API's (application programming interfaces) provide a way to connect computer software components. Broadly speaking, API's make it possible for organizations to open their backend data and functionality for reuse in new application services. We are now entering into a new form called API economy. The API economy, act as the digital glue that links services, applications and systems. This allows businesses to make the most of their data to create compelling customer experiences and open new revenue channels.
Companies are investing into API’s for two main benefits:
1) As a Customer Acquisition Channel = Similarly to the way Web sites acquire new customers through referral traffic and affiliates, APIs need apps to refer more patrons. The more developers use your API, the more third-party applications will be built and consumed.
2) As a way of increasing Retention = The more people that use apps that rely on your API, the more market share you will have for that type of API. After achieving critical mass, it will be hard for competitors to unseat you, or for those third-party app developers to migrate to another API provider. Consequently, it will be harder for users to move to the competition, thus increasing your retention rate.