Open APIs are a no-brainer in the IT landscape of 2010. I have been talking myself to hundreds of people over the last years, trying to convince everybody to build and publish an API. However I’d like to share some thoughts on what I believe is next. Will we still be talking about APIs, API management, etc in a few years from now? What role do APIs play in a multi-channel distribution play?

Not having an API today is like not having a website in the 90s. There are tons of great use cases out there: e.g. ebay – $7bn worth of items on ebay were added through APIs (Mark Carges, CTO ebay). Twitter, Amazon, Salesforce.com and many other best practices. However, we have also learned that building an API is relatively easy, but its distribution is not. Not everybody is as successful as Amazon Web Services with over 300,000 customers using their API, or Google’s APIs which are in the millions. The key topic of this article is therefore to look into how the distribution issue can be solved.

First, I’d like to look at Web Service Business Models and their evolution:

1. We initially had websites which added an API to their system, however the website remained the core traffic driver.
2. In some successful cases, the API traffic has actually overtaken the website traffic. A good example is Twitter or Amazon WS.
3. Recently we have seen that websites have become web services, meaning the API is the product. The website serves as no more than a marketing tool, all value add is delivered through the API. Examples are Twilio, Zemanta, Strikeiron or Xignite.
4. But the newest trend is when Web Services become Open Platforms, when applications turn into platforms.

Open Platforms are the lever that allows to create a network effect which is required to succeed in the new distributed ecosystem.

Why should enterprises care about?

1. Because it is critical to be indispensable in this new ecosystem
2. New business models can be adopted and especially business opportunities shall be exploited
3. They foster innovation
4. And they are a new (future) model for software acquisition
5. Last but not least, they increase customer engagement.

An overview of this new system shows the graphic below. I call it the “Open Computing Value Chain“. The sourcing part can be seen on the left where direct access to APIs and indirect generation of additional value add is derived from a developer community. On the right side I split between direct channels, such as the website or open APIs, and multi-channel platforms, such as Enterprise Platforms (Enterprise App Stores) and Consumer (mobile) App Stores which serve B2B as well as B2C customers respectively. In the end we are talking about multi-channel management represented in multi-channel platforms which will leapfrog pure API strategies in its ability to distribute to the market and increase its reach dramatically.

At Booz & Company we also call this phenomenon Social Apponomics, in which a Social OS allows the convergence of cloud functionality. The big trend is expected towards monetization. Expect only 2 to 3 social networks dominating the social landscape and a strong commercialization of social sites. While the social networks were mainly focusing on brand building today, within the next 18 months social sites will become commercial portals and e-commerce will be hosted on social sites.

Expect a “gold rush” just as we have seen it in consumer app stores where Apple has been the game changer beginning of 2009. After some early pioneers like Handango or Pocketgear, we are seeing hundreds and thousands of App Stores today, asking themselves the question “how to get a place in the game”. Almost every of the over 700+ mobile operator worldwide are thinking of launching an App Stores. This might not make sense for most of them, but it shows the upcoming abundance of players to come:

1. Software OS vendors like Microsoft, Google but also smaller vendors like Splunk have an app store
2. Vertical players like Apple or Nokia
3. Mobile OEMs like RIM/Blackberry, LG, Samsung, Motorola
4. PC OEMs like acer, Dell or IBM
5. ISVs and fixed / mobile carriers from T-Mobile to Vodafone and Orange
6. Independent Stores like GetApp or Mobango

In the end, all of the above have different agendas but they are competing for the same audiences – developers and customers.

On the Enterprise Platform site we have a similar picture, with Enterprise Platform Enablers like Jive Software, IBM Enterprise Application Integration or Jackbe. But also full scale Enterprise “App Stores” like IBM Smart Market, Intuit and more developer platforms and PaaS-plays like the Alcatel-Lucent Open API service, Google App Engine, Salesforce/Force.com or Windows Azure. The common goal of all is to generate competitive advantages.

With such an abundance of players it is critical to ask what the key success factors to attract both developers and customers are.

• For attract developers, the quality of technical support, high reach and exposure (through the platform) and a generous/fair business model are important.
• Customers are seeking powerful brands and marketing, broad and diverse offerings, a quality storefront and an easy payments engine.

The “right to win”, will have these companies that leverage their exisiting capabilities and assets in a coherent way to determine their best strategic play.

Key messages I wanted to bring across:

• We’ve understood that APIs are important
• APIs are easy to build but distribution is key
• Enterprises need to engage in social networks
• Open platforms deliver the network effect which is critical to succeed
• B2C and B2B app stores are a preferred digital distribution model
• Enterprises need to leverage their existing assets and capabilities

Thanks to Sam Ramji from Apigee/Sonoa who organized the API Open Mic Night where I presented these ideas first.

