Five best practices for building an effective API marketplace

In their journey toward digital transformation, companies are exploring increasingly how they can extend their business through external APIs. However, these organizations are seeing that truly reaping the benefits of an API program requires them to move beyond basic API management and to the creation of API marketplaces that promote the consumption and use of APIs, which encourages the delivering of new apps and services.

An API marketplace is much more than a basic API developer portal where potential consumers of the APIs and application developers come to discover and subscribe to APIs. Instead, it provides the means and mechanisms for a diverse group of people to design and publish APIs, along with tools, documentation, and incentives to participate, such as monetization and evangelism. Similarly, the marketplace provides the tools, documentation, and evangelism to ensure application developers use or reuse these APIs. Hence, the marketplace is about ensuring the widespread and effective use and reuse of an API management platform to maximize value and benefits as illustrated in Figure 1.

Figure 1. The Key components of an API Marketplace

To function effectively, the marketplace needs to be built on an API management foundation that includes:

An API gateway serving as the actual API runtime and policy enforcement point
A security component for API key management
An API developer portal that acts as a catalog of APIs, providing a centralized location for application developers to discover, subscribe to, and test APIs
An API publishing portal that provides the ability to design APIs from backend services
API analytics that offer a snapshot of API usage

At the same time, the architecture for an API marketplace needs to address five factors critical to building a robust community for promoting the use of APIs to build apps that drive more people to the business, grow revenue streams, and increase loyalty. Let's look at each of these five essential elements.

Implementing an Effective API Developer Portal

In the past, having a one-stop portal where application developers could discover and subscribe to APIs was enough. In contrast, an API marketplace may contain multiple portals that are differentiated by the target developer base or by the types of APIs they handle. For instance, organizations can have developer portals targeting professional software developers, enterprise customers or partners. Other portals can be capabilities based, hosting different types of APIs (e.g. financial APIs versus telco APIs). Organizations also can opt for separate portals to manage internal APIs versus external APIs.

Portals in an API marketplace typically also provide collaboration capabilities. API publishers can add prototype APIs in order to get community feedback. The community of application developers can then view these prototype APIs via the API developer portal, test them out based on dummy backends, and provide feedback to the API developer. Feedback can come through public forums embedded in the API developer portal which allows multiple users to weigh in.

For example, a large telecommunications service provider has built an API-driven application/service creation ecosystem that fosters the fast, easy creation of digital, over-the-top (OTT) services that run on the company's mobile communications platform. Separate portals for developers and non-developers within the API marketplace provide intuitive experiences for users to review the terms and conditions, sign up, and start engaging with the application environment in just minutes. The portals also are tailored to specific audiences, with a portal for telecom operators that provides operator-level APIs and API analytics, and a separate portal for telecom developers that focuses on developer-level APIs and application statistics. Services created for the telecom platform are published to its app store. The tailored portal approach has enabled the business to offer apps from a broad range of developers, from start-ups to enterprises to government agencies to non-developers within small retail businesses, schools, churches and charities.

Promoting API Reuse Through Incentives

Incentives are a key to sustaining the success of any marketplace since they ensure that API developers design and publish the right types of APIs and encourage application developers to use the APIs to build applications. A traditional marketplace has an inherent financial incentive; while it is tough to match this in virtual, technology marketplaces, there are more subtle ways of handing out incentives. Both monetary and non-financial incentives drive adoption. Within the enterprise, incentives typically do not have a monetary value, and instead foster efficient reuse of APIs. For instance, organizations can maintain a leaderboard that highlights top API publishers and consumers (application developers) and thus recognize them for their achievements. Enterprises also can track which APIs have the most subscribers and display them on dashboards on the developer portal.

When exposing and promoting to external parties, there's often a financial incentive that results in paid APIs, "freemium" APIs and revenue share business models between application developers and API owners. For instance, telecommunications service providers now engage in API programs that allow developers to rapidly create applications using predefined templates, and that enables them (the developers) to share the revenues generated from the applications that they have published on the company's app store.

Monetizing APIs

Businesses are deriving revenue increasingly from apps and services that use their APIs. Moreover, APIs themselves are fast becoming products that are sold to application developers, generating revenues from other business units or third-party organizations that consume the APIs. For instance, at the telco described earlier, revenues driven by services on its digital platform are split, with 70% going to third-party service creators and 30% going to the telco.

Therefore, whether revenue splitting with developers, assessing fees for API consumption (including charge-back models), or simply reporting on inter-business unit usage, enterprises need to track which APIs are used and to what extent. Notifications and alerts about specific events that happen in the marketplace are also important. For example, they may indicate the need for developers to upgrade their API subscription level.

In a typical use case, organizations can test the APIs on the API portal before subscribing and consuming them from apps. They can then view usage reports that capture key metrics to calculate cross-division monetization. Moreover, a portal can offer forums that allow consumers to interact with publishers to receive feedback, request features, and more.

Employing an Overarching Governance Model

To meet strategic and compliance requirements, enterprises need to control who can publish what and where, as well as ensuring that the right APIs are published in accordance with organizational standards, such as URL patterns, naming conventions, and access control rules.

You can govern APIs centrally by publishing them in a centralized API developer portal. But to avoid stifling creativity, enterprises may want to consider a bottom-up governance strategy instead of a top-down approach. For instance, the enterprise can opt for a decentralized API publishing model giving each business unit autonomy in designing and publishing APIs. This often is coupled with centralized enterprise-wide security and governance policies that get applied when the API is published. This model allows autonomy during API design while ensuring that APIs adhere to organizational standards.

Incorporating Analytics

Once an API marketplace is fully functional, an enterprise will need insights into up-to-the-moment issues with performance, availability, and potential security issues, as well as analysis over time to support decision-making. Typically, these insights will come from a combination of analytics, which may be provided either as a complete platform or as individual products, depending on the organization's specific requirements.

First, streaming analytics provide real-time insights into usage, performance, and other key metrics. Next, you can apply predictive analytics (such as machine-learning) to that real-time data to identify potential fraud, subscriber rate limits, imminent capacity issues, or other factors that will then trigger appropriate actions. Then you can incorporate batch analytics to identify longer term trends on APIs that have been published over time. Some of these trends include faulty invocations, latency time, general usage across geo locations, signups over time, throttled out requests, abnormal response alerts, and API health availability alerts. Finally, dashboards enable business and IT users to visualize these trends in a meaningful way to gain insights into the available data.