The Problem with API Marketplaces
The many reasons API marketplaces are a poor way for API monetization.
January 24, 2023
API marketplaces have been on the rise as a way for companies to find and use APIs. However, there are many reasons why API marketplaces don’t work. One of the main reasons is that it is difficult for API vendors to work with API marketplaces. API vendors need to spend a lot of time and energy marketing their API, and they often do not see much return on investment because the marketplace takes most of the traffic. Finally, it can be difficult for API vendors to standout in a sea of mediocre APIs since API marketplaces are often over-saturated with APIs, making it difficult for quality API vendors to get their API discovered.
Additionally, API marketplaces lack transparency, making it difficult for an API developer to track their success. Analytics are key for understanding how your API is used and improving it. However, API marketplaces do not give developers the data they need to make decisions about their API. As a result, API vendors cannot get the insights they need to improve their API. This article will detail the significant pitfalls associated with API marketplaces and conclude with a solution that enables you to build, monetize, and scale your API through the Archetype platform.
First things first, you need to be found if you want to make money in API land. The discoverability problem plagues API marketplaces. It’s no secret that it’s tough to be found when there are over 100,000 APIs out there. Even if you’re lucky enough to have your API featured on a marketplace, the chances of someone finding it are slim. And if people can’t find your API, they certainly can’t use it. Since API marketplaces have recurring revenue from your subscription, they are not incentivized to help you get more API traffic. This is a tough truth for API developers in industries with limited adoption. The platforms will be incentivized to go after higher-ticket consumer APIs, not niche players in valuable industries. This lack of discoverability is ultimately a lose-lose situation for the API developer because they lose money, and API marketplaces don’t make any effort to help.
Not only is it difficult for an API developer to be found, but it’s also tough for them to differentiate themselves from their competitors. API marketplaces all share the same core functionality, so API vendors must rely on their brand identity and marketing efforts to stand out. This can be a complicated task when API consumers have limited time and energy to search through API catalogs or browse websites for new APIs that may be useful. This is especially damaging if you have the exact API solution that perfectly fits the customer to understand your unique value proposition.
If one chooses to try API monetization on a marketplace solution, API vendors find it challenging to market their API in a way that makes sense. Most API marketing efforts promote the API marketplace rather than the API itself. This is because API marketplaces are where people find APIs, not the other way around.
API marketplaces are similar to online stores because they provide a place for API consumers and vendors to meet. Still, unlike online stores where customers can make purchases directly from the store’s website or app, API marketplaces don’t allow their users any such functionality (e.g., you can’t embed your page naturally into your site). This makes it difficult for API vendors to generate leads and drive traffic back to their API.
Imagine going to a shopping mall (archaic but bear with me). When you are in a shopping mall, the stores inside have limited marketing ability since they are stationary, and at most, they may pay for a poster or banner. The API marketplace is the same experience for API vendors since they essentially pay rent without any ROI.
Lack Of Transparency
Another reason why API marketplaces don’t work is that they lack transparency. This is key if a developer to earn through API usage-based billing. API vendors want to track their success, but this is often difficult because the analytics provided by API marketplaces are limited. API vendors need more information than just how many API calls were made to determine whether or not their API is succeeding or failing at meeting its goals and quotas.
API vendors want insights into things like user demographics, usage patterns (e.g., which endpoints are most popular), and so on — but these types of analytics can be challenging to find let alone available at all. These metrics are essential to pivoting your business and meeting your user’s needs.
- Upselling strategies
- Price optimization for ROI
- Develop usage-based billing/metered systems to streamline your highest returning customers
API Vendors Can Be Difficult To Work With
As if API marketplaces weren’t tricky enough to use, they also have notorious reputations for being difficult to work with. API vendors often complain about their API marketplace’s customer support and pricing model. API marketplaces typically charge API vendors fees ranging from 20% - 40%, which is a significant chunk of change, especially when you consider that most API vendors don’t make much money anyway.
The Archetype Way
Although API marketplaces don’t work, there is still an excellent solution for scaling and monetizing your API through Archetype.
Archetype allows you to quickly launch an API and start generating revenue right away with minimal effort on your end. Vendors using Archetype can directly integrate with their customers without the customers knowing Archetype is involved. This means API vendors have more control over their API and its pricing. Additionally, Archetype provides detailed analytics to provide insights into your users, including reports on usage by cohort, errors, and best practices to analyze churn, which will help you develop optimal pricing strategies and up-sell your services.
Archetype takes care of your billing infrastructure, so you never need to worry about quota limits which allow you to launch an API in minutes. API vendors who want to scale their API effectively should consider using Archetype instead of API marketplaces, as API marketplaces are sub-optimal for growing APIs.
Working with Archetype offers many unique benefits, including: API vendors have more control over their API and its pricing. API vendors can track their success using Archetype’s detailed analytics to ensure that they are meeting the needs of their users and maximizing revenue.
Archetype is the only billing infrastructure solution built for APIs. The Archetype platform enables you to monetize and scale your API. We provide the tools you need to succeed in the API economy.
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