API-led product growth might be the essential part of your digital business transformation strategy that you are missing. A strategy that can enable the monetisation of data sources, faster product innovation, and increase engagement with your community of API consumers.
In this post, we’re getting under the hood of API-led product growth and its importance, but before we do that, here’s a quick recap of what APIs and API products are.
If you’re already familiar with these concepts, feel free to skip directly to the definition of API-led product growth, below.
What is an API?
In the past, Application Programming Interfaces (APIs) were purely technical elements. But viewing APIs through a middleware lens or as mere integration technology is just the tip of the iceberg. It is essential to understand that when used as connectors, APIs can unlock huge amounts of commercial value in terms of extended business capabilities, new customer experiences and digital service innovations.
As consumer and business-to-business operations shift rapidly towards connected experiences, organisations must evolve their product design, delivery and management practices quickly to stay ahead.
Today, APIs are the decisive driver of digital product transformation, whether as channels for this digital delivery or as actual API products.
What is an API product?
Typically, an API product (aka API-as-a-product) is where APIs are not just the delivery mode but the service product itself. An API product is simply an API that is designed, marketed, distributed and maintained as a product or service. Increasingly, companies are driving business value by making the API business logic their core product offering.
APIs are most valuable when designed as services and managed as products that deliver customer value. API products are much more than middleware because they drive business results.
API product delivery often overlaps with the concept of API-driven Software-as-a-Service (SaaS), where an API will power the SaaS offering and its entire business logic.
Who are the consumers or users of API products?
The direct customers and consumers of API products are developers building API-based solutions. These API developers will use and integrate API products into their product applications to improve their end-user product experiences.
An API-as-a-Product offering to developers essentially promotes, “here’s what you can do with this API and the value you can derive from it — how you integrate this into your product experience is totally up to you.”
Given that API developers are API products’ customers, API products need to be designed and provided with a significant emphasis on customer experience, which in this case is developer experience (DX).
So, now that we have introduced to you the value of APIs-as-a-product, let’s look at how this approach works as a full-blown business strategy.
What is API-led product growth?
API-led product growth is a business strategy where product growth comes from an API product-centric approach to developing APIs.
You can measure API-led product growth in terms of growth in customer base, usage/ consumption, product engagement and API product-driven revenue.
Here are the API-led product growth essentials:
1. An API-led Product Growth Program
An API-led product growth program requires that teams plan, organise, and share a vision of their API-led product growth program. It also requires adopting tools that support this approach.
2. Clear growth objectives
As mentioned previously, it is essential to have a clear growth north-star metric relating to what kind of growth is the objective. Growth could be measured in terms of consumer adoption, growing product growth availability across markets or, more commonly, revenue growth.
3. A full lifecycle API management platform
An API management platform enables the controlled management of all stages of an API’s life cycle. For example, planning and design, implementation and testing, deployment and operation, and versioning and retirement.
Crucially, for API-led product growth, a powerful developer portal as part of this offering will enable the provision of a self-service catalogue of API products, governing an ecosystems of developers who consume APIs and all the capabilities needed to promote and drive API product adoption.
4. Consumption monitoring and monetisation models
API products need to be monetised to achieve API-led product growth that focuses on revenue goals. Monetisation is often dependent on being able to monitor API product consumption.
API providers must choose the best monetisation model for their specific use case. Popular monetisation models include:
- Freemium. Developers offer basic API functions for free with some limitations.
- Pay as you Go. Developers pay for each transaction they make. Depending on the nature of APIs, the transaction cost could be fixed.
- Subscription. A cost-capped version of the Pay as you Go model, typically with a period in which the subscription is active.
- Unit costing. An API provider might charge per unit of use for infrastructure but can also charge per “unit” of process.
- Revenue sharing. Developers earn a commission by promoting a product or service made by API Providers. Companies with mature affiliate marketing programs generally offer these models.
5. A focus on Developer Experience (DX)
Taking API products to market isn’t enough alone. To successfully deliver API-led product growth, the developer experience (DX) of those API products can make or break their success. Ensuring a positive experience when using API products is crucial.
Well-designed, well-documented, consistent APIs provide positive developer experiences because it’s easier to reuse code and onboard developers and reduces the learning and adoption curve.
An API management platform’s developer portal makes it faster and simpler for an organisation to achieve API product-led growth. It does this by offering developers and partners secure, controlled, reliable and performant access to API product packages.
Real-world examples of API-led product growth
There are many examples of API-first businesses or even API product teams that leverage an API-led product growth approach.
Businesses born online often use APIs as the de facto standard for connecting data, apps, and services. Well-known examples of everyday businesses that have been successful with API-led product growth strategies include:
Initially, a standalone direct-to-consumer product that pursued an API-led product growth approach by becoming an API product available to third parties to embed into their product experiences. It now powers in-car navigation systems and rideshare/ taxi/ food delivery apps, to name a few, and has grown to become ubiquitous.
A direct-to-consumer neo-bank that also provides B2B banking services via its banking-as-a-platform API products offering. They are spearheads in developing and scaling new financial products quickly and efficiently without requiring lengthy development lead times and complex legal arrangements.
AccuWeather uses APIs to provide weather data to partners across various devices, such as mobile apps, wearable devices and connected cars.
The company has pushed further into the business market with its WhatsApp Cloud API for businesses of any size around the world. They have built their offering over the past several years as one of the key ways the otherwise free messaging app would make money.
The Bottom Line
API-led product growth is a business strategy committed to the continuous development of API products to drive business results and growth.
API management platforms, specifically Developer portals, are essential to enable organisations to meet the required demand for faster innovation, improved operational efficiency and the levels of API product observability required to achieve API-led product growth.
An API management platform, complete with a powerful developer portal, is the best API storefront and marketplace solution. It ensures API consumers can find API products, understand their value and adopt them rapidly. Tyk is the API lifecycle management platform built to fast-track businesses in their API-led product growth journeys.
Book a demo today to learn how to enable product-led strategies and deliver secure, production-ready API products.