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I finally fulfilled my favorite side project and built my own search engine using Yahoo BOSS: Suchmaus (which means ‘search mouse’ in German – I know, a bit immature). I created a German and an English version. It also comes with a cloud tag of most searched terms. The results page has images, news and a web search. This is certainly just a first version – expect more to come.

It would be great to see some traffic on the site, so have a look. Cheers.

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How big is Amazon’s cloud computing business? To determine an estimate on the cloud computing market size it certainly helps to look at Amazon’s financials for their web services businesses. AWS is one of the leading players in cloud computing. Although still a relatively small division of Amazon’s business, AWS had a net income of $58.2 million in 2010 and will make $100.7 million in 2011. By 2014, AWS expects $393 million, or 83 cents a share. Om Malik wrote an interesting analysis about the report that was conducted by UBS Investment Research analysts Brian Pitz and Brian Fitzgerald.

Earlier market sizing efforts by IDC came to the following conclusions:

• The total global cloud market in 2010 will be $22 billion and $55 billion in 2014.
• The total servers and storage account for $5 billion-to-$6 billion in 2010 and $15-to-$20 billion in 2015.

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• How Big is Amazon’s Cloud Computing Business? Find Out (gigaom.com)
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Interesting Series from Sramana Mitra on Cloud Computing: Thought Leaders In Cloud Computing: Overview. I totally agree that cloud security is and will remain one of the main concerns of cloud computing, although I think it is solvable. There is lots of critical discussion on cloud computing e.g. by McKinsey in their report on “Clearing the Air on Cloud Computing”. Time to analyze the topic in a thorough way. I’ll add some more thoughts on security concerns later on.

Read Sramana’s first interview with Pat Toole, CIO of IBM.

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Yesterday was arguably one of the best SFNewTech. Congrats for the 4th anniversary, Myles! Zuumer is certainly an excellent new way of transportation and I’ll try to get one as long as the price comes down a bit. But the tool I used immediately was Apture. I found Apture a great tool for any content and media site that wants to retain users on their site. Simply add a JavaScript line and done. It couldn’t be simpler. Great job, guys! While you are reading my blog – check it out.

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First of all I have to say that Austin is a lovely city. I was very positively surprised… and imagine – not everybody has a Bluetooth headset, talking to an iPhone and a Mac on his laps – must be that I’ve been to the Bay Area for too long already. Live music on the street, in the airport, in almost every bar around town. Nice stuff.

SXSW is a huge event that draws a major crowd – mainly from the US, but also with growing participation from some European countries – mainly Germany the UK and France, hosts three parallel events SXSW Music, Film and Interactive.

Although I found many talks and sessions a bit mainstream, the crowd, the atmosphere, the geeks, the parties made it a very worthwhile event. The best contacts I actually got from the nightly events, aka parties – numerous of them every night, with a cool and relaxed crowd covering a wide range of the industry.

Open (Web) APIs

Not surprisingly, APIs are on the rise. In most talks they were a core topic, the expo was full of them and several companies organized extra shows like Mashery’s Circus Mashimus or Alcatel Lucent’s Eleven API. APIs are certainly mainstream now, at least in the US, while many Internet businesses begin to receive the first positive returns from their investments. However, many of them are still at the beginning of exploiting their value. While companies have opened access to their original services, content and functionality (good!), it is absolutely crucial to manage APIs correctly. Nobody would ever think about not securing their systems against regular HTTP access misuse. The whole Internet industry by now is focused on HTML websites as a distribution channel and revenue stream. I predict that by SXSW 2011, we’ll have a similar understanding for APIs as well. Manage your API correctly, secure and manager its access, monitor and analyze its usage and monetize the traffic! Watch this interview about the API industry here with Laura Merling from Alcatel Lucent, Sam Ramji & Greg Brail from Sonoa Systems as well as Martin Tantow, co-founder of 3scale.

Location Based Services

Location was certainly a big topic as SXSW. I’d say – not as big as everybody predicted, but Foursquare, Gowalla, Twitter, Google and many others have certainly made location based services (LBS) mainstream. However I would argue that new software like HTML5 (geolocation) alone will probably have at least as much effect.

Apart from enabling location integration on their site a few days ago, Twitter launched a new subdomain, sxsw.twitter.com where you can track Twitter employees around town. Nice idea. This should be white label so that other companies could use it for their own purposes. But the biggest surprise (at least for me) was that Twitter is finally going monetization and launched @Anywhere, Twitter’s new advertizing platform. This makes lots of sense. Although details about @Anywhere are yet to follow – think Google, think their ad revenue stream, and think back Twitter and their growing relevance in crowdsourced content. You got it. Twitter has gathered a who-is-who of the industry, namely Amazon.com, Yahoo, Salesforce.com, Microsoft Bing, Citysearch, The New York Times, eBay and several others as their initial partners. Although this is not the maximum version of an ad network on Twitter itself, it shows the further revenue streams for the company. Twitter API monetization anyone?

