Using someone's API? You don't have a business, THEY do.
7 points| ecommando | 14 years ago
Whether you're using Adsense, Adwords, Twilio's APIs, Google Maps or Search API, or even Wikipedia's Suggest API to generate traffic and/or revenue, you don't have a business.
You have a website that provides traffic, and potentially revenue, to the provider, and they can terminate or redirect your business at any time, without notice.
Sure, you may have revenue right now, but if you don't re-invest those revenues to build your own dataset to support your requirements, your business WILL go away at some point, or the terms will change in such a way that makes your ability to generate revenue disappear.
No company will guarantee you that the API will be available forever, nor will they guarantee you that they won't deprecate the API, or even just your license, should they decide to compete with you in that space.
Sure, it's okay to build an app using an API provided by someone else, but if you plan on building a business with that functionality, you owe it to yourself, and to your customers, to implement your own version of that API and the supporting data to ensure continued availability after the supplier ultimately turns its sights on your niche.
No, I'm not paranoid. My experience tells me that an API provider, especially a public one, is like a nasty virus. It has to consume more and more of the market, by whatever means necessary, to generate more revenue to satisfy it's stakeholders.
Google is a perfect example of that. It provides marketing services to FourSquare and other check-in services, but then it uses the data they generate using it's services to build and market it's own checkin service, while STILL taking their money for ads.
Don't get me wrong, I don't hold anything against Google for using its market position as it does. It has spent the time and money to get where it is, and FourSquare has the right to use or not use Google services to market itself, and it had to accept Google's terms of usage in order to do so.
That said, Google doesn't build anything that has a dependency on singular external sources, as it expects its users to do with its APIs. If there is a single source, Google buys it or replicates the dataset using it's own means, then positions itself as the primary source for that data.
Take map data. Google didn't have any map data. It licensed and bought its way into the market, and now if you google "maps", Google comes up as the primary source, and there are ZERO ads for that keyword. It used to be that when you typed "maps" into Google search, you'd see ads for Rand/McNally and other map service providers.
Now, they're all gone and only the big online map data providers are atop the natural results, and it's uncommon to see any ads.
Think you can SEO your way to the top of the list in maps? Good luck. It's not happening.
If you're currently in this position, you should be preparing for your business for imminent collapse. Alternatively, you could build or buy your own version of the dataset(s) and/or API(s) you use so that they have no outside dependencies.
If you're an investor, and you're approached by someone using external data sources as a platform for their business, DO NOT invest unless they have a solid plan to buy or build their own version of the dataset(s) or API(s). In fact, I'd suggest making any investment contingent on them doing so.
Just my $0.02 (adjusted for inflation).
jeffreymcmanus|14 years ago
Every business has dependencies and suppliers. This includes the magical Google. Did you ever notice how many copyright notices appear at the bottom of every Google Maps page? Did you ever wonder why those are there? It's because Google licenses data and technology from third parties to make their Maps product happen. How does the data get there? That's right, through an API.
An API is just another kind of supplier. Every business can be disrupted by its suppliers, and that's true for APIs as well.
As a thought experiment, to test how sensible this rant is, replace the word "API" with the following other kinds of suppliers: hosting provider, internet service provider, payment processor, employees. All have the potential to disrupt your business. What matters is what your contingency plan is.
ecommando|14 years ago
Google licenses the data, but has the resources to acquire the data, and the company that owns it. If you go to the vendor and try to license the data, the cost is now so high that a startup without funding will be unlikely to afford it.
With the exception of "employees", you are correct.
Each is a single point of failure that should be considered, each with its own set of criteria. If there is a sufficient supply of vendors, then the single point of failure (or sourcing in this case) does not pose a threat to your "business".
In the event where the payment processor keeps your customers credit card information, for example, you risk losing your customers when you have to go back to your customers to re-acquire the data should the provider cease to exist, or their policies prevent them from being used. This can be mitigated by using gateways that don't hold the data (like PayPal) as an exclusive processor, and managing that data yourself.
Risk mitigation should be applied to every aspect of your business that has a reasonable risk of becoming a choke point for operations.
R
okaramian|14 years ago
molecule|14 years ago