The rise of the API economy and consumer-led ecosystems

Adam DuVander speaks fluent “developer” while serving as Developer Communications Director at SendGrid. Previously, Adam wrote for Wired, Webmonkey and edited ProgrammableWeb, the leading resource for APIs.

Just a few years ago, application programming interfaces (APIs) were largely viewed as an easy, functional way to make applications work together, a digital adhesive of sorts. Today, the value of the API has evolved into much more than a simple bridging mechanism.

For many developers, APIs have become the foundational architecture that allows them to manifest their vision. Consider the Pareto Principle, which states that 80 percent of the effects come from 20 percent of the causes; apps and cloud services already do 80 percent of what your application needs so leverage that ecosystem to focus in on the 20 percent of “magic” that you can call your own.

A look back

As a term “API” has been around for a while, but the modern, Web-connection version gathered steam in the early 2000s thanks to Amazon’s Store API. This allowed any Web property to have an Amazon presence on its site.

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A small retailer might integrate with Amazon’s Store API, which would allow it to sell and ship merchandise from its own Web property without developing standalone e-commerce functionality. At a mass scale perspective, this opened up an entirely new channel (and economy) for small and medium-sized merchants.

Facebook and Twitter soon followed suit with their own open API strategies. A Web publisher that integrated with Facebook’s or Twitter’s login API(s) began to have a greater capability of collecting and understanding data about who is visiting, browsing or commenting on their web property, in turn allowing them to sell better products and services to their advertising customers.

Since the time of these early examples, APIs have seen massive growth and adoption. One of the most successful companies to open its API has been Salesforce.com. The company has nearly 3 million applications represented in its third-party app ecosystem, with the majority of its site traffic driven by its API.

APIs are influencing the entire Internet as a model for quickly building and growing successful businesses. The Internet is transforming from a network of Web pages owned and operated by different entities to an ecosystem of open APIs and applications that work together to empower everyone to create new applications, new businesses and new ways of working together.

Why do I need to leverage APIs?

APIs have a clear business benefit, but they also have several additional operational benefits (many of which tie back to business growth & success). Today, there are thousands of APIs available for developers of Web applications to explore.  There are APIs from leading name-brand technology companies like Facebook, Google and Salesforce.

There are also now many APIs that are coming from non-traditional industry sectors, like government agencies, educational institutions and financial services firms and large brick and mortar retailers.

Some of the benefits that an API can provide include:

APIs cut down on distractions. They allow you to outsource parts of your operations and infrastructure to other companies that are domain experts.

APIs help you acquire knowledge. Allowing parts of your application infrastructure to be handled by experts puts you in the position to learn from said experts.

APIs help you tap a broader application ecosystem for value. The more that you allow experts to help you with non-core parts of your application infrastructure, the more nodes of a network of experts you are connected with.

APIs help you create & test new offerings. By opening your own API, you’re opening your business to be leveraged by an ecosystem of customers & partners that may help create new opportunities for your business.

In the simplest terms, becoming a consumer of APIs simplifies building your application or your business. That is, when you integrate with an open API to help manage infrastructure and operational concerns – even if it’s something you know how to do – it frees you up to focus on what matters most – your own product. You can avoid needless distractions for your business by outsourcing to actual experts of that domain.

Let’s look at how this applies to a typical developer today. Most are using many different API calls & services to design and build their applications. They may be using Twilio for SMS or voice, Facebook or Twitter for login, Parse for mobile app data and analytics or SendGrid for email.

The fact is that for most of what an application needs to do, someone or some company has already solved for it. And you can likely use many of these services for free to start, and then incrementally grow your spend as you scale.

This Pareto-As-A-Service model enables you to leverage the existing API ecosystem as a foundation so you can then focus on what the unique value, talent and vision that you can bring to the market.

Contributing back to the API economy

Once you’ve leveraged the API ecosystem to build your app, you have the opportunity to contribute back to the ecosystem (and to your own business) by providing an open API of your own, thus empowering developers to build against your platform. This creates value for your partners and you win by contributing to the ecosystem and giving customers a seamless cross-application experience.

API integrations have become so popular as a business driver that many companies are starting to launch API-only business. Consider WePay, a company that recently reconfigured its business to focus exclusively on providing an online payments API built specifically for integration e-commerce, crowdfunding and small business software platforms. In just the last year, WePay has seen its API business increase 600 percent and recently landed a $15M Series C round.

Whatever path you choose to take, let the Pareto Principle be your guide. Focus instead on building amazing apps and incredible customer experiences – the API ecosystem will help you with the rest.