APIs aren’t just tech widgets; they are valuable digital products. APIs allow companies to tap into their complex technology make-ups to create new digital experiences, build new services to grow revenue and provide security.
API adoption leads to lower costs and an increase in sales, operating income, and even in a company’s market value. And when enterprises implement an API marketplace, they drive greater API consumption, tame complexity, promote a business focus for API products, and improve the developer experience.
But how can you measure this API success, and what API metrics should you track?
What are API metrics?
API metrics are measurements and data points that provide insights into the performance, usage, and effectiveness of APIs. They help organizations understand how APIs are being used, identify any issues or bottlenecks, and make informed decisions to optimize API performance and improve the overall API strategy.
Types of API metrics include API usage metrics, response time, or error rates, but they can also help measure business KPIs for values like customer acquisition and retention or time to market.
Business users will want to know the impact of APIs on business outcomes (how many new customers have signed up through an API channel, for example), while enterprise architects are typically more interested in metrics indicating the performance of the API platform (number of API calls, latency).
API monitoring is crucial given the importance of APIs to a modern business. It can indicate digital business health and allow businesses to take immediate corrective action if an important app is down. It can help determine which new services are performing well and which aren’t.
Categorizing different types of API metrics. What can you measure?
Measuring the value of APIs in your own company is not easy. There are four general types of API metrics that companies can track.
Let’s think of it as a pyramid somewhat akin to Mazlov’s hierarchy of needs: there are the basic functions required for mere existence – food, water – before people can focus on fulfilling relationships and ultimately self-actualization at the very top.
For APIs, the foundation is going to be whether an API works or not, or how long it takes to respond. These metrics are critical to an API strategy for obvious reasons, so at the bottom of the pyramid lie operational API metrics. As you go up the pyramid, you’ll see business API metrics, followed by monetization and, at the very top, the overall ecosystem value APIs are providing.
See also: 4 essential components of an API program to go from vision to successful execution
Operational API metrics
The most basic set of API metrics is operational. They measure an API’s technical performance, such as the number of APIs, the number of API calls, CPU or memory usage. Operational metrics give an indication of the operational stability of an API platform.
Business API metrics
The next set of API metrics are business performance metrics. They give a better idea of the business value of APIs as they can measure the speed of onboarding, retention, customer satisfaction, or a number of partners using your API.
These metrics look at how an API contributes or supports a business value indirectly; a core proposal of a business is not speedy onboarding of their partners, but we can’t imagine a thriving business without that capability.
API Talks Webinar: How to align API metrics to business outcomes
Monetization API metrics
Monetization tracks incremental revenue from an API, direct or indirect. Only a minority of APIs can be monetized directly, i.e., API consumers pay directly for their API consumption.
Different pricing models exist to charge for API calls (e.g., pay per call, subscription). Getty Images or AccuWeather are examples of companies based on direct monetization models.
See also API monetization models: Strategies to leverage APIs for greater revenue
A big-picture API metric: ecosystem value
This is where the true value of APIs lies. Some refer to it as indirect monetization—enabling new channels for existing business activities. It focuses on revenue that is enabled by APIs.
The question isn’t “What is the direct value of an API?” but rather “What is the value of the business?”. It shows how much business an API enables, how much business flows through an API.
For example, 90% of Expedia’s and 60% of eBay’s revenue comes via an API.
How to focus on the right API metrics
Don’t be too operational
Companies tend to focus on operational metrics at the expense of metrics that indicate the value of APIs to the business. Why is that? A few reasons.
First, many API initiatives are driven solely by IT, so they become too IT-centric during implementation.
Axway’s experts share this experience; a lot of companies tend to think operationally (e.g., the first thing is to authenticate a user), so we’ve long encouraged enterprises to focus on the value instead (e.g., why does the user need to be authenticated? What is the value of that?).
Secondly, operational metrics are easier to establish and track than business metrics.
And finally, there’s a misconception that operational metrics are an indication of business metrics.
The truth is, your API may have an excellent time-to-first call and zero latency, but if it’s only ever used by one developer… what’s the point of its existence? (Especially considering that developing and maintaining an API comes with a very real cost.)
Pressure to prove ROI
We’ve noticed an important point: the more the IT department cooperates with a line of business, the less pressure they feel to prove the value of the API investment.
Where the request to create an API came from a line of business, or where the line of business tracked the metrics, IT didn’t feel pressured the prove the API value and come up with metrics.
