James’s Musings

thoughts, photography, and geeky stuff
from an unrelentingly curious Silicon Valley entrepreneur

It’s the API, Stupid! How to Crowdsource Your App Ecosystem

APIs Are Cool.  Who Knew?

by James G. Beldock on May 6, 2012

In the ’90s, every­one knew that BizDev was the key to suc­cess in Silicon Valley. What will be this decade’s BizDev? The API. Twitter was pro­pelled to ear­ly suc­cess by lever­ag­ing a huge com­mu­ni­ty of de­vel­op­ers vir­tu­al­ly none of whom were ac­tu­al­ly em­ployed at Twitter. How did they do that? They crowd­sourced. Twitter built a solid API and evan­ge­lized that API through­out the red-hot San Francisco con­sumer and so­cial me­dia de­vel­op­er com­mu­ni­ty. (For the unini­ti­at­ed, an API, or Application Programming Interface, al­lows oth­er soft­ware to in­ter­act with your soft­ware, with­out hu­man in­ter­ven­tion.) Virtually overnight, the API sup­port­ed not just the ma­jor­i­ty of Twitter traf­fic, but with­in a year, ful­ly 91% of Tweets came through the API. You would be jus­ti­fied in an­swer­ing “What is Twitter?” with “It’s the API, Stupid.”

Here’s why APIs mat­ter: you crowd­source your app ecosys­tem. Developers who like what you’re do­ing and have users who would ben­e­fit from mix­ing a lit­tle of you with a lit­tle of them will grab your API, mash it up with their app, and voilà, they’ve spawned new mem­bers of your ecosys­tem. Your suc­cess is now mul­ti­plied by their suc­cess. How mul­ti­plied? Well, in the case of Twitter it’s lit­er­al­ly thou­sands of Twitter-en­abled apps, in­clud­ing one or two you’ve no doubt heard of (the iPhone, for ex­am­ple: Twitter is built in­to iOS 5). If you’re my fa­vorite tool for read­ing things when I have time, Instapaper, you have 140 Instapaper-en­abled apps you can point to.

It’s not just that so­cial net­works have tak­en over the web. It’s that so­cial net­works have tak­en over soft­ware. Do it right, and as your plat­form goes vi­ral, you be­come the sin­gle repos­i­to­ry for your par­tic­u­lar con­tent and data, while si­mul­ta­ne­ous­ly process of us­ing your con­tent and data is crowd­sourced by your ecosys­tem. Your val­ue in­creas­es not just as your user base in­creas­es, but ex­po­nen­tial­ly as your pro­duct is in­te­grat­ed in­to those of oth­ers. (How much does it in­crease? I’m glad you asked. See The Math Part be­low.)

What hap­pens when we take an app or so­cial plat­form and give it an API that lets oth­er apps or so­cial plat­forms lever­age that net­work? Nitrous. Each app that con­nects to your plat­form gives your plat­form ac­cess both to ad­di­tion­al users and to ad­di­tion­al data. Of course, the­se math­e­mat­ics (see The Math Part) fur­ther un­der­score why tech has be­come such a win­ner takes all world: there is lim­it­ed screen re­al es­tate in all those apps in the ecosys­tem. They will like­ly have room for on­ly one pre­ferred provider of what­ev­er your plat­form is good at. That had bet­ter be you, or you miss out.

The win­ners have fig­ured this out. Google of­fers 96 APIs; Microsoft has more than 30; Yahoo has over 50. And the old world com­pa­nies? They’re get­ting it to. The New York Times of­fers 14; AT&T 9; Ericsson 16.1 Amazon.com’s Amazon Web Services takes their API supreme­ly se­ri­ous­ly, and there are en­tire com­pa­nies, like Eucapyptus, bet­ting on them to con­tin­ue do­ing so. Foursquare in­no­vates with their API reg­u­lar­ly enough that you use the date you are writ­ing your code to ac­cess their API, to en­sure for­ward com­pat­i­bil­i­ty. Programmable Web thinks there will be 5,000 any day now:

Programmable Web API Growth Chart

So, if you’re start­ing a tech com­pa­ny, lead with your API. Treat it like a pro­duct. Release it reg­u­lar­ly. Advertise it. Promote it. Even build your com­pa­ny around it. For it will ex­po­nen­ti­ate your val­ue. 

