API as a Product
Most application programming interfaces (APIs) are sets of rules and protocols that allow different software applications to communicate with each other. They allow different software programs to interact with each other by exposing the functionality and data through a set of defined interfaces.
APIs are important because they allow different software programs to share data and functionality, which can greatly increase efficiency and reduce development time. They also allow for the integration of new technologies and services into existing systems, making it easier to add new features and capabilities.
APIs are becoming increasingly important in today’s digital economy as they allow companies to share data and services with partners and third-party developers to create new products and services. They also allow for the automation of business processes and the creation of new revenue streams.
In this chapter, you will learn how to think about APIs as products. We will cover the following topics:
- Building with APIs
- Establishing APIs as products
- Types of APIs
- Business models for API products
- Who builds APIs and who uses them?
- Notable API products that are shaping the API landscape
- Defining success for a product
By the end of this chapter, you will have learned about how you can think of APIs as products, how APIs are establishing themselves as a category of products, and some of the most prominent API products.
Building with APIs
APIs can help organizations become more efficient, make better use of data, and create new revenue streams. They can also open up new opportunities for innovation and provide a better customer experience.
Knowing how to work with APIs can be a valuable skill for developers, as more and more companies are looking for people who can integrate their systems with other technologies and services. Additionally, knowing how to use APIs can help developers create new applications that can take advantage of the data and functionality exposed by other systems.
- Increased efficiency: APIs can automate business processes, allowing employees to focus on more important tasks
- Improved data access: APIs can make it easier to access data from different systems, which can be used for reporting, analysis, and decision-making
- New revenue streams: By making data and functionality available through an API, organizations can create new revenue streams by allowing third-party developers to access and use their data and services
- Innovation: APIs can open up new opportunities for innovation by allowing organizations to integrate with new technologies and services, and by enabling third-party developers to build new applications and services on top of an organization’s data and functionality
- Cost savings: By exposing data and functionality through APIs, organizations can reduce the time and costs associated with developing and maintaining custom integrations between different systems
- Better customer experience: By making data and services available through an API, organizations can provide a more seamless and integrated experience for customers who use multiple channels to interact with them
With benefits such as increasing efficiency, improving data access, unlocking new revenue streams, and so on, APIs have become an exciting category of products. In the next section, you will learn about APIs as products and how they are used across industries such as e-commerce, finance, and so on.
Customers can access software and its functionality through a web browser or a mobile app without having to install or maintain it on their own servers. The SaaS provider is responsible for managing the infrastructure, security, and maintenance of the software.
SaaS is a type of cloud computing that enables customers to pay for the software on a subscription basis, usually on a monthly or annual basis. This allows companies of all sizes to access enterprise-level software without having to invest in expensive infrastructure and maintenance costs. Examples of SaaS include Salesforce, G Suite, Zoom, and Slack. SaaS is widely adopted in many industries, such as Customer Relationship Management (CRM), e-commerce, human resource management, project management, marketing automation, and many more. SaaS and APIs have a close relationship, as SaaS providers often use APIs to make their software available to customers.
APIs allow SaaS providers to expose the functionality of their software to external systems and applications. This allows customers to integrate the SaaS with other systems and automate workflows, such as integrating a SaaS CRM with a marketing automation tool or accounting SaaS with a website e-commerce platform.
APIs also allow SaaS providers to offer customization options to their customers, such as the ability to create custom reports or automate certain business processes. This allows customers to tailor the SaaS to their specific needs. With this understanding of the relationship between SaaS and APIs, you will learn to think about APIs as products in the next section.
Establishing APIs as products
When we say that an API is a product, it means that the API is being offered as a standalone service or offering that can be consumed by external customers or partners. In other words, the API is not just a means to an end but also a revenue-generating product in its own right.
APIs as products typically have their own pricing, service level agreements, and terms of service. They are often monetized through a variety of models, such as a subscription-based, pay-per-use, or revenue-sharing model.
APIs as products can be used to create new revenue streams for a company by allowing third-party developers to access and use their data and services. They also enable companies to access data, functionality, and services from other companies, enabling them to build new products, improve existing ones, and drive new business opportunities.
APIs as products can be used in a variety of industries, such as e-commerce, finance, healthcare, transportation, and more. Companies in these industries can leverage APIs to create new business models and disrupt traditional ones.
An example of how APIs allow companies to offer their products and services is how Uber uses the Google Maps API for mapping, uses PayPal APIs to offer a convenient way of making payments, and uses Twilio APIs to allow drivers and riders to communicate securely.
Uber is a ride-hailing service that allows users to request a ride through a mobile app. In order to provide its service, Uber uses a number of APIs, including Google Maps, PayPal, and Twilio:
Figure 1.1 – Examples of APIs being used during a single ride using a ride-sharing application such as Uber
The Google Maps API allows Uber to access the Google Maps platform and use its functionality within the Uber app. This includes features such as real-time traffic information, an estimated time of arrival, and turn-by-turn navigation. This allows Uber to provide accurate pickup and drop-off locations, an estimated time of arrival, and the best route for the driver to take to the rider’s destination.
The PayPal API allows Uber to offer PayPal as a payment option to its users. By integrating with the PayPal API, Uber can securely process payments made through the app using the user’s PayPal account. This allows riders to easily pay for their rides without having to enter credit card information.
By using these APIs, Uber is able to offer a more seamless and integrated user experience. The Google Maps API allows Uber to provide accurate and up-to-date information about pickup and drop-off locations, while the PayPal API allows for a convenient and secure way for users to pay for their rides.
Twilio is a cloud communication platform that allows businesses to programmatically make and receive phone calls and send and receive text messages using its APIs. Uber uses Twilio to provide a way for drivers and passengers to connect without revealing their phone numbers.
When a driver accepts a ride, the passenger’s phone number is sent to the driver through the Twilio API, allowing the driver to call or text the passenger without ever seeing the passenger’s phone number. Similarly, the driver’s phone number is sent to the passenger through the Twilio API, allowing the passenger to contact the driver without ever seeing the driver’s phone number.
By using Twilio’s APIs, Uber is able to protect the privacy of its users by keeping phone numbers private. The Twilio API allows Uber to handle communication between drivers and passengers securely and efficiently. This way, it can enhance the user experience and help to improve the safety of the service.
To sum up, the use of the Twilio API allows Uber to use a cloud-based communication platform to connect drivers and passengers without revealing their phone numbers. This enables Uber to provide a more secure and efficient way of communication while protecting the privacy of its users.
Overall, the use of APIs such as Google Maps, PayPal, and Twilio allows Uber to access functionality and services provided by other companies, which they can then use to improve their own service and offer more features to their customers. This also saves them the cost of building any of these services by themselves while also reducing the time it takes to develop them.
Types of APIs
The Google Maps API is probably one that is most often used by people without realizing it because it is used via an interface, such as Uber or Lyft. APIs allow products to use capabilities from another product or company in a seamless way. This dramatically reduces the complexity of building software, as these capabilities are often so extensive that it is not possible to develop them from scratch.
There are three major types of API protocols and architectures:
- Representational State Transfer (REST): The most popular approach to building APIs is the REST architecture. REST is based on a client/server model and separates the frontend and backend of the API. This model allows for a great deal of flexibility in development and implementation. REST is stateless, which means that the API does not store any data or statuses between requests. For slow or non-time-sensitive APIs, REST supports caching, which stores responses. REST APIs, also known as RESTful APIs, can communicate directly or via intermediary systems, such as API gateways and load balancers.
- Remote Procedural Call (RPC): The RPC protocol is a straightforward way to send and receive multiple parameters and results. RPC APIs are used to perform actions or processes, while REST APIs are mostly used to share information or resources, such as documents. For coding, RPC can use two languages: JSON and XML; these APIs are known as JSON-RPC and XML-RPC, respectively.
- Simple Object Access Protocol (SOAP): SOAP is a messaging standard defined by the World Wide Web Consortium and is widely used to create web APIs, typically with XML. SOAP supports many internet communication protocols, including HTTP, SMTP, and TCP. SOAP is also expandable and doesn’t have a specific style. This means that developers can write SOAP APIs in different ways and quickly add new features and functions. The SOAP approach defines how the message is processed, including features and modules, the communication protocol(s), and the construction of the SOAP message.
Software architects will make the selection of the protocol depending on the use case that you are trying to serve with your APIs. There are various users and purposes for APIs, and you should be monitoring and managing them to verify that they are being used correctly. API products can fall into one of four categories:
- Public APIs: This is available for anybody to use. Good examples of public APIs are the APIs published by the US government, such as the Census API, which makes census data available to the public. The Google Books API also makes its entire database of books available via its public APIs. Public APIs may not always be free to use. Public APIs that are available for no cost are also referred to as open APIs.
- Partner APIs: APIs exposed by/to strategic business partners are known as partner APIs. They are not accessible to the general public and require specific authorization. While open APIs are entirely open, access to partner APIs requires an onboarding process that includes a particular authentication workflow.
- Internal APIs: Internal APIs, also known as private APIs, are accessible only through internal systems and are hidden from external users. Internal APIs are not intended for use outside of a company. They are limited to internal development teams to improve productivity and the reuse of services.
- Composite APIs: Multiple data or service APIs are combined to form composite APIs. They allow developers to make a single call to numerous endpoints. Composite APIs are useful in microservices architecture patterns where information from multiple services is required to complete a single task.
The type of API determines the user base that the API is targeted toward. You will need to identify and understand the unique needs of the audience and design the product in such a way that the customers are able to discover and use the right APIs for the desired use case.
Business models for API products
- Business-to-business (B2B) APIs: These are APIs that are designed for use by other businesses. B2B APIs can provide access to a wide range of services, such as data analytics, financial services, and logistics management.
- Business-to-consumer (B2C) APIs: These are APIs that are designed for use by consumers. B2C APIs can provide access to services, such as weather forecasts, news updates, and social media platforms.
- Business-to-business-to-consumer (B2B2C) APIs: These are APIs that are designed for use by other businesses, but ultimately benefit consumers. An example of a B2B2C API would be an e-commerce platform API, which allows businesses to access inventory and customer data, but ultimately benefits consumers by providing them with a seamless shopping experience.
- Consumer-to-business (C2B) APIs: These are APIs that allow consumers to access and manipulate data and services provided by businesses. An example of a C2B API is a bank API that allows customers to check their account balances, view transaction history, and make payments.
- Consumer-to-consumer (C2C) APIs: These are APIs that allow consumers to access and manipulate data and services provided by other consumers. An example of a C2C API is a peer-to-peer marketplace API that allows users to buy and sell goods and services.
Overall, APIs can be used across different business models to provide access to data and services securely and efficiently and to enable new business opportunities and revenue streams.
As you begin to understand the types of APIs and the variety of business models for APIs, it is also important to understand the customers for APIs. In the next section, you will learn about API producers, API consumers, and the relationship between the two.
Who builds APIs and who uses them?
API consumer refers to the entity that uses or consumes the API provided by the API producer. The API consumer can be a developer, an organization, or another system that accesses the API to retrieve or update data or perform other operations. API consumers use the API created by API producers. You will learn more about the different life cycles of the API consumer and API producer in later chapters.
APIs are typically built by software developers who work for a company or organization that wants to expose certain functionality or data to other systems or applications. These developers create the rules and protocols that define how the API works, and they also create the code that implements the API.
APIs can be used by a wide range of people and organizations, depending on the purpose of the API. The customers for an API, also known as API consumers, can be broadly categorized into the following groups:
- Internal developers: These are the developers within the same organization that built the API, who use the API to access the data and functionality within the organization’s systems. They may use the API to automate business processes, integrate systems, or access data for reporting and analysis.
- External developers: These are the developers outside of the organization who use the API to access the data and functionality provided by the organization. They may be third-party developers building applications that integrate with the organization’s systems, or they may be partners or customers who access the organization’s services through the API.
- Business users: These are the people within the organization who use the data and functionality exposed by the API to make decisions and run the business. They may use the data for reporting, analysis, and decision-making.
- End users: These are the users of the final product that uses the data and functionality exposed by the API.
APIs can be used by a wide range of people and organizations, depending on the purpose of the API. They can be used to automate business processes, integrate systems, access data, create new revenue streams, and improve the customer experience. APIs can also have different types of customers, such as developers, B2B customers, B2C customers, and so on, depending on the business model of the company providing the API.
The main goal of an API is to provide a way for different systems and applications to communicate and share data and functionality, and the customers of an API are the people and organizations that use that data and functionality to achieve their goals.
Now that you have developed an understanding of what API products are, their types, and the business models associated with them, we will take a look at some of the industry’s most prominent API products in the next section.
Notable API products that are shaping the API landscape
Most ride-sharing companies use the Google Maps API in the background. E-commerce stores use APIs to update tracking information on orders and send shipping notifications to their customers. Services such as Shopify are built on a layer further abstracted where sellers don’t have to make API integrations themselves but are offered the Shopify marketplace platform for e-commerce, which comes with nearly all the e-commerce-related integrations pre-built. Shopify integrates with PayPal using APIs, so the seller needs to provide their credentials for Shopify to connect with a PayPal account for their Shopify store.
These are some prominent API-first companies:
- Amazon Selling Partner API
Twilio is a cloud communications platform that enables developers to programmatically make and receive phone calls, send and receive text messages, and perform other communication functions using its web service APIs. Twilio has revolutionize authentication, two-factor authentication (2FA), as more users know what SMS and email codes are. Twilio has had a significant impact on the API industry by making it easy for developers to integrate communication functionality into their applications without having to build and maintain the underlying infrastructure. This has led to the creation of a wide variety of innovative communication-enabled apps and services. Additionally, Twilio’s pay-as-you-go pricing model has made it accessible to small and large businesses alike.
Twilio uses web service APIs for programmable communication, such as making and receiving phone calls, sending and receiving text messages, and performing other communication operations. Twilio’s API offerings across SMS, WhatsApp, voice, video, and email provide the building blocks to design highly customized and sophisticated customer interaction workflows. More than a million developers use Twilio, along with countless large brands.
Twilio’s voice and video APIs were instrumental in enabling developers to build video applications that supported thousands of businesses that came online during the pandemic. The healthcare industry benefited the most by building secure voice and video applications to serve the community.
User verification is one of Twilio’s most comprehensive services. Businesses can use SMS codes and programmable voice flows to verify user’s identity.
Before Twilio disrupted contact center technology, most companies were using custom-built software that was hard to scale and maintain. Twilio is more advanced in contact centers compared to other domains in the same niche. It enables moving offline contact centers to the cloud quickly, all with built-in security, fraud prevention, 24/7 uptime, and so on.
Printful is an innovative service that brings custom merchandise printing and embroidery to the masses. Printful has integrations with website-building platforms such as Shopify and Wix, where artists can upload their artwork to be printed on T-shirts, hats, socks, jackets, stickers, and more. The Printful APIs create and push them to Shopify. When a customer makes an order, Printful will automatically print and ship the product that the artist designed on its platform. Printful will also update shipping information passed on to Shopify via APIs. Shopify sends order tracking updates to customers using email templates. This integration makes it easy for thousands of artists to make money from their art, make it available all over the world, and handle large numbers of orders.
The Twitter APIs have allowed several tools to be built on top of Twitter. Twitter APIs enable users to get Twitter data used to construct many sophisticated models, such as stock predictions based on Twitter sentiment analysis, and applications such as election predictions. The Twitter APIs also allow applications to post, retweet, and comment on tweets programmatically. By using these APIs, people have built many engaging Twitter bots, such as the Notion bot, which, when tagged by a user, saves the tweet to the user’s Notion board automatically.
Banking and finance are heavily regulated spaces because of the sensitive nature of these organizations’ data. As people start making more and more transactions online, their need to enable payments and connect various applications to banking has created the need for the abstraction of personal information while processing transactions.
Plaid is a FinTech company that establishes communication between applications, users, banks, and credit card providers. For many companies, it is impossible to integrate with the thousands of financial institutions that currently exist. Plaid has enabled these companies to simplify that process by acting as a middleman.
Plaid works without a standalone application and without the end user creating an account with Plaid. Plaid is integrated into other applications. Depending on the app’s requirements, the service may appear as an option to add a bank account or link a different sort of account while you’re using it. You’ll be in Plaid’s connection flow once you’ve been required to enter information, which usually comprises the following steps:
- Choose your financial institution or bank.
- Authenticate bank accounts by entering username and password information.
- The authentication of the provided information takes place.
- Choose which financial accounts you want to link.
- The connection to the selected application or service is now complete.
Plaid verifies ownership of your bank accounts and captures the data points stated in the preceding section when you enter your username and password for those accounts. This data is shared with the application or service you’re using. Services such as Venmo, Chime, Acorns, and Robinhood use Plaid to enable their users to connect their bank accounts with these services with ease.
Plaid provides various pricing options, starting with the free tier, which allows customers to try building and testing the core functionality such as transactions, Auth, balances, investments, and liabilities with up to 100 live items. The pay-as-you-go option offers unlimited items and no contractual minimums. Pay-as-you-go pricing provides customers with a way to provide pricing flexibility to customers. Avoiding contractual minimums allows more customers to try the product and grow their usage as they realize the value of the service. Most enterprises will have a more customized pricing option and work with a salesperson at Plaid to work through contracts.
More digital experiences are powered by Tealium iQTM tag management than any other corporate tag management supplier. Tealium iQ is the core of Tealium’s customer data hub. It lets businesses manage and control their customer data and MarTech vendors across the web, mobile, IoT, and connected devices.
Tealium iQ is a feature-rich product with a unique tag management approach. Tags in Tealium iQ use a three-step template: tag configuration, load rules, and data mappings for adding and editing tags. The Tag Marketplace in Tealium is a pre-made tag template library of more than 1,000 tags ready for import. The user interface delivers data in rich dashboards for analytics and interpretation of data.
IMDB is the most extensive online movie database, and over the years, it has been home to millions of movie reviews and ratings based on user-generated data. It also catalogs all the cast and crew of movies, TV shows, and more. This rich data can be accessed using IMDB APIs, available only in a paid model with prior approval.
Amazon Selling Partner API
The Amazon Selling Partner API (SP-API) is a service that Amazon offers to developers that lets them use all of the old features of Amazon Market Web Services. This API is updated with features such as a REST-based format and JSON outputs. The API allows you to create applications for your personal Amazon seller account, applications for sellers to authorize and use to help run their Amazon businesses, and applications to be published to the Amazon Marketplace Appstore.
One example of an application built using the Amazon API is camelcamelcamel.com, which tracks and monitors prices for any product specified by a user and notifies the user when the prices drop to the desired value. This service also monitors the prices of products and shows the highest and lowest prices over time.
Postman is the standard API development tool in the industry. It is used to build, test, catalog, and change APIs. Postman allows users to use APIs in a user-friendly GUI and eliminates the need to write code to work with APIs. Postman also lets users add predefined API calls to a collection that other users can import and share. Postman also supports access to popular web API clients. The AWS documentation for Postman is well laid out and provides a step-by-step guide to creating an API project with it.
The Postman API allows users to access data stored in the Postman account programmatically.
Marqeta is another notable FinTech API start-up that executed its initial public offering (IPO) in 2021. It is a cloud-based, open API platform that allows consumers to create customized cards. Businesses may use Marqeta to provide their consumers with payment cards without dealing with banks. Marqeta manages the payment technology’s backend, lowering the integration cost for businesses and allowing them to issue cards to their consumers swiftly.
On-demand delivery services such as DoorDash and Uber give new employees payment cards powered by Marqeta that can be used at stores and restaurants to keep up with the rise in orders. Using Marqeta’s APIs, they are able to onboard new workers quickly and use Marqeta’s card servicing to provide their users with a standard experience in terms of being able to report transaction disputes, issue new cards, or report stolen cards.
Marqeta also provides buy now, pay later products that enable services such as Affirm and Klarna to pay their merchants. Corporate credit cards are also starting to be powered by Marqeta APIs for a smooth employee experience. Large financial institutions, such as JP Morgan and Goldman Sachs Marcus, have begun to use Marqeta to issue virtual cards to their customers because of the easy API integration.
Meanwhile, developers at crypto exchanges such as Coinbase and ShakePay use Marqeta’s APIs to allow customers to convert cryptocurrencies into government-backed fiat currency at the point of sale. Businesses can build their applications using Marqeta’s APIs, where users can sign up for cards. Marqeta has a pricing model that is based on how much you use it and offers complex dispute flows that lower the costs of running cards.
Defining success for a product
The product manager is in charge of setting up metrics for the whole customer journey and connecting them to the business process that goes with them. Product managers usually work with data analytics teams to instrument the data needed to deliver the necessary analytics to measure product adoption, usage, and retention.
Whether it’s a SaaS product, a physical product, an IoT product, or an API product, a company’s objective is to monetize the product in a way that benefits the company while also providing value to customers. Customer value can be measured in many ways, such as by increasing sales, increasing net margins, lowering operational costs, and keeping customers from leaving.
There is always a need to decrease customer turnover, regardless of the product or service. Product owners are responsible for producing value for their goods and controlling customer churn, whether they are SaaS products such as Slack, Dropbox, or Coupa, or tangible items such as smartphones or video game consoles.
Customer centricity begins at the very beginning of the customer journey: marketing. When the messaging for a product is clear regarding the value it delivers to the customer, the right customers are drawn to the funnel. A good customer experience will come from an optimized funnel, a smooth onboarding process, and good customer service.
As you have learned in this chapter, there are several ways that different companies design their product offerings to drive value and ease for their customers. Putting customers at the center of your product thinking allows you to design products that are tailored to your customers’ specific needs.
At this point, you should be familiar with the various ways that products are categorized. Understanding the types of products will help you analyze the unique challenges of any product based on its technology, business model, and the relationship between API consumers and API producers.
Looking at API products, you can now understand the architectures and protocols used and the types of APIs across private, public, partner, and internal APIs. With this understanding, you can look at the wide variety of APIs currently on the market and understand how these protocols enable the development of unique API-first products and business opportunities. You are now ready to think of APIs as products.
In the next chapter, you will learn about API product management and develop product thinking to enable you to build an API-first strategy for your organization.