APIs

APIs: What to Consider when Pricing Them

APIs started just as an acronym that only programmers know in the 2000s. Now, they have become an important piece to ignite several innovative solutions. They unleashed a number of opportunities in various services to help them function more efficiently.

Using APIs is easy, but many don’t understand what it takes to make it useful. People are too focused on the technology part that they overlook the use cases for which they can add value to their businesses: representing a way to reduce operational costs and automating business processes completely.

But, how do you make money from APIs and how should you price them to get the best return? There are three ways to monetize APIs:

  • Data Collection. This is Facebook’s preferred method. It involves collecting of data from third party applications to use in your advertising efforts or your own products.
  • Product Adoption. It allows developers to build custom integrations that increase the value of products and keep the users locked-in.
  • Developer Usage. This is the most obvious way to monetize APIs. You simply charge developers for API calls.

The Developer Usage model has three pricing models, so you need to think carefully and choose wisely. The first models is Pay-as-you-Go, which simply means that you pay per API call. Fixed quota means you pay for a fixed number of calls per month and you are not allowed to exceed. Lastly, the Overage model is like the previous model. However, it allows developers to exceed their call limit in exchange for a small overage fee.

Each pricing model has its own pros and cons, but the last one may be the best option for you. It has the scaling advantages of the pay-as-you-go model and offers the predictability of the fixed quota plan.

Of course, how much you should charge per plan depends on your business. Just consider these three C’s when pricing:

  • Cost
  • Competitors
  • Content

On pricing your APIs, determine what type of value they can deliver and your actual pricing structure. Determine how much the access is worth in conjunction with your existing web-based offering and competition, then choose the pricing model that your customers will ultimately be comfortable paying. Find out how we can help here.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply