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What Is an API, and How Does It Work?
By Jessica Bennett
You have a business conference to attend in Dallas. You hop onto one of those flight deal sites and put in your travel info. The site processes for a second and then returns a long list of available flights sorted by price, airline, or layovers. It’s incredibly convenient, but how did the flight aggregator website get all that information? The answer is through the use of an application programming interface, or API.
APIs help power much of our digital lives and make many online products and services possible.
Modern businesses need to understand what APIs are and how they improve customer experience, increase productivity of internal systems, and can even add some zeros to a company’s bottom line.
APIs can get technical, but we’ll keep things simple. With a basic understanding, you can make sure you take full advantage of this powerful technology.
What Is an API?
MuleSoft specializes in building APIs and defines an API as “a software intermediary that allows two applications to talk to each other.” What does this mean? Let’s use the travel app as an example.
When you ask a travel app for a list of available flights to Dallas on specific travel dates, the app has to find that information. It does this by using APIs. Behind the scenes, the app queries each airline’s website and asks for relevant flights during these travel dates. The APIs built into each travel website answer and provide the information. The app then takes that information and feeds it back in a list of available flights that you can sort. This process happens in a matter of seconds.
In essence, the API is a messenger that pulls information from one place and feeds it to another. APIs are everywhere and have many different faces and capabilities. For example, when your car’s navigation system uses Google Maps to direct you to the airport, that’s an API. Google allows navigation systems to use its popular mapping software — for a price (more on that later). Likewise, if there are share buttons at the bottom of your company’s blog posts, those are also APIs. Each one allows users to easily share content with their Facebook friends, Twitter followers, or Instagram feed.
APIs are powerful and increasingly prolific as our world becomes more interconnected, but how does this affect business, and why would a company let other applications use their information or capabilities?
Why APIs Can Make Your Company Better
The primary value of an API is that it allows a company to access information or software capabilities from another source, providing greater value without an additional investment of time, money, and resources.
For example, let’s say you own a fleet of food trucks. Customers need to know where your trucks are, so you commission a team of developers to create an app that lets users see where the nearest trucks are based on their location.
Do your developers need to spend an unreasonable amount of time and money to create a brand-new mapping system from scratch? No. By using APIs, they can incorporate Google Maps into the app. Not only will you save money and developer time, but customers also benefit from interacting with one of the best mapping applications ever made, and one they’re likely already familiar with. The API allows for a great customer experience.
There are dozens of ways your company could use APIs to make the user experience better for customers. For example, an API can aggregate positive Yelp reviews on your site or even let users post reviews to Yelp without leaving your site.
APIs go beyond making better customer experiences. They can also improve internal processes. Maybe you want all your drivers to record their mileage and gasoline costs in a certain way. Again, your developers could potentially use the Google Maps API to create an internal phone app that lets drivers easily track how many miles they travel each day.
You may wonder why a company like Google would let the public use its mapping technology. After all, this is something they’ve spent a lot of time and money developing, maintaining, and improving. The answer is because APIs can be very, very lucrative.
How APIs Can Make a Company Rich
On the surface, APIs may seem like a bit of convenient software, but for many businesses, the API is a primary product. In fact, as MuleSoft reports, “APIs have become so valuable that they comprise a large part of many businesses’ revenue.”
Companies with great capabilities or a valuable platform can charge developers for access to their APIs. If you want to incorporate Google Maps into a customer service interface, you’ll pay Google for the privilege.
Companies that offer functionality or information other businesses or groups need are able to charge a nice sum for providing that value. To access this revenue stream, look at your company and what you can offer.
Do you generate information that can’t be found anywhere else on the web?
Have you created a robust platform with a strong audience that other companies want to leverage?
Have you created software that can be adapted for different uses?
If the answer to any of these questions is yes, then you may want to create an API and charge others for the privilege of using it.
What Are API Gateways?
If you want to become an API provider, you’ll likely build an API gateway along with your API. As the name implies, an API gateway serves as a single point of entry for specific “clients,” or apps that want to access your API.
This gateway can figure out what a specific API client wants and then route them to the appropriate place. Think of it as your API’s receptionist — answering the phone, forwarding calls to the right people in the company, and blocking unwelcome visitors from getting in.
API gateways help scale and effectively manage API traffic and can be especially useful if you offer more than one microservice. According to TechTarget, an API gateway can also assist with:
Security policy enforcement
Contract and service level agreement (SLA) management
As you invest time and effort into developing API products, gateways can play a role in helping you accelerate and expand traffic. They’re also a must if you ever want to become an API platform.
What Is an API Platform?
Some companies utilize APIs so well that they graduate from being an API provider to being an API platform. Nordic APIs, a resource for API technology and news, calls an API platform “one of the most sought-after business statuses of this decade.”
What is an API platform? Think Facebook, Twitter, and Google. These companies are so dominant that developers flock to use their APIs. Nordic APIs captures the power and possibility of an API platform by explaining, “The platform unlocks hidden value within the organization by exposing its core as an API. In this way, it acts as a centerpiece for open innovation, co-creation, and collaborative development. This facilitates an ecosystem effect where the platform becomes the basis on which others conduct their business.”
In other words, there is no way that Facebook, even with its large workforce, could possibly take advantage of every possible use of its platform. By opening its API, it allows the entire world to make its platform better. Think of a developer who creates a Facebook game: The developer earns money when users pay to play the game, and Facebook can serve ads to those same users, increasing its bottom line. It’s a win-win situation, and the future of our interconnected world.
Why become an API platform? Because, as Nordic APIs explains, API platforms are market disruptors that have the potential to transform entire industries. It’s also one of the most promising ways to build a platform-based business.
Moving Forward with APIs
We’ve skimmed the surface of what APIs can do for your business and highlighted the opportunities to better utilize APIs. That could mean using APIs to improve customer experiences, streamline internal processes, or even become an API provider so that third-party businesses and developers can adapt your technology in new and exciting ways (while possibly paying you for the opportunity).
One great place to start using APIs is to customize your interaction with your customer relationship management (CRM) platform. Some providers allow users to develop custom tools, manipulate their data, or customize their page layouts — and APIs will let you do it all. As an example, Salesforce takes an API-first approach when building features on its platform. Users get many great built-in capabilities, but since no company can build the perfect, customized platform for every single user, Salesforce uses APIs. By offering APIs, Salesforce customers take all the technology available to create the capabilities they need for their own platforms. This ensures a catered experience for the platform’s end users.
As you look to the future and search for innovative ways to grow your business, APIs should be part of the conversation. We are heading into a future that will see growth in wearable technology, the Internet of Things, and new generations born with the internet at their fingertips. The potential, power, and opportunities of APIs will only continue to grow.
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