Once a company optimizes its core products and attains their optimal market share, they turn to complimentary services. Companies which develop mobile apps benefit greatly by taking advantage of this strategy. Revenues from their core business reached $25 billion in 2013 and are expected to exceed $70 billion by the year 2017. Many of these applications are portals for a valuable information database or data stream. By exposing these data streams through an application programming interface (API), companies can design essential complimentary services. However, companies that wish to retain control of their data may only partially purse this strategy. App analytics can help companies find the balance between publishing user interfaces and exposing data interfaces.
Some API Balancing Acts
- Financial data – both professional and amateur investors are familiar with the common candlestick profile of stock markets. Some of these reveal basic data made available for free on browser home pages. Others require secure links for institutional traders. In decades past, data was guarded and only the privileged few had access. Today, the markets encourage broad-spectrum participation, and will make the data available any way possible, including through an API. One of the cons of this strategy has been the undesired use of API data streams to effect high-speed trades, which can destabilize the market. Data providers have responded with access restrictions based on participation tiers and trading behavior.
- Real estate data – commercial and residential data was closely held information designed to give realtors an advantage and not lose value-added to buyers who wished to do their own shopping. Now the online listings in the MLS database are more readily available to non-professionals. The value proposition has shifted from the information to the financing.
- Institutional data – companies such as those offering commodity items have leverage the experience of professional user-interface designers to display and propagate the information in their databases. However, they always take a risk that a designer will create a substandard interface, which could reflect negatively on the company.
Generating Revenue With an API
APIs are essentially gateways that allow third part user interface developers to make a company’s aggregated data available to the public. There are several value propositions to this strategy, including:
- Resource usage and revenue sharing
- Pay per use
The proper choice of revenue model depends on the structure of the database company, the goals of the user interface design, and of the clients. A subscription strategy puts the risk on the interface designer. He or she must pay for the contracted period regardless of volume. However, a higher-than-expected volume means ungarnished profits for the designer. A pay per use strategy relieves the risk of the interface designer. If the interface is not used, the designer pays no feeds. Both of these arrangements allows for segregation between the designer and the data host company. Often a symbiotic strategy for resource and revenue sharing is the most equitable arrangement for both the interface designer and the host. It allows fair division of both risk and profits while still allowing each entity to focus on its core competencies.
As companies develop and extend their databases in line with a deeper engagement with their customers, they must be cognizant of the responsibilities as stewards of client data. They must assume the social responsibility of keeping private client data inaccessible to general access.