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APIs are central to rapid digital transformation. Organizations across various industries leverage these software programs or codes to drive innovation and productivity across the enterprise.
Interestingly, a growing number of companies or start-ups are building their revenue models by building high-value APIs and making them available to developers. Suppose your organization also consumes third-party or internal APIs or both. In that case, you, too, can productize your APIs and build new revenue streams to support your business growth.
When you treat APIs as any other product you build to create revenue, you must first identify and determine the correct set of metrics and KPIs. Though there can be hundreds of metrics to track the performance of APIs, you can do well with only a couple of them. This blog will discuss the most vital metrics and KPIs that you can consider using to track the success of your next API product.
However, before we delve into the API metrics, let’s first understand why organizations choose to build and monetize APIs.
Key reasons businesses build and monetize APIs:
To tap into new markets and increase customer base: APIs allow businesses to extend their services to a wider customer base, including developers and third-party applications. New markets and an extended customer base eventually lead to increased revenue and business growth.
To generate new revenue streams: To thrive in the marketplace, businesses constantly need to discover and build new and improved revenue sources. By monetizing their API products, these organizations can create new streams of revenue by charging developers for using their APIs. API providers can also generate indirect revenue as the increased API usage can drive the adoption of their core products. Depending on the API product and its usage analytics, API providers can develop a robust API pricing strategy that not only impacts the bottom line but is also user-friendly and flexible.
|According to MarketsandMarkets, the API management market is projected to be worth $5.1 billion by 2023, at a CAGR of 32.9%.
To foster innovation and collaboration: APIs are not just helping businesses generate lucrative revenue; they are also enabling them to extend their core capabilities to those who need them to build their own unique offerings. Take non-banking companies, for example, such as mobile wallets and payments apps, such as Google Pay and Apple Pay, and fintech startups such as Square and PayPal. These companies seamlessly leverage the core offerings or infrastructure of the mainstream banks to build new markets and innovate new products. APIs, in this form, allow for increased collaboration between API providers and consumers and pave the way for innovation to build new revenue models and deliver superior customer experience.
Overview of Apigee monetization
7 essential API metrics to track API performance and success:
Time to First Call (TTFC)/Time to First Hello World (TTFHW): Time to First Call is a critical API metric that can give you deep insights about your API product. TTFC or TTFHW is often the time a developer or an API consumer takes when they sign up for the API key, access the documentation, and make the first call. You should do everything possible to keep the TTFC value low.
API churn rate: It’s the rate at which your API consumers stop using your product or end the subscription. Keeping track of your API churn rate can help you identify how satisfied or dissatisfied your customers satisfaction or dissatisfaction. With this insight, you can modify your API product and improve other essential metrics such as customer lifetime value and satisfaction. To evoke an old expression: acquisition is vanity, retention is sanity. So, it’s vital to track the churn rate of your product so that you do not have to spend a fortune on acquiring new customers, while it’s always easier to retain and sell more to the existing customer base.
Active monthly users (AMU): You cannot productize or monetize your API products in the real sense unless you have complete visibility into your active monthly users. Based on how many unique users your API product has, you can make data-driven decisions while building or finalizing a pricing strategy, such as a tiered pricing structure or a pricing model that is based on charges per request or 1000 requests.
API usage growth: API usage is the gold standard in measuring the success of an API product (mainly how well it’s doing in terms of its adoption from the targeted markets.) Unlike requests per call, you should analyze API usage in longer intervals, such as days and weeks. You can achieve so much by monitoring your API products' adoption or usage trends or combining it with the findings from the other metrics, such as unique customers every month. API product usage has to rise every month; however, if it’s not growing in terms of usage, you have a lot of things to look into and take action on.
Uptime: Uptime is one of the most basic yet critical, API metrics you can use to gain insights into your API products' overall health and performance. It’s often included in the SLAs (service level agreements) and affects how API consumers think of your API product. Though 100% uptime will be the aim of an API provider, it’s something that most of us will never be able to attain. However, this should not stop you from optimizing your APIs and constantly trying to improve the uptime or availability of your API product.
API revenue and ROI: Revenue generation is the goal of most API products. So, tracking the overall revenue generated by your API product and the return on investment is critical to monitoring the financial success of your APIs. The insights can help you with innovating new or better ways to monetize your product. If the revenue or ROI is not on par with your expectations, you can look into performance or adoption metrics related to your API product and take steps to improve the customer base as well as increase the usage rates.
Error rate: Error rate or errors per minute (EPM) helps determine your API product's overall health and reliability. The higher the error rate, the more buggy and error-prone your API will likely be.
However, you should not just collect the number of errors that your API is experiencing; instead, you should be able to categorize these errors so that you can figure out what needs to be fixed. For example, 500 errors signify problems with the code of the API product, whereas 400 errors have more to do with a poorly designed or documented Application Programming Interface (API) product.
In conclusion, the success of your API product hinges on the careful selection and analysis of API KPIs and metrics. Although there can be hundreds of KPIs to track the performance of an API product, you can do well with a handful of them.
Time to First Call (TTFC) and Time to First Value (TTFV) help you discover more about the product's user experience. Other metrics, such as Churn Rate and Active Monthly Users, help identify the key issues API consumers might face while using the product and improve the product so the user experience can be improved along with the revenue it can generate for the business.
Engaging a reliable API development partner can streamline and accelerate the whole process of building APIs and monetizing them the right way. To initiate the conversation, please reach out to our API experts.