/ • “API Monetization” Kin Lane, API Evangelist http://monetization.apievangelist.com/ • “Winning in the API Economy” Steven Willmott & Guillaume Balas, 3scale www.3scale.net/wp.../Winning-in-the-API-Economy-eBook-3scale.pdf • “The API-Driven Business Model” 2013 IBM Corporation http://www.slideshare.net/ibmapimgmt/the-api-driven-business-model • “Measuring the Economic Impact of the Sharing Economy” Tim O’Reilly, O’Reilly Media http://www.slideshare.net/timoreilly/measuring-the-economic-impact-of-the-sharing- economy
Notas del editor
- 3 years ago I made a case internally to invest in our APIs and its program and created my role What I want to share is a simple framework that I found effective communicating to our executive to get support building out our APIs and API program by framing our API business model in the context of the broader company strategy. Daniel Jacobson wrote an article in the next web in 2013 about why you don’t need an API strategy Although mildly controversial, the point is most businesses start building APIs do so to support their existing business strategy
- What I mean by API business model is Why do we want to have an API? Who is the customer what is the service or products we are offering? What are the revenue sources from the API program?
- Mobile and devices Faster innovation – building platform– Jeff Bezos famously mandated internally must expose their data and functionality as web service Distribution channel –SAPI more eye balls on their listings, (no too dissimilar to Twitter) Increase footprint –Expedia (90% of their business, > $2b/year) Upsell opportunity – Salesforce offer API as a paid option Sales tool and increase retention – Freshbooks New line of business Partnering opportunities Generally Multiple reasons
- MYOB is not in business to provide accounting systems MYOB is in business to “Make business life easy” When MYOB started this was achieved by providing accounting systems for Small Business On 2010+ Online accounting is the game changer to continue to deliver on this vision
- For MYOB we articulated the why as these three objectives Increase number of AccountRight Live subscriptions Partner referrals and lead generation ↑ Brand metrics around progressive, online company Increase retention of AccountRight Live subscriptions Deeper integration to systems ↑ switching costs Solutions fills feature and device gaps Develop new market opportunities through increased innovation 2000+ developers vs 250 internal PD team For MYOB, this has already played out, we have invested in an Online POS product called Kounta and released it as MYOB Kounta
- Customer - one or more of internal developers, your existing customers and partners or any 3rd party. We have decided to be open Broader the audience -> more open -> Beware, the more diverse their needs and greater cost At MYOB we have many developers that come from a business rather than technology background, because they have identified business problems that needed solving. As a result, we need to tailor our program to their unique needs – which means he haven’t done hack-a-thons but we have done integration workshops and webinars showing how to integrate. Recommend Keran McKenzie’s talk tomorrow about Leading an API Community.
- John Musser’s presentation on API business models, 7 API secrets. #2 on the list is “APIs only succeed if they offer something of “value” “
- He then goes on to describes several sources of value and he describes 6 types of value Service, Data, Function, Audience, Marketplace and Access
- Service (Twilio – communications), Data (Google places information about Places such as establishments, geographic locations, or prominent points of interest) Function (MYOB API – access to full accounting functions invoicing, banking, purchase, timesheets and payroll etc) Audience (who can go past the facebook and the 1b+ users) Marketplace (again the biggest here is ebay - $7bn+ of txn through APIs) Access –eway payment gateway that provides access to the banking payments network, i.e. covers 23 banks
- Revenue model is how to capture the generated value of the API I just talked about APIs only succeed if the generate value I would add that will only succeed if the vendor captures less value than is created, That is you need to leave enough value on the table for the customers, partners and developers using the API to share and be successful.
- Tim O’Reilly cautions about creating a Success Tax This phenomenon kicks in when users of an API (or other) service perceive that the more value they create, the more they have to pay the provider of their backend services The best model is one that the proportion of value captured by the API/Platform either stays static or decreases with “success” – e.g. pricing gets cheaper with volume. So having said that, lets look at some revenue models
- If you google API business models, revenue models or monetisation, most are based on John Mussers which has 4 categories Free Developer Pays Developer gets paid Indirect I’ve reframed to be more conceptual and simpler for conversations with our exec Actors Business is the API Vendor Customers of business Developers(consumers of API) Party other than Customer or Developer
- So I have given a quick overview of the Why, Who, What and Where’s the money of the API business model and aligning with your business, hopefully given an example through MYOBs experience I want to leave on one last point
- Netflix API program was targeted exclusively to public developers, the API had its own metrics and its own objectives Goal to reach new audiences to generate new subscribers and/or create new user experiences for existing subscribers that would increase their satisfaction with our service. results were not as transformative as originally expected new approach with the API, using it to drive the larger strategy of device proliferation for our growing streaming business Netflix can be watched on more than 1,000 different device types by Netflix employees ESPN has also closed down its program for similar reason. And also Twitter famously changed program –> their business model depends on controlling eye balls