Companies are missing the point of the API economy

The following is a guest article from Nikhil Hasija, co-founder and CEO of Azuqua.

Open APIs continue to be a larger and larger part of application development. It will only continue to grow in 2017.

This rapidly expanding API economy environment encourages creativity, innovation and expansion from developers. Developers are free to build off of the applications of other developers and create more complex and intertwined applications in ways that would never be possible without open APIs. It is truly an API wonderland for developers right now.

This amazing development environment can only be maintained if companies are continually encouraged to make their own APIs for developers. And companies only want to create APIs when developers want to use them.

With the amount of options out there now, developers could put their time into utilizing any API available. Some companies will create APIs and then be unable to get developers to use them, whether it’s due to poorly designed APIs or just poor efforts to bring in developers. Smaller companies have to ask whether or not putting out their own API is even worth it.

Nikhil Hasija, co-founder and CEO of Azuqua.

The question then becomes: how do you continue to encourage development utilizing your company’s API, besides just pure creativity? The obvious answer is to offer monetary incentives for developers that create quality applications using your API.

This is the route that many companies have taken and it has worked well. Companies like Best Buy offer API affiliate programs where developers that drive users to make purchases get commission. It’s definitely the correct incentivization option and a situation where both the developer and the company providing the API receive the benefit. Unfortunately, many other companies are missing the mark on which part of the process to incentivize.

Right now, companies like Uber and Lyft are offering developers money for nothing other than getting new users to sign up. Uber offers $5 per signup while Lyft offers $7.50 for getting the new user to also take a ride one time. These affiliate plans sound like good ideas in theory until you start to analyze the ways developers can take advantage of them.

Just think about what those plans encourage developers to do. It’s not to create applications that work hand-in-hand with the APIs and offer better user experiences. The developers don’t get paid for better user experiences. They get paid for referrals. The only metric that this program incentivizes is signup numbers. Once a user has signed up for Uber or Lyft, the developer can no longer get anything in return for applications directed at them, therefore there is no incentive after the initial signup.

Now this is not to say that all of the applications made with Uber integrations are bad. Far from it, in fact. It’s safe to say that many of the existing creations working with Uber and Lyft right now are great applications that use their APIs well and improve the user experience.

However, it’s easy to see how the system could be abused right now and how innovation would flourish if the incentivization programs targeted the correct parts of the user process. As it stands, both of these platforms are encouraging developers to create applications which attract users and then just drop them once they’re actually using the account. This sort of incentivization is short-sighted.

A possible solution to this issue specific to Uber and Lyft would be to offer incentivization based on users who use a particular application integration repeatedly. This would encourage developers to make applications which actually makes user experiences with ride-sharing better rather than just getting them into the application once. This leads to a better overall outcome for everyone involved.

This is a prevalent issue with the API economy right now and companies need to make sure they correctly incentivize. It’s also a difficult thing to decipher because even though these incentivization options could be working right now, companies need to be ready for the floor to drop out from under them.

If Uber suddenly realizes that they’re getting lots of new users but barely any of them actually come back to the application, what will they do? What if developers figure out ways to take advantage of the Lyft program in ways that Lyft isn’t expecting?

Now, even if companies keep incentivizing APIs this way, the API economy will continue expanding. That’s not at risk here. The worrying part is what the results of the API economy will be and who will actually be benefiting from it. Companies need to make sure they don’t forget that the end goal of their APIs should be improving the user experience through open development over the long term. Otherwise, we’re all in for a frustrating API future.

Filed Under: IT Strategy Software
Top image credit: Pixabay