The API Economy: Growth through Interconnectivity
March 21, 2023
Our consultant’s integration skills are consistently in demand across multiple sectors. Having seen first hand how transformative the powers of APIs are, I’ve put together a short list of some well – known companies that have built business wherein APIs drive a huge portion of their revenue; either by creating a connected ecosystem of third – party apps, or by offering an API as their main product.
In recent years, APIs (Application Programming Interfaces) have acted as such powerful engines of business growth that they’ve ceased to become just a technical tool and for many organizations, are now a key element in overall enterprise strategy. Because who doesn’t want to be better connected? According to research firm Gartner, the number of applications deployed by large firms (defined as 2000+ employees) has shot up by 68% since 2015, to an average of 129 apps per company. While small firms are understandably running fewer applications, they’re showing just as voracious an app-etite, with a 38% increase in the average number of apps run per company between 2015 and 2018.
Why does the number of applications that companies are running matter? By allowing these services to communicate directly with one another-faster delivery of product means solutions get to market faster, often in weeks instead of months. Functionality increases, and infrastructural security is improved allowing for the creation of new business models which lead to more streams of revenue. Despite these clear-cut benefits, and many more, an overwhelming number of organizations still struggle with out of date, or non-existent integration architecture, which leaves many applications unconnected. In short, companies with a strong focus API adoption, strategy and management will see more and more returns on these investments. The success stories below demonstrate the power of interconnectivity and the ability to achieve (almost) unlimited growth through APIs.
Online consumer travel website Expedia is a frequently cited example of API borne success-90% of their revenue comes from allowing third-party websites, for hotels, airlines, and car rental services, to tap into their platform. Expedia’s APIs offer properties like hotels the ability to receive reservations directly, instead of waiting for the charging entity (bank or credit card) to “call” the hotel’s booking application and inform them of the reservation. This is just one example of how Expedia can cut out manualprocesses. They also offer hotels the ability to automate their room rates and availability across multiple channels.Expedia’s success has led to the creation of several subsidiaries that use the same fare aggregator model, including trivago, hotels.com and Hotwire. The Hotwire API gives developers access to search engines that show the best prices and deals on worldwide hotel rooms. Customers can book for very low rates, as long as they are open to being surprised as to which hotel they’ll actually be staying in.
Uber is a great example of how a company managed to massively expand its business model to create and deliver a new range of services by opening their API to the public back in 2014. Uber’s primary business model was already supported by athird-party API, Google Maps, which allowed the car sharing app to “pull” location data from the web mapping services. By 2019, there were 10,000 distinct applications leveraging Uber’s own API to add to their existing digital platform. This cycle of innovation demonstrates one of the key benefits inherent in APIs-with accumulated documentation there is no need to create brand new architecture from scratch. Developers using Uber’s API simply have to connect to the existing infrastructure which can often be achieved in a day or two. How are other companies getting value out of Uber? Starbucks has added a handy feature where users can order their favourite drink inside the Uber app, to be ready when it arrives at their destination. Other popular dining and food service apps like OpenTable leverage the app in a similar way, allowing users to reserve a table in a restaurant and with just one more click, arrange a ride to their booking as well.
Subscribers of Virgin Media television might have heard of TiVo (formerly Rovi), or maybe you’ve streamed music from at least one of Spotify, Pandora, Rhapsody, Rdio or Apple Music. These services are just a few of the many media platforms that have their content metadata provided by TiVo APIs, supporting millions of devices and applications by providing a range of entertainment experiences.The company was founded as Macrovision in 1983 where they acted as a distributor of physical media, before having a remarkable digital transformation (and several name changesalong the way) that led to the creation of TiVo’s cloud content repository. They now give developers access to high quality, metadata media content that enhances websites, applications and more.
Stripe is a payment platform for the digital age. Itwas created largely for businesses that are entirely online-think ecommerce, or online subscription services. Stripe’s mission statement is to eliminate the “needless complexity” of integration, so that incorporating Stripe into your business can be theoretically done in a matter of minutes.To negate the security concerns that might arise with such ease of access, Stripe creates a unique user token for third party developers when card/payment details are submitted, which is used directly with Stripes REST API to actually charge a customer. In a few simple steps, Stripe is seamlessly integrated. This simple, user friendly technology has been adopted in almost 30 countries and processes billions of dollars in payments a year, from small start-ups to Fortune 500 companies.
Looking at some examples of API strategy across a multitude of industries provides a window into how integration architecture can not only expand the reach of existing operations, but also create new, rich and innovative business models. The API market swells with no sign of slowing down, enterprise strategists should consider how the use of APIs can resolve longstanding business headaches, and significantly drive growth.