Businesses across industries are looking at ways to extend and enhance their digital business and service offerings with the help of external APIs. However, for better revenues and digital collaborations, businesses must make the most of their API Marketplaces or in more technical terms the "developer portal", as part of their API management lifecycle.

A well-managed, robust API marketplace is a competitive advantage for enterprises to market their APIs. In this post, you will find three areas that will need your attention when building an API-driven digital ecosystem.

What is API Monetization?

It is the process by which a business can generate revenue by selling their APIs (Application Programming Interfaces). APIs are to be visualized as sellable products. Having well-established, marketable APIs help other developers to access and integrate your data and resources for their specific applications.

Most businesses are excited about monetizing their APIs. A word of caution here is to consider this monetization aspect in the context of your overall business objectives and your digital imperative.

Top three areas to consider for a successful digital strategy:

1. The Pricing

Simply put, APIs reflect the value of your business. Hence, the pricing strategy should be indicative of your overall business strategy. Consider where your APIs fit into the overall market, to identify the right pricing strategies.

Figure out whether you are using the APIs to generate awareness and increase user adoption, or if you are focused on boosting revenues. Depending on your goals, you can work out your enterprise API strategy, thereby helping to figure out the ideal pricing strategies.

Most companies use a mixture of different pricing strategies like:

Per Usage: Also known as pay-as-you-go. This is based on the number of API calls. For instance, you can charge "$X for every 1000 calls made by the customer."
Tiered License: Also known as freemium, this pricing model allows customers to try out parts of your API and pay for advanced features.
Subscription Model: You can offer customers a weekly/monthly/annual rate for usage of the API.
Per Unit: Also known as the “per seat” model, this pricing strategy provides a certain number of key or developer licenses for the product.
Revenue Share: Let’s say, Company A uses your API and makes $X. The company offers a % of X as a fee for using the API.

Other pricing models include open-share, cost-savings, etc. Before you publish an API, you need to consider the pricing strategy you want to adopt.

2. Effective API Management – the Cornerstone for a successful Digital initiative

Generally, most businesses first publish APIs, then catalog and display these APIs using a developer portal. By doing so, the publisher of APIs can provide access to developers to explore the portal to find and discover appropriate APIs. The portal contains several APIs, and developers can filter APIs based on their type, category, and division.

An API management system is the foundation for a Digital Marketplace and consists of the following components:

An API gateway solution which acts as the API runtime and policy enforcement point handling rate limiting, throttling, and other security policies.
API security can either be provided at the basic level via the gateway or by using an Integrated IAM (Identity and Access Management) solution.
The developer portal acts as a digital catalog and helps developers discover, subscribe to, and test various APIs on the portal.
The publisher portal is the place where API definition, design, publishing, promotions and monitoring happen.
API analytics provides details of API usage and making the feed data available for API monetization.

Successfully building and implementing monetizable APIs, requires a strategic approach. It needs all the above components in place, along with the right organizational practices to make it a functional and profitable initiative.

3. Focus on API Analytics, expanding your Digital Ecosystem

Once you have figured out the basics of API management, you need to start growing your digital ecosystem. Having a robust marketing plan around your revenue-generating APIs is a must-have to bring awareness and increase usage.

API analytics help you identify the best performers, find out how partners and customers are interacting with your APIs. Use it extensively to gain insights so you can Upsell and cross-sell the right products at the right time.

By deliberating on the three key areas listed here, you can start building an effective digital strategy which drives expansion, creates new business opportunities, and helps you increase revenues.

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