API licensing Business Model

API licensing Business Model

Google Maps and WhatsApp are used by billions of people. But how do they make money?
 API licensing Business Model
Whether you book a cab or pay for a product or send an email you will be using some form of API.

Payment
Gateway APIs

Google Map Auth APIs in

APIs in Uber Email

API (Application Programming Interface) is a software intermediary that

allows two applications to talk to each other.
 API licensing Business Model
Imagine you go to a Pizza place. You check the menu and order through a waiter, who
will take your order to the kitchen and brings back your pizza.

So, every time you enter your drop location in uber, it will hit the Google map APIs
and get a response to calculate the fair of your ride.
 API licensing Business Model
These APIs are the building blocks of complex programs which define an independent
set of functionalities with a reusable piece of code.

So instead of starting from scratch developers can

use these available APIs and save time writing new
programs again and again.

SMS - Twilio
Email – Mailchimp, SendGrid etc.
Payment – PayPal, Stripe etc.
 How does API work (From a techy mind)
Our mobile connects to the internet and sends our request to the remote server. This server then
collects the data from the database from your request, processes them, and sends them back as
a response to your mobile phone.

The application will convert that data into a readable response and display that
through the user interface.
 How does API work (From a techy mind)
In Short API act as a communication bridge between the User’s front-end and
the back-end system in a app.
 Types of APIs

API’s

Developer Gets
Free Developer Pays Indirect
paid

Free:
Simplest API-driven business model which allows app developers to access APIs freely.
Example, Facebook, Google Translate and government and public sector
API licensing Business Model

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 Types of APIs
1. Pay as you go — You only pay for the no. of APIs request with no minimum price defined. Ex:
AWS charges you based on fetch requests from their s3 container.

2. Tired — Just selected your suitable plan based on your consumption like API calls, subscription
applications, etc. Ex Gitlab

3. Freemium — Developers can use the services for free with basic features but require a premium
version to use additional features. Ex GitHub, HubSpot
4. Unit-based — This offers different features(units) at different prices Ex Twilio, Mailchimp

5. Transaction Fee — This model is mostly used by payment APIs where developers have to pay a
percentage of the transaction amount happens through the API.

API’s

Pay as you Transaction

Tiered Freemium Unit based
go Fee
API licensing Business Model

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 API licensing Business Model
Revenue Share — Developers get paid a share of the total revenue generated from the purchases
coming through customer referrals Ex-Google AdSense Ads on the website.

Affiliate —Here people get paid from the Affiliate commission either from the sale or driving the
traffic. Ex CPA(Amazon Affiliate Program) and CPC(Infolink's) Sign-up Referral (Skillshare for One-
time and Medium for Recurring).

API’s

Developer Developer
Free Indirect
Pays Gets paid

Rev- Share Affiliate

Sign-up
CPA CPC
Referral
 API licensing Business Model
The free use of your API will lead to increased revenue because third-party developers will
implement it on top of your API.

Paid Indirectly

Content
Content Acquisition Upsell Brand Building
Syndication

Google business -Product comparison apps Upselling a premium

review APIs -Classifieds; and service or maintaining the
-Vertical search platforms product
(flights or car rentals).
 API licensing Business Model
Content Acquisition — Motivates users to write more quality content that will result in more
sales/values to the platform Examples :
• Google Maps or Any website that allows users to write reviews.

Content Syndication – Here the goal is to spread the content to as many users as possible to
drive content syndication by making it easy for third-party apps to consume and distribute it.

• Product comparison apps

• Classifieds (RSS feed)
• Vertical search platforms (such as flights or car rentals).

They use the affiliate model to compensate third-party developers to use their product.
 API licensing Business Model
SaaS — This model allows companies to pay for enterprise licenses and access specific APIs
available on a platform.
Salesforce only offers API access to the enterprise edition.
Third party API Economy
Data-As-A-Service Business model
 Data-As-A-Service Business model
If you read online than I am sure you have heard of these two brands. So how do they
make money
Data-As-A-Service Business model

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 Data-As-A-Service Business model
Big Data
1. Data Users: Businesses that use data to form Business
Models
strategies and build better products.
Example Fitbit
Delivery Data
Data User Data Supplier
Networks Facilitators

Data Suppliers: Businesses that are primarily involved in the trading of data.

Delivery Networks: Businesses with the advertisement business model.

Example Meta and Google

Data Facilitators: Businesses involved in providing data infrastructure, analytics, and consultancy.
Example: AWS, Snowflake, etc.
 Data-As-A-Service Business model
2. Data Supplier (Information Orchestrator)

Company A Company B
Data Points collected Data Points collected

>
• Customer’s location • Customer’s location
• Pulse • Gender
• blood pressure
• Medication
• Sleep cycle
• Temperature

Company A can offer more personalized products

 Data-As-A-Service Business model
3. Delivery Networks (Service Orchestrator)
To make better shoes you need to know customer demographics like Age, Gender, Lifestyle,
Sports, Calories burned etc.

This will help them get the data beneficial for their business-
like product usage, interests and preferences etc
Examples: Fitbit, Apple Watch, Nike Shoes etc.

Apple Watch OS 9 is powerful

• Sleep tracking allows users to detect when users are in REM, Core, or
Deep sleep i.e., showing healthy sleep.

• Medications app manages and tracks medications, sends reminders

and shows drug interactions

• Workout app that shows Heart Rate Zones, calorie burnt and Identifies
sports with strokes types, etc

• ECG app, HER, and other things

 Data-As-A-Service Business model
4. Data Brokerage (Data Suppliers)
Data brokerage treats data like any other product and companies like Nielsen, Statista, etc. are in
the business of collecting and selling primary and secondary data.

How data brokers are helpful

• They aggregate samples from rural to Urban data sets across age groups to have a complete
picture.
• Help companies expand into a new product category or in international market expansion.
 Data-As-A-Service Business model
5. Advertisement Intermediaries (Delivery Networks)
Delivery network aggregates user data like interest, income and location to show more
personalized ads to increase the purchase.

The more data an advertisement intermediary collects, the more paying clients it gets.
 Data Tools (Data Facilitators)
Businesses that focus on providing data collection and handling tools like storage media, servers
and workstations, scanners, data collection, analysis and visualization software etc.
Examples: AWS, Databricks, Snowflakes etc.
Everything in tech today is a service

Types of
services in
Tech

Software-as- Compute-as- API-as-a- Data-as-a-

a-Service a-service services Service
 Data-As-A-Service Business model
Companies with data-driven business models base their core business on data.
Examples: Open AI, Facebook Ads, Bolt, etc.

This is done in three simple step

Step 2
Step 1 Step 3
First Collect the Make data a key
Find a new way to
data resource in
add value
business model
 Step 1 First Collect the data
Either Platform collects the data manually (Open AI) or allows the user to use the
product for free(Facebook).

• Open AI- The more someone uses the APIs the better the ML model becomes.
• Facebook Ads – The more you use Instagram the more personalized ads you will get.
• Bolt – One-click checkout experience by fetching your past data.
 Step 2 Data as a key resource for business models
The Value is generated by making data the company’s key resource.

• Open AI- The more you use the API to fetch data the more you pay(Token based)
• Facebook Ads – The more the customer data point, the better the ads targeting, and
the more the revenue.
• Bolt – More the websites use a bolt, the faster the checkout experience.
 Step 3 A new way to add value
Companies are building their product on the top of Open AI

Copy AI uses GPT3 a machine learning library from Open AI which builds by reading
trillions of words from the internet.

AI content Respond all your AI A/B testing

creation customer reviews landing page
 Data-As-A-Service Business model

Great data companies look like the ugly child

of a SaaS company.
 Data-as-a-Service
The Data Lifecycle- There are five common steps that characterize the data lifecycle:

1. Acquisition: The first step is to capture data from both internal and external sources.

2. Processing: Include transformation of data into a usable format.

3. Storage and Enrichment: Storing data from multiple sources to form a cohesive dataset. In
this step, metadata is added to improve discoverability and democratization.

4. Analysis: It means you generate insights that help in decision-making. So, charts,
dashboards, reports, etc.

5. Exchange: Apply outputs in a business context, like optimizing some

processes and identifying new revenue streams.
 The Data Lifecycle

Basic

Advance
 The Data Lifecycle
There are five common steps that characterize the data lifecycle:

1. Acquisition: Pulling data from sources like Salesforce, HubSpot, QuickBooks, and others to
make the acquisition a breeze.

