All major and semi-major online and app companies offer some sort of API layer. This offering is usually free and, at some point, these companies will want to charge for this service. For instance, Facebook could theoretically charge per-download of anybody’s’ profile via FacebookConnect. Now, for the most part, API access is free. However, Google Maps started charging a while ago, and Bing Search now charges $20 a month for 20k downloads max per month on the Azure Marketplace.
Fast forward 3-5 years from now: the web of access to critical customer information and database data across companies will be staggering in size and complexity. I envision that this web will have no transparency, similar to the Credit Default Swap market that nearly took down the global economy in 2007. I am not comparing CDS to API usage risk in terms of scale but to its systemic risk within its ecosystem.
With Credit Default Swaps, companies are essentially trading risk. The problem with CDS trading was that nobody knew who was holding what risk. A large default (bankruptcy or inability to pay a loan) event could trigger a domino effect, and since nobody knew who was holding the bag(s), investors threw up their hands and didn’t want to take the chance, sucking liquidity from the markets.
If nobody knows which companies are using mission critical data from other companies via an API, then the risk is undefined. If FacebookConnect, which is used by millions of companies, started charging $1 per download, how many user businesses would freeze? Some of the companies dependent on Facebook would in turn have to start charging other businesses for access to their data. This could spark a domino effect, change the industry norm, and put a lot of organizations out to pasture. Simply looking around the Silicon Valley landscape, most companies DO NOT produce cash flows and would have to begin to charge to cover the cost of API access.
I am painting a dreary picture. I am sure things will not be so binary, but will happen gradually. Then again, the CDS scare, which nearly collapsed the world economy, happened overnight. Certainly this is something to think about, especially when starting a company and executing on a plan.
Who is your company dependent on?
-StuffSafSaid (stuffsafsaid.com)
