Direct monetisation is a popular API business model that involves charging customers directly for using an API. This can be done through various pricing structures, such as pay as you go or tiered pricing models. It can be a lucrative source of revenue for companies with valuable APIs, such as AccuWeather or Google Maps, but it requires careful planning and execution to be successful. As a product manager, understanding how to develop and implement a direct monetisation strategy is crucial for achieving growth goals. This involves identifying a suitable pricing model, setting fair prices, and creating clear customer value propositions. Additionally, product managers must stay on top of industry trends and be prepared to adapt their monetisation strategies as the market evolves. With a solid understanding of direct monetisation and a strategic approach, product managers can leverage APIs to drive growth and achieve business success.
Pay as you go Developers pay for each transaction they make. Depending on the nature of APIs, the transaction cost could be fixed (e.g., one call == $XX) or variable (e.g., one call == XX% of transaction volume). For instance, Stripe calculates a transaction fee based on the payment amount. Developers are invoiced periodically based on consumption, or the transaction cost is deducted from their prepaid account balance. Some API providers like Google Cloud or AWS use the pay-as-you-go pricing with a fixed fee, but this cost decreases with more transactions being made during a billing period.
Tiered A consumer pays a fixed price per consumption tier: quota of billing units or a set of features. This is either a quota of billing units or a combination of a quota and features available in a consumption tier.
There can also be a combination of a pay-as-you-go and tiered model. For instance, an API provider may provide a quota of calls for a fixed price, and all transactions that exceed that quota will be billed via a pay-as-you-go model.
Visibility
There are different ways in which an API provider can make their API available to potential customers and generate revenue from it. A public offer is available to anyone who wants to use the API. This typically involves offering a set of pre-defined plans or tiers that customers can choose from, each with a different set of features and pricing.
A private offer is only available to a select group of customers or partners. This might involve negotiating custom pricing or terms with individual customers based on their specific needs or offering exclusive access to certain features or data unavailable in the public plans. Most companies offer both, and they are used simultaneously. It depends on the target audience, business objectives, and competitive landscape.