What is an API and Why It Is Important To A Business?

Posted by Alka Singh · November 14, 2019 · 5 Min read

Table of contents

In today’s time, the economic column is filled with the details of the unprecedented success of tech-based start-ups. Many of you might be thinking of how a start-up can be successful within a short span? Answer to such provoking thoughts in – an APIs.


What is API?

API or application programming interface is a communication protocol between a client and a server. It is used as a contract between a client and a server-side to fetch information as requested by the user, as Wikipedia defines.

However, an API is a set of routines, protocols, and tools essential in developing software applications. API in a software application defines how software components should interact. 


Why API Is Important To A Business?

The application program interface is an important business tool for all industries if they are into digital transactions. APIs are the center of sharing services of today’s business models. It is helping companies expand their potential to new horizons.

For example, Expedia generates 90% of revenue from APIs. Likewise, eBay and even Salesforce collect revenue of 60% and 50% respectively from APIs. 

However, these are those companies that keep APIs available to use for other companies. There are businesses that solely depend on multiple uses of APIs to facilitate online information or transactions. APIs are the second most important factor that start-ups are able to acquire success at such a surge. 


Areas Where Businesses Have Excelled Using APIs

As we mentioned earlier, APIs are allowing organizations to explore new areas and possibilities and reach new horizons, there are several areas where APIs plays a crucial role, such as:


Mobile Enablement

As mobile applications have evolved, they currently should be accessible in various versions for numerous operating systems and devices like iOS,  Android and Windows Phone as well as next-generation non-mobile devices, for example, Smart TVs.

This places a huge strain on the development and upkeep that affected the ways how user interface components have been, but also how data transferred to applications that are running and yet additionally how data/transactions are sent back.  

Verifying this “information channel” and keeping it uniform has turned out to be one of the most significant uses of APIs and organizations are progressively developing APIs to enable consistent data experiences and layer application builds on top to give the points of interest to every group of audience. 


Client And Partner Ecosystem Development (turning Into A Platform) 

Every company struggles to meet the specific needs that differ on a customer-by-customer basis. Basically, it should be conveyed that customers can help themselves in setting up for special needs. However, there are several partnerships are made into businesses to facilitate valuable complimentary services and assistance to customers. 

These business partnerships enable companies to share APIs for doing business. Instead of developing an API, a company can integrate an existing API into a business process to provide services. APIs help companies in setting up as “turning into a platform” – as such, they provide exact combination focuses on customers, suppliers, distributors, and integrators. 

Evernote is one such company that gives the way to many third-party integrations to upgrade user experience. eBay on the other hand, uses APIs as the foundation for a ground-breaking partner ecosystem. 


Accelerating Reach For Transactions And Content

Many companies are using APIs as an accelerator to distribute content and empowering transactions from a wide array of sources. Business is using APIs to build a special form of partner ecosystems such as media and content APIs.

Flipboard is one such aggregator that pulls in stories using API of several sources. APIs help companies reach new audiences. For instance, eCommerce and increasingly growing online retailers are enabling users to buy stuff using a wide set of interfaces instead of the website only.

Walgreens, an eCommerce site now have integrated API that allows prescription filling and submission of photos for printing. Today, the company makes available APIs open for third parties to use its features wherever and whenever they want.  


Fueling New Business Models

Twilio and Sendgrid are an excellent example of developing an API and building a profitable business over it. APIs are not just core offering of these pure-play focused companies, they have established themselves as a large business unit. 

However, it does not apply to all companies. Developing an API is a different thing while enabling and delivering value to third party developers and business partners is different. However, if one made it a successful business, it can become a clear and consistent source of revenue for them.

Potential APIs got several use-cases in the digital business; thus fuels new business models by becoming a core infrastructure of an online business. 


Driving Internal Innovation

Large scale firms have to continuously innovate to make internal and customer-facing systems efficient with growing requirements. Agility is significant to legacy systems and APIs are the key to achieving the required agility.

For example, Jeff Bezos in 2004 enforced all software of his company to interact via APIs for a long term vision to enhance Amazon’s ability to later expand into new businesses like AWS computing services. 

Today, Amazon’s internal systems are supported by packaged and accessible interfaces and reducing the friction in creating new, cross-organizational systems.  


How Developing An API Helps Business

API Academy has shared some interesting factors why businesses should consider launching APIs. Here is the potential a business get:

  • Increase in Revenue 
  • Help augment customer reach and value
  • Empower sales and marketing actions
  • Strengthen business and technical innovation
  • Ease integration of backend data and applications

APIs enable companies to scale, foster innovation and reach a wider audience. Even once Forbes puts it, “how a business wins or loses is increasingly dependent on how well they connect to external party apps, devices and services like Amazon did.” 

Share this Article