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API monetization is a direct type of data monetization strategy. You sell either raw or processed data through a nicely packaged endpoint that other developers can use in their applications.
Also, the APIs are not necessarily always used to sell the data. In some cases, you can use the APIs to store the data for your users. Or the combination of both.
There are several monetization types you can use:
Note: all these models work in both cases, either when you send the data (data provider) or expose your API for data storage.
Pay by API call is a monetization model where you charge for each request made towards your API. This can be done by charging each individual call, or you package it in bundles. For example, $10 for 100 API calls.
Pay for data consumed is an obvious model where the customer pays for the data consumed or uploaded. This can also be set up so the payment is based on every single bit used. And it also can be done in bulk, where the customer pays for every MB or GB used (depending on the specific use case).
The flat subscription model allows users to access the whole API for a flat fee without any usage limits (within reason). This can be used for data types that don't change too often, so it doesn't make sense to call the API all the time. One such example is currency exchange, which is usually fixed once per day.
Paying for available endpoints is a similar subscription model to a flat one. The only difference is you're getting access to only a specific subset of data for a flat fee. You must pay separately for access to other parts of the data (other API endpoints).
Pay by the number of apps using the API is a flat-based monetization model where a single app has full access to the API for a fixed fee. But you as a developer/company are paying for every app/project using that API.
Commission based payment model is perfect for situations where the benefit is very clear in monetary terms. For example, if you have a payment processor API and take 1% out of each transaction. This is a transparent and predictable payment model with a clear return on investment (ROI).
Companies and individuals can use API monetization for several reasons:
Obvious monetary gain is obvious, so there is no need to discuss that - every company wants more money.
Getting new customers is somewhat unexpected but a brilliant thing to do. You can even make the API free to use. Most companies likely have a lot of data that their clients consider useful. And exposing the API for free exposes you as a company to your potential customers. Free advertising that positions you as an expert in your industry.
Easier developer talent-hiring follows a similar logic as getting new customers. But now, you are targeting software developers. Let's say the developers see that you are developing cool technology. In that case, they are more likely to be drawn to your company. And more likely to want to work with you.
Long-term company stability is often overlooked, but there is something to be said about dependency. For example, some software is over 50 years old and still runs many banking processes to this day. The same is with companies like Google or PayPal, which can never fail. All because they are integrated into so many businesses, it would always be more profitable to pay them more than to let them fail entirely. And to some extent, the same can happen with your API.
In order to choose the right API monetization and pricing model, consider everything you've read in this article so far. But the most crucial part is putting yourself into your customer's shoes.
If you can do that, then all you need to ask yourself is: Would this API offer seem like a no-brainer if I were my customer? Would it seem irresistible? And if the answer is "yes", you're on a very good path.
Currently, one of the biggest data API marketplaces in the world is RapidAPI. And on top of that, it's also very simple to use. All you need to do is connect your API to the marketplace in a couple of clicks, and set the price.
But the more complicated question is: how do you correctly set up your API without taking too much time or maintenance?
One of the simplest solutions is the 8base database platform. You can set it up through a graphical interface in just a few clicks. It is production-ready out of the box, and it scales with you automatically.
Also, all the APIs are automatically generated after you create the database tables. So 90% of the work is already done for you. All you need to do is upload the data, and your API business will be successfully launched from scratch in less than a day.
Here are some ideas that might spark your imagination for your next project:
To get even more API monetization examples, check out the API business ideas blog post and get inspired to monetize your own API today.