How APIs can open new monetization streams for business enterprises

APIs have evolved from backend connectors to strategic business assets. Today, they are powerful products that drive revenue, expand reach, and accelerate digital transformation.

This blog explores how enterprises harness API monetization to unlock new income streams, foster innovation through partnerships, and build a future-ready digital economy.

Key takeaways:

• Transforming APIs into business products
• Smart packaging & planning for market-fit offerings
• Exploring direct and indirect monetization models
• Leveraging analytics, billing, and developer portals to streamline the monetization lifecycle

With real-world success stories from eBay, Facebook, and AccuWeather - and Nagarro’s 3-step framework - you’ll see how to turn your APIs into revenue engines.

Whether you're starting or scaling up, this guide helps you strategically package, price, and profit from your digital capabilities.

Business benefits for enterprises

API monetization provides a strategic advantage for organizations aiming to enhance their market presence, increase digital revenue, foster collaboration and open communication, and help co-create and co-invent new products in the markets. Some of these benefits are direct, while others are indirect.

Direct benefits: Increase in revenue through business model transformation and creating new revenue streams. Monetization helps reduce the time to revenue for API-based products or services by 30%, as monetization enables direct revenue generation. It helps recover the cost of digital assets lying idle and reduces operational costs and effort by 30% with automated payment processing.

Indirect benefits: It helps enterprises increase their reach and acquire new customers, retain them for longer periods, help to digitize their existing partnerships, and create an open partnership platform. It fosters a developer community to drive market expansion and continuously evolve to stay competitive. It helps with a 24% reduction in time to market for new API-based products or services, as the monetization infrastructure can be quickly implemented.

Strategic benefits: It improved operational efficiency by reducing manual and regressive processes. It creates a positive environment of agility and scalability of products and services. Overall, it improves developer experience, which improves customer satisfaction. 

Figure 1: Different benefits of API monetization

Please note that the actual business impact depends on:

• The quality and value of the APIs
• The effectiveness of the monetization strategy
• The competitive landscape
• The overall business model and goals

Evolution of API from technical assets to business products 

APIs underwent various evolution phases, sometimes breaking barriers and creating new contours. While integrating two applications started with a quite innocuous remote procedure call (RPC), the advent of the Unix system increased API usage, which eventually took a quantum jump during the dot-com era. During this time, it took its first step to transform itself from a technical asset to a business driver.

Slowly, APIs moved to more business functions, where they are packaged as business products with digital capability, leading to the monetization of such products.

API Products are usually valuable assets from the provider's and customer's perspectives. They create partners in the ecosystem, drive the adoption of services and products, and eventually generate new revenue streams. Thus, constructing APIs as business products lays down the foundation for monetizing them.

However, treating API as a product involves cultural change within the organization as business owners need to change their mindset from project to product. 

         Figure 2: API as business products for different devices

How to package API products to generate business value?

After curating APIs as a product, an enterprise must package them based on market demand. This involves bundling services from different sources into a single, saleable interface, offering a streamlined customer experience that eventually helps monetize such data and services.

API providers use Products to offer one or more APIs to business consumers. API products are typically bundled with documentation, support, and usage policies, making them easier to integrate and use. They also use Plans to control access to APIs and to manage API usage through analytics, and they can monetize based on consumption.

API Packaging offers multiple plans for its business consumers based on their requirements. For example, a 'Silver Plan' can allow 100 calls/hour, and a “Gold Plan” can offer 1000 calls/hour. Any business consumer can choose the respective plan based on their needs and pay the premium accordingly.  

The following rules apply to the relationship between product packages and plans:

• A plan can belong to only one product.
• A product can have multiple plans that each contain a different set of APIs.
• A plan for one product can share APIs with plans from any other product.
• The package provides a tailored experience to consumers in various combinations, providing a customized and streamlined experience.

   Figure 3: Snapshot view of APIs, billing plan and integration with payment gateway

While an enterprise creates plans and packages based on its current business needs, it usually changes and is dynamic. It depends on the following input for plans and packages:

• Enterprise's long-term and mid-term strategy on products and markets
• Input from business owners based on market demand
• Feedback mechanism from different customers through collaboration and communication channels
• Usage pattern of services based on location, demography, business value, etc.

What are the different API monetization strategies and models?

Once an enterprise completes packaging its respective API products and mapping them to different plans, it must choose the right API monetization strategies and models aligned to its business needs. This approach should focus on its respective digital strategies, business model transformations, and overall standing in monetization maturity.

Some of these API monetization models are direct, while others are indirect. Enterprises must understand all models and choose the one that best fits their current standing on digital strategy and maturity. Sometimes, it's better to investigate one's competitors' coverage of some of these models before selecting their own.

Here's a breakdown of common API monetization strategies and models.

Direct API monetization models:

Free 

• It drives adoption of APIs and brand loyalty to meet certain business objectives

Developer pays

• Pay as you go: API consumers pay only for what has been used without minimum or maximum charge.
• Freemium: Basic features are free, with higher-value features priced

• Tiered: Have multiple tiers of paid access, such as Basic, Pro, Ultra, and Mega. Pricing steps up for every tier, as does the inclusion of functionalities.
• Points-based: API features or APIs have different values and are assigned several points. The developer either pre-buys several points (like tiers) or is billed by the number of points used (like pay-as-you-go).
• Transaction fee: Consumers pay a fixed fee or a percentage of the transaction fee. 

