As a focus on the API, he says "Open APIs. Taking your private SOA, opening it up to partners, and attaching a business model to it is still something that mostly Web companies do, but an growing number of traditional businesses are opening up their data to partners now in a form of decentralized, self-service business development."

Even with the success of APIs like Twitter, Amazon and Facebook, it can still be a struggle to articulate the value of opening an API to execs and other business folks whose support is needed. (Maybe this is why so many APIs are launched as skunkworks projects.) But we can start by identifying the business model.  Common ones with open APIs are:

The future of marketing is about companies developing useful applications for their customers that extend web services that the customers are already using. This replaces the current model which is to use web applications to communication with customers.  The problem with current social media marketing is the noise. A company is one of thousands, sometimes millions of users and it is easy to get lost. Developing applications via API’s provide a way for companies to break out of the crowd and at the same time create value for customers.

During the recent Mashery Business of APIs conference, I heard from a lot of different companies on how, why, and to what end they were exposing APIs.  I was particularly interested in the business model piece of it.

Here is a brief summary of some of  the business models that can be associated with an API:

Here’s how it can happen in the new decentralized, self-serve business development model based on open APIs: Yahoo creates a generic open API. Company X finds and uses the API without ever approaching Yahoo, builds a product and follows the usage rules (for example Yahoo might require a “powered by Yahoo” logo that links back to their search services). After a while company X’s service might get popular enough to warrant a direct deal with Yahoo (think of open APIs as a self-qualifying biz dev funnel). But even if it doesn’t, Yahoo gets the benefit of having thousands of small projects build on their APIs. Added together, they can make for real scale.

Fabulous article and very forward thinking in 2007. Drives home the point that done properly, the API can help achieve incredible scale.