Google Acquires Apigee, Reminding Us of APIs’ Value to Platforms

Google announced on its Cloud platform blog  the acquisition of Apigee for $625 million. Their new purchase provides application programming interface (API) management services to hundreds of clients, including Adobe, BBC Worldwide, Walgreens, Kaiser Permanente, Swisscom, and many more. While this sounds like another typical instance of Google swallowing a smaller, cutting-edge company to enhance its own offerings, this particular one has significant value for the platform market.

For those not acquainted, APIs are everywhere; they’re a hundred percent necessary for the modern world of business. If a company has any sort of digital operations, I guarantee there’s an API. It’s a tool that facilitates interaction and integration with the owner’s proprietary data and functionalities. When Yelp shows you the location of a restaurant, the app is accessing the Google Maps API. Tinder’s entire account creation and management is built on Facebook’s API. That lawsuit you probably read about between Google and Oracle involved using an API to build the Android operating system. APIs lie at the core of digital products everywhere.

Google’s acquisition of Apigee signals their intent to move into the API management game, which Forrester expects to almost quadruple in value by 2020 as more and more companies start and expand their digital offerings. All signs point to Google rolling Apigee into their cloud division and increasing their offerings to their existing and potential enterprise customers. Here’s what Diane Greene, their SVP for enterprise cloud computing, has to say:

“The addition of Apigee’s API solutions to Google cloud will accelerate our customers’ move to supporting their businesses with high quality digital interactions. Apigee will make it much easier for the requisite APIs to be implemented and published with excellence.”

Something they’re failing to note (or perhaps intentionally skirting) is the value this deal has for the platform market. Apigee has a ton of impressive clients, many of which utilize their APIs to operate platforms.

A staple client of Apigee’s services, Walgreens is the largest chain of drugstores in the US and they’ve typically been timely, almost avant-garde, with their digital updates. In July 2012, the company released their first open API, QuickPrints, which enabled mobile developers to connect their users to the Walgreens photo printing service and gave them a cut of the revenue generated. Following that success, the pharmacy chain unveiled the Prescription API, which allowed third-party healthcare apps offer their users the ability to refill or transfer the prescriptions to the Walgreens store of their choosing. While still built around the linear approach of producing photos and drugs for consumers, Walgreens still utilized elements of the platform approach by building a network of developers that could peddle their services for them to their existing user bases. Many more successes came later, but the value of APIs for Walgreens is clear.

Another big client for Apigee is Ticketmaster, an exchange platform (one of the oldest) for tickets to events like concerts, festivals, exposition, sporting events, et cetera. They hired Apigee to help them launch their first set of open APIs earlier this year, aiming to externalize innovation from developers and support their users with event discovery. As well, Ticketmaster allows users to purchase their tickets via other platforms (like Groupon or Walmart) in real time, all thanks to their partner API.

Thanks to the power of APIs, companies don’t need to do all of the heavy lifting themselves and they can truly power entire platform businesses. Several major dating apps (Tinder, Bumble, Coffee Meets Bagel) draw their user info from Facebook and also use that to validate their users’ identity, reducing the capabilities of bad actors to join. As well, platforms can reap serious benefits by opening their APIs to other services. Social platforms, specifically Twitter, Facebook, and LinkedIn, have opened their API to scheduling services like Hootsuite, Buffer, and Kuku, empowering users to optimize their social posting practices.

Access to APIs can be a weapon in and of itself in the battle for market dominance. As Instagram took off, Twitter users were able to post their photos directly to Twitter with the Instagram app. After Facebook acquired Instagram, they revoked access to Insta’s API and now, the outbid Twitter can only link users to the Instagram post, adding friction to the sharing experience and decreasing the UX value.

Google’s acquisition of Apigee points to the importance of API management, but it also highlights the general value of APIs and their necessity for platform success. Creating and opening an API tears down the walled garden and fosters widespread innovation from third parties, which only serves to increase the value of the platform.

Filed under: Platform Innovation | Topics: API, platform

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