Developer gets paid

• Indirect benefits Revenue share:An API consumer acts as an agent to help sell a provider's product/asset. A percentage of the transaction fee (i.e., commission) is paid to the API consumer.
• Affiliate: Affiliates help bring traffic to your site by featuring your ads or content. You pay them based on how users respond—whether they see, click, interact, or buy.
• Referral: Revenue is generated whenever a customer purchases by reference, like an affiliate, but is paid only when the customer purchases the item. Payments can be one-time or recurring.

Indirect API monetization models

While there are multiple ways to monetize APIs, this blog will focus on the three most important ones.

• B2B integration: APIs allow customers and partners to connect directly with an enterprise's systems. Customers get real value from using the API—like smoother workflows or better data access—which encourages them to keep using it, helping with long-term retention.
  Partners can also use the API to integrate more deeply, strengthening existing relationships or enabling new ones. After mergers or acquisitions, this approach is also useful for quickly connecting different systems and teams.
• Business expansion: APIS are marketing tools that provide brand exposure to the company's products, new physical locations, and new customers.
• Internal usage: APIs are used by internal developers to build customer-facing capabilities for the enterprise. They also enable improved productivity, time to market, regulatory compliance, and strategy/architecture requirements. 

Enterprises usually select a combination of direct and indirect models to cater to their business needs. 

Different billing plans for differing business and consumer needs

Billing, invoicing and payments are the last steps of the monetization lifecycle. But before we look at the different billing and payment models for API monetization, let's understand how API usage can be monetized, tracked and billed.

Businesses can generate revenue from API products by setting up pricing plans and billing rules and linking them to a payment gateway.

A developer portal makes it easy for users to discover and start using your APIs, while the API gateway and API manager help monitor traffic and usage. This tracking ensures accurate billing and invoicing based on how the APIs are used.

Figure 4: Snapshot view of APIs, billing plan and integration with payment gateway

Now that we know how to meter and bill API product usage, let's look into some common API monetization billing plans:

• Pay-per-use: Users are charged based on the number of requests (per AP call) or data (per megabyte) used. While this gives consumers ample flexibility, it may lead to unpredictable costs if not properly monitored.
• Subscription-based: Consumers pay a fixed fee every month or year in this model. It works well for users who have predictable usage over time. For the enterprise, it offers more stable and predictable digital revenue, making planning easier.
  However, it may not be ideal for startups or new users who are unsure how much they'll use the service.
• Freemium: Users can start with a free tier offering limited API access. They can upgrade and pay accordingly if they need more usage or advanced features.

This approach helps attract more users and lets them try the API before committing to a paid plan. Charges for advanced features or higher usage are usually based on how much they use.

Success stories on generating revenue through API monetization

eBay: eBay generated significant value by integrating APIs into its existing value chains, shifting its mindset from "API as a product" to building "Product as API." It logically grouped its APIs by capabilities (Sell, Buy, Commerce, Development), utilizing an API marketplace. It is moving towards an API-first strategy, resulting in $5 billion in revenue from its buyer APIs alone.

Facebook's shop service: Facebook launched "Shops," enabling businesses to create free storefronts on Facebook and Instagram, even without a website. This service integrates with platforms like Shopify and BigCommerce for sales logistics, allowing users who follow a brand to easily "View Shop" and purchase directly within the social network interface, attracting a new customer segment for Facebook.

AccuWeather: Accuweather leveraged API integration and monetization through Google Cloud's Apigee platform. Their partnership with Apigee led to the launch of the AccuWeather API Developer Portal in May 2017, significantly growing their developer base to over 60,000 API users.

Nagarro's tailored approach to API monetization 

Nagarro recommends a three-step solution to API monetization to initiate rapid revenue growth. 

• Embracing API analytics:  Embrace API Analytics for API usage tracing, limitations, and related statistics to accurately track API trends. This will provide insights into product usage and demands, helping draft and design packages and billing plans accordingly.
• Setting up subscription management: A centralized portal for API consumption metrics, individual service usage, purchase, and billing helps set up price tiers and subscription plans with detailed rate plans. It further helps manage the subscription lifecycle and integration with the billing system.
• Setting up billing and metering: The billing and metering system helps track API product usage based on the subscribed plan. It also generates invoices for different customers based on their subscription plan. While this system usually helps track direct revenue benefits, it can be extended to track indirect benefits like internal or partner usage. 

        Figure 5: A three-step approach for setting up monetization management

Conclusion

API monetization is a rapidly growing and highly successful strategy. It is projected to reach $72.6 billion by 2033 with a 28.1% CAGR, driven by its ability to generate new revenue, expand reach, acquire customers and partners, and transform business models.

Notably, 85% of organizations now have dedicated API product managers, and 46% of decision-makers see API products as crucial for digital revenue and business model innovation, inspiring industry leaders to capitalize on this lucrative growth driver in the digital economy.

Monetizing APIs unlocks the potential of enterprise digital assets like data and services, enabling new revenue streams through co-creation and digital partnerships. By understanding API value and choosing the right monetization models, organizations can strategically drive business model transformation.

This requires careful planning around customers, market value, pricing, and plans to achieve a new enterprise paradigm.