Building a business that relies heavily on APIs is a model that has brought success to many companies. Sometimes success comes in the form of diversified revenue streams, other times it means increasing customer value within the existing ecosystem. API-driven businesses also allow for more third-party innovation, which in turn boosts the success of the business.
What defines a company that is API-driven? In this case, it means any company where the API powers a core part of their business. For all of these companies, their API has played a major role in driving growth at some point in their history.
Twilio really defines what it means to be API-driven. They are a cloud communications platform-as-a-service. That means developers can use their APIs to programmatically make and receive text messages and phone calls. For them, their API is the entire business; and it’s earning them a lot of money. Q1 2018 saw a total revenue of $129.1 million, up 48% from Q1 2017.
Twilio started in 2008 with just a simple API for making phone calls. After a couple years, in 2010, they added an API for text messages. Since then, they’ve expanded (through internal development and acquisitions) to include SMS shortcodes, VOIP, 2-factor authentication, and more – all via API. Throughout the development of their business, Twilio has demonstrated the importance of starting small, focusing, and iterating based on customer needs.
Another takeaway from Twilio’s success is learning to balance the needs of API consumers with the needs of business owners and key (non-technical) decision makers. Twilio has a great reputation amongst the development community for being easy to use and implement. A search on Hacker News brings up pages and pages of projects using Twilio.
While they focused on the needs of the API consumers when deciding what features to build out, they also took care to build a reputation as best in class for their particular API offerings. This enabled them to acquire major clients like Facebook, AirBNB, and previously Uber, and has a lot to do with their growth and success.
Stripe is one of the most successful and best known API-driven businesses. While they don’t disclose exact numbers, analysts estimate that Stripe is handling over $50 billion in ecommerce annually. This means a revenue in the ballpark of $1.5 billion, no small feat. No recent valuations have come out, but in 2016 Stripe was valued at $9.2 billion during fundraising efforts.
Stripe was founded in 2010, and took a few years to build out their initial API. From the very beginning they piqued the interest of many investors and received a good deal of seed funding (from Y Combinator) and VC investments from groups including Sequoia Capital and Andreessen Horowitz.
A massive part of Stripe’s success lies in the problem they identified and proceeded to solve. Prior to Stripe, developers were in limbo when it came to ecommerce payment processing. They were forced to either use a self-hosted gateway (e.g. Authorize.net), which came with a lot of setup required, or go for a branded 3rd party option like Paypal.
These options were all very limited. They didn’t offer APIs, and very much didn’t care about the experience of the developer. Payment processing isn’t exciting or groundbreaking, but so many companies have to do it and so many developers have to implement it, that there were major business opportunities for an innovator – a role Stripe has very gracefully stepped into.
Taking a developer-first approach has also worked in Stripe’s favor. They made it incredibly easy to get up and running, so that payments can be accepted almost immediately. This ease of use has resulted in tons of 3rd party integrations, which diversifies Stripe’s ecosystem without removing means of profit.
Unlike the previous companies, eBay didn’t start out with the intent of being API-driven. Instead, they got into the API game as a result of so many unlicensed 3rd parties relying on their ecosystem. With the release of their API, they became one of the pioneers of this style of API-based web services.
The original API was only released to a select few official partners, at first, but today the extensive API is open to anyone. With their API, users can submit items, sell items, list items, display listings, and a lot more. It enables things like automated auction monitoring and improvements to the auction management process.
With all this ability to build upon the eBay API, there are loads of ways for 3rd party services to monetize from their system. This has resulted in a flourishing ecosystem offering far more than eBay could or would alone. Exposure to eBay is much greater than it would be otherwise. Today, more than 60% of company revenue comes from the API, and developers are using the API to create nearly a billion listings per quarter.
More recently, eBay has expanded into new API territory. They’ve added expanded Commerce APIs which allow businesses to use eBay as a platform for on-site ecommerce. This is a unique and exciting approach to ecommerce development.
