APIs, data feeds, and cloud warehouse integrations are quickly becoming the default way customers consume data, yet many providers still struggle to effectively monetize them. In this piece, we explore what makes monetizing machine-to-machine and programmatic delivery particularly challenging and some practical steps on how to overcome this.
Over the past few years, APIs, data feeds, and cloud warehouse integrations have become an increasingly important mode of delivery for Data & Information businesses. From the vendor perspective, they unlock new high(er) value use cases, embed data deeper into customer organisations, and typically lead to higher levels of “stickiness”. From the customer perspective, they meet the need for flexible data delivery, serving increasingly sophisticated and data literate teams, feeding directly into internal data lakes and models.
Despite this, many Data & Information businesses have not yet cracked how to effectively monetize these offerings, leaving significant money on the table in the process.
Two key factors make monetizing APIs / machine-to-machine delivery particularly challenging.
Wide ranging levels of value derived by customers
A key characteristic of Data & Information businesses is that the value derived by customers can vary widely depending on the characteristics of their business, the nature and extent of their usage, and the specific use cases they’re working on. This fact is only exacerbated by APIs / machine-to-machine delivery, where the range of potential use cases and levels of sophistication can vary enormously.
Before you even begin thinking about how to capture value through pricing, you must first understand how customers derive value and, critically, how this differs across segments and use cases.
Lack of visibility
A further challenge with API / machine-to-machine delivery is that beyond raw data volumes, vendors typically have limited visibility of how customers are using their data. This compounds the need for deep customer understanding. Vendors need to understand how customers are likely to derive value in order to ask the right questions and look for the right indicators.
Monetizing APIs / machine-to-machine delivery
Effective API / machine-to-machine delivery monetization therefore requires deeply understanding how customers derive value (including relative to your other delivery mechanisms) and establishing a practical mechanism for extracting that value through pricing and packaging in a world of limited visibility.
To do this, you first need to consider how your API / data feed / cloud warehouse integration sits alongside your traditional delivery mechanisms. Does it serve entirely different user groups and use cases? In this case, you can package and price it independently. Does it augment and enhance existing user groups and use cases? If so, you can position it as an up-sell. Worst case, if it cannibalises your existing delivery mechanisms, extra care must be taken not to erode value.
Next you need to understand how customers derive value from the API / data feed / cloud warehouse integration. In some cases, value will be directly linked to data usage. In this case, “calls” or data volumes can be an effective proxy for value, and hence the basis for pricing. Often though, data volumes are not a good proxy for value, with value varying substantially for the same amount of usage based on who is using it and what they are using it for. This calls for other pricing factors, such as firmographics, licensing rights, and use case differentiation.
Finally, you need to build a practical pricing and packaging approach which is both effective at proxying for the key dimensions of value but also practically implementable in a world of limited visibility. Effective sales enablement will be a critical success factor here. Understanding, selling, and extracting the value of APIs / data feeds is not simple, and it’s critical that sales have the right training, tools, and collateral to deliver effective monetisation in practice.
Summary
API / machine-to-machine delivery is becoming an increasingly important mode of delivery for Data & Information businesses, with benefits to both vendors and customers. Despite this, many Data & Information businesses have not yet cracked how to effectively monetize their APIs, data feeds, and cloud warehouse integrations, leaving significant money on the table in the process.
Our projects in this space typically unlock 10-30% incremental ARR through deep customer understanding, close alignment of packaging and pricing to value, and hands-on implementation support.
If you would like to discuss your packaging, pricing, and commercial strategy further, don’t hesitate to contact our Data & Information sector experts to arrange a call.
