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The Instapaper Dilemma: The Journey to an API Business Model

David
Feb 22, 2011
EXCELLENT discussion on Instapaper Blog of the business model struggle that API providers go through. 
 
Marco lays out common tensions that platform owners go through as they get many requests for an API and consider how to deliver an API to developers.  He is getting requests for an API so there is demand!  And he realizes that APIs are a powerful way to drive distribution and adoption.  However, he is concerned about the cost of supporting an API and potential competition with his own applications
 
He initially hobbles the API to protect is business model, and ends up with people scraping his website.  He considers charging developers for access via a revshare model, but realizes that effectively charging developers will kill the adoption he is seeking.   
 
He arrives at a clever solution that every API provider should consider for their business.  He gives the basic API away for free, and makes the full API free to developers.  Brilliant!  This is a user—pay arrangement, and it accomplishes a number of things:
 
*makes developer adoption of the Instapaper API very easy
 
*aligns his interests with 3rd party developer’s interests and drives *user-paid* subscriptions of his service
 
*leaves room for 3rd party APIs to innovate and to make money on his API
 
It is a brilliant discussion and a MUST read for api providers struggling to figure out the right business model for their APIs:
EXCELLENT discussion on the Instapaper Blog of the business model struggle that API providers go through. 

Founder Marco Arment lays out common tensions that platform owners go through as they get many requests for an API and consider how to deliver an API to developers. Marco's dilemma is common. He's getting requests for an API so there is demand! And he realizes that APIs are a powerful way to drive distribution and adoption. However, he is concerned about the cost of supporting an API and potential competition with his own applications.

He initially hobbles the API to protect his business model, and ends up with people scraping his website. He considers charging developers for access via a revshare model, but realizes that effectively charging developers will kill the adoption he is seeking.   

He arrives at a clever solution that every API provider should consider for their business. He gives the basic API away for free, and makes the full API free to paid subscribers ($1/month!). Brilliant! This is a user—pay arrangement, and it accomplishes a number of things:

  • makes developer adoption of the Instapaper API very easy
  • aligns his interests with 3rd party developer’s interests and drives *user-paid* subscriptions of his service
  • leaves room for 3rd party APIs to innovate and to make money on his API

It is a brilliant discussion and a MUST read for API providers struggling to figure out the right business model for their APIs. Read up!

You can also check out our resources page for more of our perspectives on APIs and business models. 

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