Creating New Business Models with Transactional APIs
What’s the difference between a content API and a transactional API?
Any business that wants to expose IP (intellectual property) to be monetized through an API (think magazines and newspapers, music, video, gaming, ebooks, etc) needs a more complex solution than a content API, which offers open access to static content to virtually anyone with development judo chops. Twitter is an example, think of all the creative apps that have been built to enhance your experience, from dashboards, to leaderboards, to photo sharing and follower management. Some of these apps are monetized by the developers, but (at least for now), API access is free. And generally, content APIs are also easy to build.
Transactional APIs that expose digital products require different business models to monetize this content. They need to handle distribution and commerce platform functionality such as entitlements and payments. They require tighter authentication and security measures – HTTPS is not enough, they also need to be PCI compliant. Unlike content APIs, they need to measure revenue, not just database calls. And parts of the API may not be accessible to all, only trusted partners.
For example, The Guardian has 3 tiers of transactional API. The free level is open to all, is self-serve and works on an ad-based model. The next tier is “niche,” and is ad or revenue share supported, and is more topical/target focused than the open tier. The tightest level is bespoke licensing, a commission-based partnership with developers that are highly engaged, building apps that are very closely tied to the Guardian’s core mission and objectives.
New business models
Another example is Best Buy. You may recall the buzz about its open Remix program (now BBYOpen), which ran regular contests for developers to build the most creative and useful remixes of its product catalog and content assets.
Best Buy also used its API internally to build mobile apps and the like, and forge entirely new business models, like its strategic partnership with Citibank.
Citibank’s cardholders can use its app to browse the full Best Buy catalog and purchase products with rewards points. Customers can also scan products in Best Buy stores, walk over to the service desk and pick up their purchases, just like ship-to-store. The Citibank app creates a purchase transaction inside Best Buy’s commerce platform, performing the "currency" conversion. The venture has proven to be a rewarding one for Best Buy.
It will be very exciting to see how online commerce evolves over the next few years as more content publishers and retailers embrace disruptive digital selling through transactional APIs, whether the features and functionalities are developed internally or externally.
Peter provided more examples, check them out A Look Inside Tomorrow’s Digital Commerce Platform, and download your complementary copy of Forrester’s Market Overview: Digital Commerce Solutions 2011.