What am I gonna do differently next year? I’ll stay for the Music event as well. Awesome show, Austin!

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Below find some thought leadership on Online Marketing: “Maximize your ROI by Converting Web Traffic into Sales”.

I know there is lots of knowledge and material around this topic. This presentation is bringing some structure to a wide spread problem of all Internet businesses. I am splitting up the problem into: Be Seen, Be Found, Capture & Engage, Convert and Analyze.

Online / Web Marketing is the most exciting research subject on Marketing currently. Please feel free to comment, criticize, add, discuss, etc. Thanks for reading!

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The online media industry is feeling increased pressure to monetize their content on the web. The current battle between Rupert Murdoch and Google is just one example within this game which will put on weight over the next months. Especially newspapers are seeing their offline revenues dwindling and increased online competition – often without a sustainable concept or strategy for a turn around. Marc Andreessen even suggests to shut down the print edition right now and become a pure internet player. Or you see it like Joseph Schumpeter and call it “creative destruction”. In any case, and as most of online media, the newspaper industry has to reinvent itself.

So far the bad news for media companies. The good news is that new technology provides new resources of revenues and distribution channels. Many media companies have launched APIs (application programming interfaces) recently. APIs basically allow the distribution of content & services to other businesses. As some call it “Bus Dev 2.0”, this new distribution channel introduces an additional revenue opportunity:

• Indirectly: additional traffic is generated through the API which increases revenues through traditional business models, or
• Directly, when the online businesses charges for the access to the API.

Both business models are certainly valid and make sense. Here is a list of role models, online media (and other) companies who are successfully utilizing the API technology to generate revenues:

NPR
Launched in July 2007, NPR’s API is the first major media API that opens up original news and other information for online re-use by other parties.

In the words of Todd Mundt, this creates “Unprecedented flexibility [that] allows anyone, from a blogger in Pittsburgh to KQED in San Francisco, to generate highly specific content searches of the NPR archive (going back to 1995) and port the results to a webpage or an application.”

Beyond exposing the information to over 250,000 produced stories on public radio stations, the NPR API provides lessons learned on particular technical and business challenges and also helps pave the way to a more collaborative and open dialogue with media producers and the public moving forward. It helps to demonstrate that intellectual property rights and mashups do not need to be mutually exclusive. Instead of building legal barriers around the content, there is an alternate opportunity that media producers can embrace: the utilization of APIs as a distribution channel.

The New York Times
The New York Times Developer Network launched the first API in public beta in October 2008. Since then, the media company has launched a set of internal and external APIs, allowing other programs or websites to access its data and services.

It all started with an APIs for article search – users can search for more than 2.8 millions articles since 1981 such as movie reviews, recipes or congressional votes. The roadmap for 2010 includes events, weddings, news feeds and bestsellers.

The New York Times is a pioneer for this technology and many others are copying their model. Hundreds of mashups have been created, including complex visualizations of the origin of Barack Obama’s Campaign finance. The system is expected to increase activity drastically in the future – eventually bringing over 2.5 times more viewers to their content than the NYTimes.com website itself.

Expect this to be huge. As soon as the big media companies realize the potential of distributing their content via APIs they will all want to engage. The necessary infrastructure from companies like 3scale is available to make this happen.

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We have improved the 3scale support portal recently. This includes new documentation, videos, a forum, integration with GetSatisfaction, etc. The support portal will make it much easier for customers to integrate our API management solution and understand which steps are necessary. Watch videos on YouTube and Viddler.

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Thank you, dear hacker! I just arrived at my San Diego hotel room for a few days off last week, checking e-mails before going to bed, and found several e-mails and Twitter direct messages back from friends asking me what’s wrong with me. It took me a while to realize what has happened: my Twitter account had been hacked. The hacker has sent hundreds of direct messages to all my followers, trying to convince them to click on some bullshit URL. The damage was immense. While posting a message on Twitter about what has happended, changing the Twitter password, trying to de-link applications that I granted access to Twitter, I was kept busy replying to angry followers announcing to de-follow me. But the damage was already done.

There seems to be a serious security issue at Twitter. I am a bit surprised that the company has not invested more seriously in its security – $55M investment should have paid for some good security experts? I am for sure not the security maniac myself – but this has never happened to me in my Internet life since the 90s.

Don’t get me wrong, I think Twitter is an excellent messaging tool. But companies come and go, and I believe that security should be a major concern for a communications company. This goes for all the social media out there. Security lacks can cause huge damage and if the company can’t close them, users will go elsewhere.

BTW – while writing this post, Crunchbase gives me a ’500 – Internal Server Error’. More problems ahead?

See also:
Twitter’s Security Dilemma: The social network’s inaction around security issues shows that it needs a security chief.
Twitter’s Security Meltdown: This is serious. Twitter has a big security problem.

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