What’s In Your Treasure Chest: Valuing Your API

How does API in­te­gra­tion work for First and Third Party APIs

The laws of val­u­a­tion dic­tate how an API is val­ued. Essentially this means your API is worth what peo­ple are will­ing to pay for it. Consider a house you’ve built from scratch. Clearly you’re thrilled be­cause you’ve put to­gether this ter­rific house which you con­sider the best thing ever built. But if no-one is will­ing to buy it, it’s not worth much. So your API will need to ap­peal to users look­ing to im­ple­ment a third party API. This raises the ques­tion, what do these users find ap­peal­ing?

Generally ex­ter­nal users will weigh up the cost of the third party API with the value it will pro­vide, sim­i­lar to con­duct­ing a cost-ben­e­fit analy­sis. The cost of the API is not con­fined to the price paid for the third party API it also in­cludes the cost of im­ple­men­ta­tion and the cost of ad­dress­ing any se­cu­rity con­cerns. CIO have pro­posed one al­go­rithm to valu­ing your API. Consider the cost your users would in­cur if they each had to de­velop the API them­selves, di­vided by the num­ber of com­pet­ing APIs. Ensure you di­vide the num­ber of users by 10,000.


Based on this for­mula, you should con­sider a few el­e­ments when de­vel­op­ing an API. How long would it take oth­ers to de­velop this API? How many peo­ple are likely to use my API? Who is my API com­pet­ing with? What is the API func­tion­al­ity? The an­swers to these ques­tions will de­ter­mine how valu­able your third party APIs are.

As a re­sult, it’s im­por­tant to un­der­stand your mar­ket. No one will be will­ing to pur­chase third party ap­pli­ca­tions that aren’t rel­e­vant to them. Additionally, keep your doc­u­men­ta­tion clean and sim­ple. The more com­plex it is, the more it will cost the user to im­ple­ment the API. It may also be help­ful to think of your API as a uni­ver­sal of­fer­ing you’re bet­ter off try­ing to serve the masses than you are try­ing to serve a few in­di­vid­u­als.



David Burkett

Growth en­thu­si­ast and res­i­dent pom

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