The Math Part

OK, you asked for math. There are three laws of­ten used to de­scribe the val­ue of a net­work: Metcalfe’s Law, Reed’s Law, and the some­what more com­pli­cat­ed Beckstrom’s Law. 2 Metcalfe’s law is quite straight for­ward: it says that the val­ue of a net­work of nodes is sim­ply n^2. Simple enough. One per­son with a fax ma­chine? Useless. 10 peo­ple with fax ma­chi­nes? At least 100 times more use­ful. Reed takes Metcalf a step fur­ther and points out that it’s the con­nec­tions among users that are scal­ing, and there­fore that a mea­sure more like 2^n is more ap­pro­pri­ate, be­cause the com­bi­na­torics per­mit so many per­mu­ta­tions of con­nec­tions (e.g. of the users, two of the n might be in con­nec­tion for one pur­pose, three of the n, etc., and then a dif­fer­ent three of the n might be in con­nec­tion for a dif­fer­ent pur­pose). Beckstrom’s law is more com­pli­cat­ed, so I’ll just quote it lat­er and let you read his ex­pla­na­tion

How much val­ue does this add? Certainly for a given ap­pli­ca­tion, that val­ue is pro­por­tion­al to the size of the oth­er application’s user base (let’s call that q for each oth­er ap­pli­ca­tion). And let’s call the num­ber of oth­er ap­pli­ca­tions that lever­age your plat­form p. Depending on whose net­work val­ue law you like, I pro­pose that the val­ue of the net­work in­creas­es by a fac­tor as­so­ci­at­ed with the num­ber of users of each of those oth­er apps that lever­age your plat­form, which would be ex­pressed as c\sum_{i=1}^pq_i, where c is some scal­ing con­stant that like­ly changes dra­mat­i­cal­ly de­pend­ing on whether your pro­duct is so­cial in na­ture or not. Here’s my pro­pos­al for mod­i­fy­ing the three laws:

Beldock’s Law
More prop­er­ly, Beldock’s Corollary to the Network Value Laws
 
Network Value Law API Impact on Network Value
Metcalfe’s Law n^2 \displaystyle \left(n^2\right) \cdot c\sum_{i=1}^pq_i
Reed’s Law 2^n \displaystyle \left(2^n\right) \cdot c\sum_{i=1}^pq_i
Beckstrom’s Law \displaystyle \sum_{i=1}^n\sum_{k=1}^m\frac{B_{i,j,k}-C_{i,j,k}}{(1+r_k )^{t_k}} \displaystyle \left(\sum_{i=1}^n\sum_{k=1}^m\frac{B_{i,j,k}-C_{i,j,k}}{(1+r_k )^{t_k}}\right) \cdot c\sum_{i=1}^pq_i

So there you have it. Treat your API nice­ly. It’s worth a cool c\sum_{i=1}^pq_i!

Photo Credit: Thomas Hawk, Sept. 14. 2006, li­censed un­der Creative Commons. Slightly mod­i­fied.

Be Sociable, Share!
  1. See the great 5,000 APIs post from Programmable Web. []
  2. Credit to friend, se­ri­al en­tre­pre­neur, RapLeaf CEO, and Founders Fund Venture Partner, Auren Hoffman, for first giv­ing me a copy of The Starfish and the Spider, which Rod Beckstrom co-wrote, for first get­ting me to think about the math­e­mat­ics of the­se phe­nom­e­na. As usu­al, Auren was a step ahead in re­al­iz­ing how im­por­tant the­se scale equa­tions would be­come. []

Comments on this entry are closed.

Previous post:

Next post: