APIs are pretty important. You already know that, or you wouldn’t be a reader of this blog. To that end, we realize there’s an element of preaching to the converted in this post.

However, even some of those who understand the value of APIs may not know that there are countless companies out there that wouldn’t be around today without APIs. And we’re not just talking about small time startups here; there are huge companies who have built their infrastructure around APIs to the extent that they depend on them for survival.

In this post we plan to take a look at some of those startups and highlight some of the ways in which APIs make what they do possible. If there are any startup founders reading, pay close attention to how APIs could fit into your business model. For the rest, we hope this will be an eye-opener to how important APIs are to digital business today.

Uber

Folks in business often say that there’s no need to reinvent the wheel. Using APIs for functions that would otherwise have to be built from scratch is a prime example of this. Should every company consume APIs? The answer is almost always an overwhelming “yes.”

We’ve covered the power APIs have to build new revenue streams, and transform everything from smart cities to machine intelligent marketing. Others have even said the Internet itself would fail without them. For startups with low-bandwidth, APIs make life MUCH easier.

Writing for BetaBoston, Kyle Alspach neatly sums up why APIs were critical to growing Uber:

“What APIs do for tech startups is let them focus on what they’re really good at (their core competency,” in entrepreneur-speak).”

Alspach goes on to add that it’s

“Because of APIs, Uber can focus on getting drivers and users, finding the right pricing model, and expanding to new cities.”

Among the public APIs used by Uber are the Google Maps API for GPS, the Twilio API for SMS notifications, Braintree’s API for payment processing, and the SendGrid API for automating email campaigns. With their willingness to rely on third-party APIs, Uber has saved itself thousands of hours of work and has been able to grow far more rapidly than if they’d built everything themselves.

Like Uber, Airbnb also uses SendGrid, Braintree and Twilio. They also use Nexmo for SMS and voice verification. Uber and Airbnb have so many different aspects to their business – automated notifications, payment processing, user verification, and so on – that it only makes sense to use third-party APIs to take some of the load off.

Use case #1: For Uber and other two-sided markets like Airbnb, APIs enable a company to focus on their core competency.

Buffer

When seeking out apps that rely heavily on social APIs, you really could list any number of social management apps here: Buffer, Hootsuite, SocialBro, SproutSocial, and others. SproutSocial has specifically mentioned that they couldn’t exist without APIs in one of their blog articles.

What most of these apps have in common is that they allow users to do something that the API provider does not. This usually refers to creating a dashboard to enable:

• Scheduling posts
• The simultaneous use of multiple platforms
• Batch processing
• Measuring engagement, such as comments or likes

Though Uber has built their app alongside various APIs, they could probably replace them if they really needed to given there are competitors in the market (though it would take a lot of time and effort). For social management apps, however, the social brand is critical to their makeup, meaning their reliance to a specific Twitter API, or Facebook API, is very high.

Social APIs are notoriously transient – even small changes to these APIs, like the deprecation of the Tweet count API or the removal of Instagram’s /feed could have drastic effects, and event render third party apps irrelevant.

Nevertheless, SproutSocial has raised just shy of $20 million to date and has more than 15,000 customers. There’s no doubt that building a business around an API, risky as it may be to build on “borrowed land,” is a proven strategy.

Use case #2: Buffer, SproutSocial etc. have built on top of existing apps by using their APIs as a gateway.

Instagram

Know how Instagram got started? Check out this quote from Kevin Systrom, Instagram co-founder, in a Business Insider article from 2012:

If you go on to my Flickr page, you’ll see a photo that looks like an Instagram photo, from about 2007. I’ve always been into taking my photos, cropping them square, putting them through a filter in Photoshop. We just reverse engineered how to do filters, now we opened it up to the masses.”

What Instagram first provided was, at the time, a very unique filter system. But with copycats springing up all over the place, Instagram needed to find a competitive edge. One reason Instagram has become so successful is their willingness to embrace APIs.

For example, Instagram uses the Foursquare API to provide location tagging. The addition of location tagging was something that Instagram users were clamouring for before it was added, and tapping into the Foursquare API was a simple and effective way to implement it.

But, far more significant, was when Instagram opened up their own API to be used by other developers. This was used in some pretty cool ways, such as the option to locate popular pictures on a map, by sites and apps like Worldcam and Pixifly. Less than a year after the API release, tech journalists were writing about the cool things people were doing with Instagram, and such articles have been common ever since.

We’ve seen how APIs can be used to modify or improve an existing app in the Buffer section above, which Instagram did with Foursquare, but Instagram is also an example of how valuable APIs can be to a business model.

Use case #3: A portion of Instagram’s explosive growth can be attributed to the creative services third party services developers came up with as a result of Instagram providing it’s own API.

FantasyPros

We’ve seen how APIs can be used to extend and mimic the actions of other apps. Now it’s time to consider how APIs can be used to collate data. A prominent example of a site that does just this – and one that many will devote time to as the fantasy football season heats up – is FantasyPros.com.

One of the things FantasyPros does well is use data from several different sources to come up with weekly picks and projected leaders, plus weekly and season projections.

Some of this data is collected and entered manually from selected experts, but the ability to generate a custom playbook by logging into ESPN or Yahoo accounts through the site means that APIs are also in play.

According to the creator of FantasyPlus, the site pulls information relating to weekly projected points and rankings from sources including CBS, ESPN, NumberFire, FFToday and ProFootballFocus using APIs and custom feeds.

The result? The site is widely regarded as having some of the best projections around, as found by this article in 2013. For those of you saying “Fantasy football? Really?!”, we encourage you to think about other possible applications for data collation.

A site could use data from reported crime maps available on police websites in conjunction with the Google Maps API to locate amenities, doctors, dentists and so on to create a holistic picture of urban living conditions. This exactly what Illustreets has done in the UK.

Use case #4: APIs that collate, cross-reference and splice data in interesting ways represent a big step in the process of turning “big data” into “useful data”.

Final Thoughts

We can see from the four examples above that APIs aren’t merely “nice to have,” but are incredibly valuable in the startup ecosystem and beyond. Each of the above examples highlights a different way in which APIs can be useful in app/website development:

• They allow developers to save time by avoiding rebuilding from scratch where it’s not necessary.
• They can be used to extend existing apps in meaningful ways to the extent that a company can succeed building its product entirely around APIs.
• APIs allow for cross-platform/cross-medium data traversal.
• Effective API usage can elevate a site or app above its competition by collating data without the need for extensive manual entry.

It’s not an overstatement to say that the apps and websites mentioned above couldn’t exist, at least not in the form we know them today, without APIs. And, if you’re chasing a billion-dollar IPO, you could do a lot worse than to think about building on top of one of the many robust, scalable APIs out there.

Of course, that’s really the biggest issue surrounding building on top of or adjacent to existing apps using public APIs; due diligence is absolutely required to ensure that an API is reliable, secure, scalable and powerful enough to keep up with the demands of growing businesses.

Even then the process is not without risk: one change by the API provider could end up pulling the rug out from under you. Many startups and businesses out there, however, have decided this is a risk worth taking. It’s working out pretty well for Uber, after all…