Application programming interfaces (APIs) now are seen by many as a way to create new connectivity service provider revenue streams based on the licensing of access to network features.
But how big a revenue stream is possible. The answer depends partly on how we count such revenue and partly on the value developers see in using and paying for such APIs.
“How we count” matters.
Some forecasts seem to suggest very-large 2022 markets for APIs, but also seem to assume that the revenue is for the actual services or features an API might invoke, rather than the licensing revenue for using an API.
That seems to be the case for forecasts of global telecom API revenue potential of “$209.17 billion in 2021,” expected to reach “$829.26 billion by 2030, growing at a CAGR of 16 percent during the forecast period, 2022-2030.”
That clearly is based on an assumption of connectivity revenues using an API of some sort.
So one issue is “what counts” as API revenue. Consider Twilio, one of the API firms almost always noted as an example.
In the fourth quarter of 2022, for example, APIs accounted for about eight percent of total revenue. All the rest came from messages, voice or video calls.
Messaging revenue accounted for 43 percent of Twilio's total revenue. Calling represented 37 percent of Twilio revenue. Video calls drove 12 percent of Twilio's total revenue.
The point is that API licensing does represent some portion of Twilio’s revenue. But the vast majority of revenue is generated by the calling and messaging volume its customers generate.
While Twilio does not have a business without APIs, it makes most of its money supplying connectivity services.
In a similar fashion, perhaps many forecasts of API revenue will attribute connectivity revenue to the use of APIs. much as Twilio experiences.
In some instances, the API-led connectivity service revenue could represent activity that otherwise would not have occurred. In some instances the API-resulting activity will be a substitute for connectivity that would have been sourced some other way.
In yet other cases the API-driven connectivity might represent a combination of both incremental new activity and some displaced activity.
The other imponderable is the value developers might see in various network functions, ranging from location to device presence in a local area or other elements of the network state and capabilities.
Nor is it clear how much existing API value will be shifted from one provider to another, such as from Twilio to a mobile service provider.
The “how we count” issue obviously exists elsewhere. We often cite “5G revenue” amounts or growth. We almost always ignore the fact that most 5G revenue displaces an existing 4G account and revenue stream. What really matters more is the net new incremental revenue that is created by 5G that goes beyond mere replacement of an existing 4G source.
It appears APIs will present a similar problem.
No comments:
Post a Comment