How do you measure the success of your API products? Doing so is key to ensuring that they are performing as they should be and that you are optimising opportunities for growth. If you want to make the most of your APIs, read on.
What does API success mean?
API success means many things. On one hand, it means that your API meets a business need by solving a problem. On another, it can mean that your API delivers a great user experience that delights its consumers. Many people also define API success in terms of how well your API product is delivering in financial terms – and a range of API monetisation strategies exist to ensure that you can achieve this.
All of these success elements are intertwined. After all, if your API doesn’t perform well or delivers a terrible user experience, it’s hardly likely to bring in as much revenue as it otherwise might. In fact, it may even bring financial losses – an overwhelming number of support tickets originating from poor developer experience could quickly ruin your unit economy. This is why measuring API success is all about taking an overarching business performance perspective. We’ll lay out some milestones below to show how you can achieve this.
Why is it important to measure the success of your API products?
There are plenty of good reasons to measure API success. You might need to report to your boss or board on your API’s performance, for example. Or to ensure that you’re doing all you can to keep your customers happy. Both require you to measure how successfully your API is performing.
Measuring the success of your APIs as a routine part of your business operations also means you’re likely to spot any areas where you need to take action at an early stage. Another good reason to keep on top of monitoring and measuring successful performance.
Future development of your API products can also benefit from your success measurement activities. After all, if you understand what users are doing with your APIs and what success looks like, you can offer them new capabilities that will better serve their use cases – a key part of optimising for growth.
By viewing the success metrics of your API product(s) as a dashboard, with your engineering team as the steering wheel, you can focus on introducing features that your customers need and will use. Like any other product, your API product will evolve, so you need to ensure that the changes you introduce deliver a measurable positive impact to your business and your customers.
Setting metrics for API success
Setting metrics paves the way to optimising your APIs through measuring their success and using your findings to guide your future actions. Some common metrics that you can use to do this include those that are standard for any product.
Direct monetisation strategy
These metrics (or a subset of them) are ideally suited to API products using direct monetisation strategies:
- Adoption rate – the number of developers and/or businesses consuming your API.
- API traffic – the number of API calls your customers make to the API product.
- Churn rate – the rate at which consumers stop using your API over a given period of time (for example, a quarter or a year). A high churn rate can indicate issues with performance, user experience or some factor. It is the reverse metric of your retention rate: fewer churning customers equals higher retention.
- Retention rate – the number of customers you retain over a given period of time (for example, after the first month of using the product).
- Net revenue retention – if you’re using a direct monetisation model, you can track the total of retained or expanded revenue over a set period (typically a month, a quarter or a year).
- Active users – the total number of unique users who are actively using your API product. The definition of ‘active’ users will depend on your API products’ use case. For instance, you could define active customers for a payment API as those using it on a monthly basis, and consider anyone not using it within a month to be inactive.
- User (developer) engagement – the amount of interaction and engagement with your product, for example on forums or through your documentation.
- User experience metrics – these include your Customer Satisfaction Score (CSAT), Net Promoter Score (NPS) and the number of filled support tickets (which indicates how happy users are with your API product). When measuring your NPS, ask driving questions to understand what affected customers’ answers.
- Revenue – something you’ll need to keep a close eye on, whatever your product.
- AARRR frameworks – some API Product Managers use AARRR framework tailored to their use case to measure rates of acquisition (or awareness), activation, retention, referral and revenue.
With indirect monetisation strategies, however, it is harder to define the API’s contribution to the company’s financial success. This is where your creativity and domain expertise come into play.
Indirect monetisation strategy
Depending on your business model, there are multiple ways that you can measure the success of an API using an indirect monetisation strategy. Some examples include:
- Improving retention rate for customers of your core product. Are you building an API product to improve retention of your core product customers? This is about improving retention through offering APIs. Slack, for example, offers APIs to its users to make the product stickier as a whole, supporting a better retention rate. A good measure for this could be the difference in the retention rate between customers using your APIs and customers not using them. You can run a cohort analysis to reveal that difference.
- Automation impact. If you’re automating a manual process to reduce the number of errors or speed up the process, then you need to measure to check you achieve the desired outcome. Does the process run quicker? Do you receive less errors in the automated process?
- Adoption analysis. Are you trying to unlock a new segment of customers who require APIs? If so, you can measure the adoption rate of your API product by customers in that segment. If this segment of customers is growing, and they are happy with your API product, then you’re doing an amazing job.
This is far from an exhaustive list, but you get the idea. You can unleash your creativity when it comes to finding the right metrics for your particular business.
In addition to general business metrics, there are also metrics that are specific to API products because of their fairly technical nature. These include:
- Time to first API call – the time required between a developer accessing documentation and making their first successful API call.
- API calls per business transaction – the number of API calls required to complete a meaningful business action.
From a technical performance perspective, it’s also important to measure API success characteristics such as API traffic volume, error rate and latency. Keeping a close eye on uptime is also essential, of course.
Qualitative success measurement
Qualitative success measurement is also important, so be sure to monitor the kind of feedback your API is receiving. This should include feedback given to your organisation and on online forums and review sites. Feedback from your sales and support teams is pure gold because they are in day-to-day contact with your customers.
They can help you identify sales opportunities or upcoming issues long before they are reflected in your metrics dashboard. Ratings sites are important too. All of this helps to build a picture of your API’s overall success in consumers’ eyes.
This kind of feedback can also impact how likely developers are to give your API a try. If your product is routinely dismissed for poor functionality on forums and review sites, developers may well move on and look for an alternative before they have even tried your API. A very good reason to include milestones related to feedback and ratings as part of your success measurement approach!
Finally, revenue and return on investment milestones are essential to measuring success. While all the elements above can feed into these figures, these are the milestones that, ultimately, will tell you whether your API is delivering as it should.
A final thought… Remember while setting your milestones that they always need to align with your overall business objectives and strategy. That way, you can ensure that your methods of measuring API success and optimising for growth will always be in tune with and support your business plan.