Why Every Company Needs an API

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For those of you not familiar with the term, an Application Programming Interface (or API) is essentially the source code that allows two independent websites or databases to communicate with one another via an Internet connection. As I’ll soon explain, it’s an extremely valuable business tool for almost any type of company.

First, a real-life example. Netflix and Facebook want to partner up to automatically tell your Facebook friends about the movie you just watched. The prehistoric way to do this would be to have an employee at Netflix compile a list of every movie everyone watched yesterday and send it over as an excel file each morning. As you can imagine, this process would be time consuming, error-prone, and slow.

Alternatively, Netflix can fire up an API an automate the whole process. After verifying that Facebook has the proper credentials, the Netflix API seamlessly transfers Facebook the account data they’re interested in, in real time, with minimal maintenance. Once in place, the same API can be used for other purposes as well.

How does that apply to my business?

You may be thinking an API is a nice tool for software engineers at Internet companies, but has nothing to do with your predominantly brick-and-mortar business and wouldn’t be useful to you in your non-technical position.

This couldn’t be further from the truth.

In my consulting work for Mashery, a company that manages the Netflix API, I’ve come across dozens of traditional companies that have creatively used APIs to accomplish a variety of different business goals. Wherever there’s inter-company communication and lots of dynamic data, there’s usually an API lurking behind the scenes (or at least there should be). Some common use cases for an API include:

  • Allowing 3rd parties to develop Android, iPad, or iPhone applications for your company gets the software to market faster without having to hire an internal team. An API feeds the 3rd party developer the data they’ll need to build and maintain the app (say, today’s stories if you’re a newspaper).
  • Managing a company’s indirect sales model. For companies that have a network of affiliates acting as re-sellers of their product, an API manages what can be hundreds of dynamic relationships, making sure the parent is in full control of the data each affiliate is receiving. For example, Expedia’s APIs make its inventory of airline tickets and hotels available to other travel websites in exchange for a fee per transaction.
  • Allowing for mashups, or programs that bring together data from another source and mix it with their own content. For example, a fashion website might want to show you the nearest place you can buy a particular pair of shoes. The department store’s API would provide them with pricing, inventory, and store location data in order to drive traffic.
  • Internal coordination. At a company with multiple distinct branches, communication between the branches can be facilitated using an API. For example, a client calls customer service to complain about a late delivery. Using the distribution branch’s API, customer service can tell them what went wrong during the shipping process and the new ETA.

The above examples all offer the user of an API some combination of additional revenues and reduced costs. But there’s one thing that ties them all together:

APIs facilitate the flow of information to the people that need it

This allows your brand to penetrate new markets in the far reaches of the Web, and allows you to squeeze every last bit of value out of the data that your company has created. In an age where the Internet and big data have opened doors for companies to scale, an API is the tool that allows you to take full advantage of these developments. In my experience, there are very few businesses that couldn’t in some way benefit from an API.

Think about your own business:

  • Do you have regular communications with outside parties involving standardized information or data?
  • Could you increase sales by exposing your brand to a broader audience?
  • Could real-time data from your business provide value to another company?

If the answer is yes to any of these questions, it’s time to at least start thinking about an API.