The Application Program Interface (API) is critical to the success of the newly emerging platform-as-a-business-model – think of AirBnB, Uber and YouTube. These are examples of platform business models made possible by technology.
What exactly is a platform?
A platform is a business model that connects individuals or businesses to create content, exchange services and create businesses. The company that owns the platform serves as a marketplace and does not own the content or services.
For example, AirBnB does not own any of the properties on its websites. Those properties are owned by the individuals and businesses that use AirBnB as a platform to connect with one another and do business. This enables a platform business to scale rapidly, as it leverages the network effects of its ecosystem and is asset light.
Everyone wants to become the next Uber or AirBnB. These could be digital natives or digital immigrants or even government departments and agencies. While it is obvious that they will need some kind of technology tools to enable their platform, what is not obvious is that this would invariably involves APIs.
What are the key ingredients for a successful platform? Firstly, it has to provide an open and non-proprietary interface that enables ecosystem participants to create value. Such interfaces are realized through APIs. The participants can use the platform’s APIs to build new apps, extend the platform’s reach or even innovate new functionality. A good example of this is the Google Map API, which is open so that anyone can use Google maps to integrate with their own services. Platform users are also producers, and all of this is made possible by APIs.
Second, a platform should act as a data aggregator that collects data from its community and provides that data back to its users. Uber collects travel pattern data of its riders and shares that with its drivers, so they know where to locate passengers or the peak times when their service are most in demand. Uber also shares travel data (consent-based) with ecosystem partners such as hotels or businesses that may benefit from such data.
Indeed, by mashing up data with 3rd party data, new services could be created, either by Uber or its ecosystem partners, in a virtuous cycle of innovation. This is why data is the new currency in the digital economy. How does a platform business like Uber collect the data? You guessed it: through APIs.
Third, a platform must be able to engage its users across multiple channels, be it mobile, web or on future devices yet to be imagined.
Platform businesses must be adept at engaging with their users across multiple devices, where the content or service can be consumed. APIs serves as the integration layer that connects these diverse touch points together. Businesses can then get a continuous stream of user interactions that they can stitch together to offer highly personalized, contextual experiences for their users.
British fashion icon Burberry is a great example of using APIs to offer a highly personalized shopping experience for its customers anywhere in the world, whether in-store, on web or mobile.
Fourth, a platform must be able to scale quickly and efficiently as it expands its partnership ecosystem. In the traditional world, each business partnership requires extensive resources that usually take several months. In the digital world, partnership integration is measured in days or weeks.
APIs enable partners to plug and play into the existing infrastructure to create value without the need for complex integration. Moreover, it is not just speed but also efficiency – APIs enable partners to self-serve without the need to form large business teams to manage partners.
A great example of scaling digital business is Telstra, which uses APIs to drive new revenue streams by on-boarding partners that use Telstra APIs to build new apps and services on the Telstra network. In the first 30 days, Telstra on-boarded 3000 developers, an astounding number that would simply not be possible had Telstra done it the traditional way.
Platforms are now no longer a novelty but a serious consideration for all digital businesses today. As the platform economy grows, the use of APIs is becoming ubiquitous.
Indeed, it is accurate to say that APIs are the oxygen for the platform economy. However, as APIs become commonplace, challenges arise in scaling, securing, monitoring and managing the lifecycle of APIs. If not properly managed, APIs could present serious problems to running your platform business. In my next article, I will describe how to meet these challenges.
By Chee Keong Law, Director of Channel and Alliances, Apigee