Monetization: Approaching products as API Design Wins

Think of when you went to an arcade, popped in a token to play that classic pinball machine. Perhaps you play Animal Farm on a gaming console like a Nintendo Switch. The thrill of advancing to various levels in any game motivates you to unlock more secret passageways. There’s even news of eSports making its way to the Olympics.

In the world of electronic components, specifically semiconductors (we’ll just call “chips” for brevity) there is an ecosystem that awaits manufacturers who win a place in a product design called a Design Win. Think of the chip or API as the token or game unlocking new worlds.

When comparing API and chip ecosystems, think of how AI and 5G networks rely on both ecosystems as a demand for real-time interoperability grows.

What would it take for the world to adopt “design wins” for APIs?

A design win means large-scale adoption of the chip such as in a popular device, vehicle or smart city. Design wins are important ways to “transfer business”. One way to track adoption is through an early analysis of the bill of materials BOMs aka “recipes” that produce the best direct revenue and reveal indicators of growth or under-leveraged channels. However, just like tracking direct and indirect API monetization can become complex, so design registration programs are tricky for original equipment manufacturers OEMs and chip suppliers when it comes to rewarding distributors.

Companies that offer directories of technology stacks that build our favorite products are on the right track. Marketplaces, API networks or directories, and unified catalogs are also ways to understand what software solutions are powering successful experiences. Much of this discussion is also about branding. Think of the PC laptop that comes with the Intel Inside sticker.

The motivation for connecting these dots includes new revenue streams and a healthy API product life cycle.

The design win means faster innovation

We see companies such as Dyson and others able to churn out life-saving products into the market in 10 days. The key to Sir Dyson’s success is leveraging existing technology optimized for safety and efficiency. In addition, in any landscape, a target like a design win, essentially a promise that your technology will be adopted pumps a positive psychological effect and puts pressure on the organization to deliver.

Here are the top three monetization strategies that come from API Design Wins.

1. Direct Value – Charge for the data and/or functionality the API provides based on transactions that tie directly to sales in production
2. Indirect Value – Charge for data and/or functionality the API provides based on how they assist in either acquiring or boosting meaningful user activity
3. Ecosystem Value – Charge for access to the community and resources to get the most value out of the API. Here you can better understand and learn from others who have adopted the technology before you make key business decisions to ramp up, modernize and create new income streams more quickly.

In the physical world, chips and related components have local and international new product introduction and end-of-life notice requirements. The design life cycle is often much longer because the margin of error is much smaller.

In the digital world, we scale more quickly and provide visibility more easily such as with the utility pricing model.

Do I build or do I buy?

Public and private sector organizations may not have the expertise to build or buy APIs. Organizations that build their own APIs may not have the bandwidth or experience to create the best ones and don’t want to maintain their own. However, the same organizations that may purchase API driven data or functionality are wary of relying too heavily on third-party APIs in the long run.

Closing this gap can be driven by two events:

1. A sudden need to adjust quickly to changing market needs, otherwise comprising market position completely
2. The leadership foresight, planning and execution to prepare for the unknown, but with enough data to warrant the need for automation and integration

Most companies have already built APIs as a natural part of the SDLC. Then, executive leadership learns about how important APIs are to the foundation of their partner ecosystem and a tighter business coupling.

Current state

Should I “buy” APIs?

But, if my business relies on APIs where I have no visibility or control, how much risk do I bear versus creating my own?

• Fragmented
• Concerned about reliability and longevity
• Multiple catalogs and directories
• Various discovery methods

But what if I build APIs?

In place of APIs, think of logistics when it comes to Amazon’s supply chain approach and you’ll see why they now own fleets of vans, airplanes and their own distribution centers. Amazon is also famous for exposing all business value and communications as APIs early on.

In place of APIs, think of content, Netflix, Sony (both digital) and Arrow Electronics (electronic component) also understood the approach of creating and owning the entire life cycle of your assets. That is why Netflix started producing its own shows and movies. Of course Sony also understood the value of the ecosystem for their Playstations and support smaller gaming development shops and films on the entertainment side. Arrow Electronics bought Hearst Media knowing that competing distributors relied heavily on Hearst’s technical content and would have to scramble to produce in-house content.

Design win exemplars

Chip World

Apple announced that they plan to sell Macs with their own chips beginning in 2021. Instead of continuing with Intel as its main supplier long term, Apple plans to rely on iPhone and iPad processor designs. Ideally, they may slowly transition more of their supply chain inward.

India’s leadership states that importing chips and components and the lack of a manufacturing ecosystem is hurting their space ambitions.

Software World

Corresponding examples are both Netflix and ESPN who were early proponents of public API developer portals. They shut down access to their APIs as part of new strategies to monetize their business and didn’t want competition as API Consumers. The issue companies face is if they don’t create an official API, as in the example of the popularity of Pinterest, they may get pressured to do so and fans may build APIs that are not company-sanctioned.

1. Integration
2. Channel Partners
3. Technical Alliances
4. Technology Stacks

Whether you build your own API as a product or choose to integrate with an existing API, consider the analogy presented in this article for your design win monetization approach. Comment below on how you’re making your “Powered by ___.” mark in products and services with your API.