How APIs drive network effects

APIs are the hidden heroes behind the seamless ordering and delivery of a late-night cheeseburger. They enable instant communication between your delivery app and the restaurant. Historically, establishing such integrations was a lengthy and costly process, but APIs now streamline these connections, facilitating faster and more efficient business collaborations.

Imagine a late-night hunger pang. You reach for your smartphone and order a cheeseburger, and within twenty minutes, a (hopefully) warm cheeseburger arrives, satisfying your craving.

Few people take time to think about the effort that went into making it:

  • The farmer who provided the raw ingredients.
  • The chef who prepared it.
  • The driver who delivered it.
  • The APIs that made it possible.

That's right, APIs. They are the unsung champions of the internet and are responsible for over 70% of all internet traffic. Everybody knows their big brother, "the cloud," but the cloud would be nothing without APIs. Whenever you click on a button in an app or browser and something "cool" happens, odds are an API delivers the magic. Conversely, you can spot a company that doesn't have APIs when they force you to re-type information repeatedly like it's the 1990s.

Returning to our cheeseburger story, when the order is first placed with the delivery app (e.g., Wolt), APIs are called to the local McDonald's restaurant to register that you want a cheeseburger. McDonald's responds that yes, they understand you are hungry, and a burger is coming.

Even in this simplified version, we all take this for granted, but what happens behind the scenes? Historically, the Wolt and McDonald's CEOs would need to have played at least ten rounds of golf. Following that, their teams would have spent up to two years running a lengthy project to connect the two organizations. This would have resulted in a bespoke integration between the two organizations at a significant cost. The total number of partnerships is limited to a handful a year.

Today, APIs are revolutionizing the way businesses collaborate. The transformation from lengthy, costly integrations to quick, standardized APIs enables organizations to onboard more customers and partners to their digital platforms. Streamlining integration is not the only benefit to organizations adopting an API-first strategy:

  • Creating Interoperability - By enabling different applications to communicate with each other.
  • Supporting Innovation and Development - APIs provide developers with access to advanced functionalities and data, which can stimulate innovation.
  • Facilitating Collaboration - APIs enable collaboration across different platforms and services, allowing businesses to build partnerships and integrate complementary services.

In our cheeseburger example above, APIs enable a Two-Sided Marketplace, where the growth of one user group (e.g., McDonald's) enhances the value for another group (e.g., your stomach). This interdependence creates a positive feedback loop, reinforcing the network effects as more users join and interact with the platform.

Network effects compound growth in ways that linear funnels cannot. Organizations wanting to scale the number of partners and customers on their digital platform understand that they need to offer a way to onboard to their platform quickly and efficiently without scaling the internal team or consuming their developers' time.

Many organizations face the issue that even when they understand the benefit of providing APIs, they cannot capitalize on these because of inefficiencies and a lack of automation. Even though they've built out a suite of APIs, they find it challenging to get them into the hands of the developers who want to use them. Organizations often struggle to onboard new developers with a "white glove" approach, where each customer/partner developer is treated to 1:1 time with your team to get them up to speed. If our food delivery service is to partner with over a million merchants, we must find a more scalable solution for onboarding new developers.

A good API Portal Platform can help solve this scaling problem by allowing partners to self-service, providing developers access to documentation they can try out, and automatically generating secure API credentials. This enables them to grow the number of partners, customers, and developers using their digital platform and capitalize on the network effects, driving both top-line growth and bottom-line efficiencies.

Apiable is an API Portal Platform that simplifies API onboarding and consumption. Its portal is purpose-built for API teams to create, secure, market, and monetize API products.

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