Web APIs made their debut in 2000 when both Salesforce and eBay introduced API-based services. The basic architecture of a web API hasn’t changed much since then, though the diversity of API offerings has exploded. The core simplicity of API architecture is part of what has helped them endure and blew up API growth.
At their simplest, APIs can be spun up by a junior developer in one afternoon. At their most complex, web APIs facilitate highly secure financial transactions, handle the administration of multi-channel customer care operations, and provide easy access to academic-quality machine learning. Even the most complex APIs are still accessed through the same basic methods as the simplest ones were 20 years ago.
What has changed, besides complexity, is necessity. APIs used to be a ‘nice to have’ or an unusual innovation. Radical changes in consumer behavior in recent years are driving more mobile and web traffic toward app integrations that use APIs.
Among the factors driving changes are the general growth of e-commerce, the explosion of direct-to-consumer retail, consumer preference for mobile apps over traditional websites, and a shift away from in-person services in industries from hospitality to auto dealerships.
Companies without an API presence are missing out on a tremendous opportunity for partnerships and growth. As you evaluate your digital presence, your API offerings need to be front and center, reflecting the best your organization can offer.
The only constant is change. The growth of the API marketplace is a symptom of that volatility, but it’s also an extremely valuable investment opportunity. Your API strategy can be a central piece of your future-proofing efforts and a driver of revenue and innovation for your organization. Let’s get into some API management market trends.
The Scale of the API Marketplace
In recent years, the defining characteristic of the economy has been unpredictability.
McKinsey estimates that as much as $1 trillion in total economic profit is ripe for redistribution across sectors as companies and consumers adjust to changing conditions. APIs offer a compelling option for adapting to this landscape.
The expansion of the API marketplace is a matter of breadth and depth. Digital commerce has been driving down operating costs across many sectors, leading an increasing range of organizations to invest in growing their digital presence. Recent progress in machine learning and faster networking technologies is accelerating the trend.
Consumer expectations are changing, as well; any business with a customer service or distribution component is now expected to have a robust online interface, an app, and integrations with other platforms.
Mobile banking and payments are an example. Mobile payments have only gone mainstream in the last few years, but now are the preferred payment method for everything from fruit stands to freelance software developers. Banks that don’t support mobile payments are increasingly left behind. For more on this, check out our recent podcast episode with PayPal’s development team.
At the same time, the number of companies offering increasingly complex, multi-faceted digital experiences is growing. During the COVID-19 pandemic, the fitness industry saw major disruptions to old business models. The companies that thrived were those that seized the opportunity to deepen their customers’ engagement by adding social networking components, support for mobile devices, and greater customization options. All of those innovations are based around APIs and create value by adding more depth to the data they supply to consumer-facing applications.
Benefits of APIs
Many of the benefits of well-managed API offerings are practical. When you move a greater portion of your services to APIs, you split your front- and back-end development operations, making your development teams more agile and efficient.
Other benefits are less tangible – goodwill in the developer community, a progressive image with consumers, and a greater sense of agency for your development teams. Investing in your API offerings helps you deliver flexibility, collaboration, lean operations, and a positive, open brand, all of which are likely to help you thrive in volatility.
According to recent market research, the global API market is projected to grow at better than 10% annually over the next several years, from $2.5B(USD) in 2020 to $6.3B by 2028. Preparing your company to succeed means embracing the values above and claiming your place in the growing API marketplace.
Why APIs are Booming Now
The technology behind APIs has evolved, but the basic architecture hasn’t changed much in 20 years. So why are APIs surging ahead now? The answer is flexibility, which plays out in a few ways.
APIs are Platform Agnostic
Web API architecture is platform-agnostic. For organizations still supporting legacy applications and services, APIs offer a way to expose those older systems to users on a range of modern platforms, including mobile devices. For example, a company with historical sales data stored in an old CRM might want to make that information available to their salespeople, who are now primarily using tablets or smartphones while on client visits. Creating a web API for the database would expose the CRM to being easily consumed by front-end applications, setting up the company to adapt quickly to their sales team’s needs in the future.
APIs Offer Increased Collaboration
APIs also help meet the growing expectations for collaboration and ease of use within the tech community. Increasingly, it’s not enough to make your data and services dependent on a certain operating system or tech stack. The tech community – including developers and consumers – demands a much more open approach to information sharing than what was the norm a few years ago. The upside of providing greater access is that your users can create functionality and solutions that unlock undiscovered value in your services.
Simplified Integrations
APIs simplify integrations for developers, too – adding functionality with an API is very familiar to most developers, letting them capture the value of your services quickly and creatively. The structure of an API call won’t vary much from one API to another, so that developers waste little time in setup, getting them engaged with your services faster. Even if you continue to make much of your data available only behind a paywall, allowing greater access to your data and services translates into customers and collaborators who can add value and broaden your reach.
A Tale of Two Types of Company Transformations with APIs
Flexibility also drives the growing list of industries and organizations that support APIs. The first web APIs were offered by technology companies, but that’s no longer a limitation. RapidAPI reports that, among their [top 50](https://rapidapi.com/blog/most-popular-api/) most popular APIs in 2021, there were multiple sports, finance, and geography APIs. Among the most popular product APIs, there are several focused on food, including retailers and nutrition data. API offerings are expanding in retail, consumer entertainment, manufacturing, and more. Peloton delivers in-home personalized fitness via an API, while auto manufacturers are now sending safety data directly to regulators with the NHTSA API.
The market sector that now accounts for the largest share of the API management market is Banking and Finance. The banking and finance industries are undergoing tremendous change, with the rapid growth of online-only banking, regulatory changes, and market disruptors like Robinhood changing how investors behave. Increasing investment in APIs, and particularly, a careful API management strategy, can help banks pursue new business models and improve customer experience. Rapid innovation is crucial to responding to radically changing consumer behavior. For any highly-regulated financial institution, predictable, well-planned architecture and governance are equally important for protecting sensitive information, and well-managed API programs are bridging that gap.
Finding Your Place In a Crowded Field
Standing out in the API marketplace isn’t easy, and doesn’t happen by accident. It takes a well-planned management strategy and careful attention to your API consumers.
In Part 2 of this article (coming soon), we’ll describe a highly effective approach to API management: your APIs are a product. Investing in them now will earn you confidence and enthusiasm from your consumers in the future, so you can rise above the crowd.
One of the best ways to truly invest in your APIs as products is through a design-first approach like the one we model here at Stoplight. We’re here to help you get started, and you can download the API design guide best practices below to start your journey of becoming one of the best API companies.