XML APIs have been a part of Salesforce since day one, back in 2000 when it launched. The founders realized early on that, particularly at the enterprise level, sales data needs to be shared across multiple company platforms. In this case, an API was the perfect solution and allowed Salesforce to fully integrate with existing systems. Today, 90% of Salesforce revenue is via their API.
The same APIs used by 3rd parties are also used internally to power salesforce.com. The APIs and web interface were launched at the same time, and provided what is now recognized as the first enterprise-level web SaaS.
One major selling point of Salesforce is the marketplace of third party applications, available directly within Salesforce. Salesforce actively works to support these app developers, recognizing that they drive revenue too even if it’s not direct. It very much pays to support third party development. Salesforce recently doubled down on this investment as well, with the $6 billion acquisition of Mulesoft, an api integration platform.
Rovi is definitely the oldest company on the list, founded as Macrovision in 1983. They offered a database of metadata which was directly encoded with videos starting in 1985. From there, they expanded to other physical media, like DVDs and DVRs, and with time most major Hollywood studios utilized their encoding service. From there, they expanded to DRM and distribution management of electronic media.
In 2009, they rebranded as Rovi and pivoted to offer their metadata via API, rather than encoding it with media directly. They’re most known for their music metadata, which is used by major companies including Apple, Facebook, Spotify, Slacker, and Pandora. They also cover areas like TV, music, movies, and games. Recently, they acquired TiVo and rebranded as the TiVo corporation, greatly expanding their product line but continuing to maintain their APIs.
Unlike Rovi, Algolia is one of the newest companies on the list. They chose to capitalize on the trend of API-based SaaS, and offer search as a service via a series of APIs. In the case of Algolia, all product offerings are powered by the API.
Algolia took a smart approach like Stripe, finding a common pain point amongst site owners. Thanks to Google’s lightning-fast search, site visitors have come to expect the same from any search experience. Unfortunately, this is a major technical challenge and not something that can be quickly implemented from scratch.
There were some other options available, but they were made to simply be embedded in the site. That meant they didn’t have a lot of room for customization. Algolia knew they couldn’t possibly anticipate every user need so they opted for an API.
The API is incredibly thorough, offering developers access to all of their data, with tons of ways to parse and organize it. Geo-based search, custom facets for ecommerce, and much more is available to anyone who subscribes to they API. They have been quite successful with this approach, utilized by content heavy sites like Medium and Product Hunt, and major ecommerce companies like Birchbox.
7: IFTTT & Zapier
All of the companies above focus on an API-driven approach that appeals primarily to developers. The APIs are highly technical, requiring prior knowledge to understand how to implement them. While these (and many, many more) APIs have a ton to offer, they’re not available to the masses.
IFTTT and then Zapier came on the scene attempting to change this. Instead of focusing on developers, they went for a less technical audience. Their products offer a GUI-based approach to API consumption.
IFTTT (If This Then That), which is more consumer focused, offers a simple system of triggers and actions, available in a brightly colored UI. A user signs up for an account, and selects an If (aka a trigger). This could be anything from someone tagging the user in a Facebook photo, to a relevant hashtag being used in a slack channel.
They authorize connections to the service in question, and then pick the That, the action which follows the initial trigger. This might be saving the Facebook photo to a Google Drive account. These triggers & actions are saved as recipes in the system, and are run automatically once enabled.
Zapier functions quite similarly to IFTTT, but is focused on professionals. The concept is the same, connecting accounts from different platforms to share data. Unlike IFTTT, multiple actions can be chained together, for more complex API-driven interactions.
The downside of this GUI approach is of course that a desired trigger or action must exist in the system. An entire API is not immediately available for consumption. Regardless, the fact that these companies took a new approach to APIs has brought them a lot of success and ongoing partnerships. The lesson here? APIs are for everyone.
Building a business around an API can bring massive success. As microservices and serverless development continue to grow in popularity, companies that invest heavily in their APIs should see more and more use. Whether the company exclusively offers an API, or uses their API to drive an ecosystem of third party apps running alongside their SaaS, doesn’t matter. APIs allow enterprises to use the service even within existing platforms, makes implementation more flexible, and ultimately drives innovation.