One customer was struggling to come up with KPIs for an API portal, because it was purely a technical investment and he assumed he had to come up with an ROI justification for the line of business.
How to Measure API Impact with Product Intelligent Strategies
Monetization can create friction
Only a few companies’ business model is based on charging for API consumption. For the vast majority of companies, the value of APIs lies in enabling their participation in the wider ecosystem.
Charging for these APIs would create unnecessary friction—in fact, it may be more valuable to incentivize others to use your APIs!
For example, industrial leader Bosch found that opening up APIs free of charge for the electric motors of their bicycles allowed startups to create accessories and services that form an ecosystem which builds customer loyalty (geolocation, training, sports, connection to Strava, etc.).
PermataBank, a leading Indonesian bank, extended its customer base by embedding its banking apps in fintech apps and services, leading to an increase in new account creation by 375% over three years.
Discover more examples of indirect API monetization here.
What API metrics are companies tracking?
Most companies remain too focused on tracking operational rather than business metrics. Both are important, but there’s a gap between business and IT that remains to be bridged.
In Axway’s 2024 State of Enterprise API Maturity report, we found that organizations look at metrics surrounding API quality, consistency, security, and compliance to maximize the value of APIs to their organization.
The top API metrics they look at to assess the value of their APIs included:
- Metrics of a company-wide initiative that uses the API (e.g., mobile banking application)
- Availability and reliability
- Number of calls — usage
- Subscriptions number of users/organizations
- Response times
Enterprises today are making ROI an important part of their API strategy. But only half of organizations fully track ROI of each of their APIs.
Treating APIs as products – and integrating these API products into your go-to-market strategy – is key to success.
Discover 10 KPIs to support your strategy and develop stronger API product intelligence.
Our survey found that API metrics also play an important role in building these API products: decision-makers consider that performance/SLA and usage metrics are some of the most important elements to include for an effective API product.
Download the full 2024 State of Enterprise API Maturity report here.
From interviews we’ve conducted with customers, we found two interesting things:
- One customer measures the “reuse factor,” i.e., how many times an API is reused. It doesn’t measure WHAT the saving is, but the NUMBER of times a saving has occurred because they didn’t have to build something new. This is spot on, because companies stand to save nearly $30K on average every time they reuse an API. Another customer independently complained that it is a pity they don’t have an API metric to track how many times an API is reused.
- Another client said that IT doesn’t really measure business metrics for APIs. Business users initiate a request for a particular API to be created, and they look at results themselves in different databases—they use different databases because it differs with each API created.
How do you decide which API business metrics to track?
In our survey, IT and Line-of-Business decision-makers ranked “building the right APIs for business use cases” as the top challenge when it comes to tracking and measuring API metrics (47%).
This is immediately followed by struggles around “alignment between IT and line of business on how to report and track API success” (46%).
The fact that nearly half of decision-makers agree they need stronger alignment between IT and line-of-business to reach common success with API programs – is important here.
The best way to decide which API business metrics to track is to start by cooperating with your business counterparts. You need to understand who you are measuring the metrics for and why.
- IT needs to understand the key business goals that the organization or a particular business unit has (this could be, for example, increase in online sales).
- The next step is to translate the business objectives into measurable API metrics (e.g., online sales via an API channel), and select just the top five.
- Finally, assign APIs to API metrics. Now, you just have to track and report the results to your stakeholders.
Both business and operational metrics are important. Both sides (IT and LOB) need the tools to accurately measure ROI, and ensuring alignment on how an API’s success will be determined is crucial to ensuring APIs are being developed correctly to meet those goals.
In the following Q&A video, Axway VP Catalysts Brian Otten dives deeper into the metrics you should be tracking to show value for your API program.
The TL;DR commandments of API metrics
Measuring APIs is difficult. But there are a few things you can follow and watch out for to make your life easier. Here’s some of the key takeaways to remember from our research:
- IT and line of business should cooperate in coming up with success metrics for API programs
- Don’t be too operational—focus on the value that APIs bring
- You don’t have to monetize everything
- The true value of an API is its ecosystem value
Amplify Enterprise Marketplace offers precisely the kinds of metrics and tooling API teams need. It unifies your distributed APIs to enable more robust governance and security, ensuring compliance and consistent API lifecycle management.
In this excerpt from a demo, we share a glance at how the Business Insights component of the API marketplace offers detailed metrics, analytics, and dashboards to help you make better API strategy decisions.
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