2. Processing: clean data and mutate it into consistent, usable formats.

3. Storage and Enrichment: Adding metadata on cloud-based storage or warehouse

4. Analysis: Preparing charts, dashboards, reports etc.

Morphological box for the classification of data marketplaces

Transactional centric
Neutral

Hybrid

Domain Unspecific
Aggregation

Decentral
Pay-per-use

Transaction fee
Open source business model
 Open source business model

Open-source software is software with source code that anyone can inspect, modify, and
enhance

1. Open Source code

2. Proprietary/Closed source
Let’s understand this with WordPress

SaaS Self Host

 Let’s understand this with WordPress

Worpress.com is developed and run by the private company Automattic.

Worpress.com Worpress.org

WordPress.com let you buy a domain, and WordPress.org is the open-source version
host it without worrying about performance installed using Cpanel by the user.

Makes money from hosting and other Makes money from Marketplace whenever
services you purchase an add-on or a theme

Run majorly through donation

Hosting

Plug-ins
 Open source business model

The business model is a company’s strategy for both creating and capturing value, then
free and open-source software only covers the first half of that mysterious equation.

Open-source
business
model

Constellation
Systems
Open Core of Value-added Hosting
Integration
Libraries
 Open source business model
1. Open Core - It’s a business strategy where a company offers a “core” version of a product
with limited features as free and an add-on commercial version as proprietary software.

The free version acts as a growth channel and builds a base of users that can add to the
source code. The company will then develop an enterprise version.
Open Core business model
 Depth in the Open source business model
The mix of how much functionality is open and how much is a paid add-on can vary a lot
across tools.

Whether these add-ons are targeted at high-volume use cases or at low volume
decides the earning potential of open-core
 Open source business model
2. System integration or Services model - When a customer pays for technical support,
consulting services or additional add-ons.

But the Services revenue is unpredictable and requires a significant headcount with thinner
margins.

Example Although Red Hat makes 3x the revenue from consulting, their margin is 31%
compared to 93% on their subscriptions.
 Open source business model
3. Hosting – It enables small companies that don’t have sophisticated in-house DevOps teams.to
use companies own infrastructure without having to be concerned with the operational
overhead of managing the infrastructure.

Example: Mongo Atlas , Sanity CMS

MongoDB’s cloud business operates at ~65% and Elastic’s at ~40%.

 Open source business model
4. Marketplaces
The core product is open source, and they make revenue from marketplace/addons/plugin

Example: WordPress, Android

• Android makes money from play store fees

• WordPress makes money from marketplace fee
• Mozilla generated $500m in annual revenue by making google a default search engine.
 Open source business model
Here are six methods you can employ:

Paid support - Project maintainer, you have a lot of knowledge about the codebase.

Software as a Service (MongoDB) - Offer a complete Solution, Monitoring tool for optimization

Open-core model - Alternative for open source projects to monetize their code request

GitHub sponsors - 100% of sponsorships go to the developers.

Paid feature requests - Get Paid To Build Open Source Extensions for Existing Products

Get paid to build open-source extensions for existing products

Block chain as a business model
 What is Blockchain?
Blockchain is the technology of distributed ledger that give
control to people instead of an Authority.

Centralize ledger Distributed ledger

What makes blockchain so unique

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Block in a blockchain

cockpit of a truck
What makes blockchain so unique
Web 2 Vs Web 3

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 Block chain as a business model

Blockchain BM

Blockchain-as-a
Core Development Wallets and other
Utility Token Service Aggregator
Platforms services
(Baas)
 Token Economy – Utility Token Business Model
So, all Blockchain uses Distributed ledger technology (DLT ) which requires consensus, and a
token is one of the mechanisms to reward the token miner or token holder.

Example: Solana and Ethereum

These companies issue some tokens at their Initial coin offering (ICO) and make a profit by
holding some tokens for further development.

If you refer to their tokenomics you will realize that Solana still
holds more than 60% of the token while Ethereum foundation
holds 7-8%
 Blockchain-as-a Service Aggregator (Baas)
AWS for blockchain which means you will simply do an API call for your favorite blockchain, and
you can use that service.

Example: Alchemy is a node provider for a variety of blockchain

 Core Development Platforms
Example: Bitcoin and Ethereum i.e. Ethereum Blockchain as a Service (EBaaS).
 P2P Blockchain Business Model
The peer-to-peer (P2P) blockchain enables end-users to interact with each other directly.

Example – IPFS

IPFS, an interplanetary filesystem, takes advantage of the blockchain business model.

Also, there is mining software that will let users share their unused storage space.
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