API Economy - An Introduction

What Is An API?

API stands for Application Program Interface. APIs allows programmers to write a mobile app to look up your monthly gas bill from stored in the cloud database. In other words, the cloud database provides database information through the API.

How Does API Work?

So how does the gas bill  app access the data in the database? Through the database API. The API is a clear set of software functions (provided by the database) to allow another program (the address book app) to retrieve customer information. Simple examples of API functions can be get_bill().

 

Let's assume that PG&E (a utility company) has 4.3M gas customers. The information on the 4.3M customers are stored in a database for 1. Billing (I need to send a monthy bill to customer Nat Gus) 2. Service (customer Nat Gus has 2000 SF house, has a gas water heater, gas stove range).

So far, this example is one where the API user (address book app) and the API provider (the customer database) is in the same company PG&E. But the API (to the customer database) can also be MONOTIZED. That is, you can sell the right to use the API.

Another Example - Making Money from API

At the business level, API allows you to finally make money that was not possible before API. it allows companies with 1. data (customer data, weather data) or 2. service (send us data, we return insight) to SELL. Another way of making money from API is to allows access to your PLATFORM (Amazon, Alibaba, eBay) and you charge a transaction fee. Let’s look at the ways:

Data To Sell Via API And Make Money From Your Data

The WeatherChannel has been collecting weather information around the globe. You are an insurance company that want to calculate th risk of flood in Oslo. The WeatherChannel will sell the insurance company access to the weather data via. Once the payment is made from the insurance company to the WeatherChannel, the WeatherChannel will give. The insurance company an API KEY, and the API documentation. 

Service To Sell Via API And Make Money From Your Software/Know How

You have developed an algorithm to predict who will drive recklessly and cause an accident. You want to “sell” this algorithm. One way to do this is to provide a API to your algorithm. Insurance companies will pay you money, you provide an API KEY and API documentation, they send data (age, race, family incoming, zip code) etc, the you can figure out if they will cause an accident. Service can be more than algorithms - it can be a team of analysts in India doing research.

Grow The Platform API And Make Money From Transactions

You have an e-commerce platform. On this platform, sellers can post goods for sale. Buyers can shop and buy. You want to grow this platform - the more sellers you have, the more buyers will come. You provide a FREE API to verified sellers for them to post their goods for sale. When an item sales, you get money. 

Conclusion

An API enables business to safely share or sell their data on the internet.