3rd Party API’s and Your Business
Facebook, Twitter and many other massive corporations have treasure troves of data just waiting to be harnessed. As an app developer, you can use this data to build an empire, just like Twitter (which was essentially a skunkworks project metamorphosed into grand vision). That is, unless you piss off the company that owns all that beautiful data.
As was the case with Twitter and their recent Developer trials and tribulations, other companies are realizing that Open is also Hard. Facebook recently announced it would be cutting off Voxer’s access to its API because Voxer doesn’t contribute enough data back to Facebook (if anyone can find this in Facebook’s Developer Terms, I’d love to see it). This is a direct result of Facebook entering the VoIP market, and one has to wonder why they didn’t just cut off SnapChat’s access when they launched Poke. This should serve as an intentional shot across the bow from Facebook and a swift lesson in using someone’s API for your business. Let’s dive in to the case for and against using an external API.
The 3 Metrics That Matter: Growth, Growth, Growth
Most VCs want to see growth and lots of it. In fact, one could argue that our Growth economy couldn’t exist without it. In the feverish rush to acquire users for consumer products the appeal of opt-in email lists has been prevalent for some time. Getting users on the mailing list was of paramount importance because it let you market to them. Social is the same but with inherently more virality because of the number of interactions each user has each day. Attracting users through social engineering on sites like Facebook can help facilitate growth in a startup that might otherwise take quite a great deal of time (see Instagram, Viddy and arguably Voxer). Accessing Facebook’s data is valuable because you can get more users very quickly. It is, however, not without its tradeoffs, specifically in the form of the Damacles sword; the guillotine of blocked access. If, one day, Facebook can break your app by turning off your access, do you have a business or are you the victim of a protection scheme?
The case for going it alone
When you build a business organically without relying on other infrastructures, the success and failure of that business is yours and yours alone. This is both frightening and deeply empowering. Your business lives, or dies, by your hand, but the truth is that in either case this is true, it’s just easier to fail faster in the former case. Users that see your product as a destination instead of an addendum are inherently stickier and will likely result in more revenue over time. If you are building a non-freemium business many of your peers go this route.
So what’s the right answer?
Voxer may survive this fight for one simple reason: Facebook is a component of a larger solution. Building a business that is beholden to one particular API is like being a cobbler who only buys shoe inventory from one designer. If that designer decides to capriciously raise their prices (or stop selling you shoes entirely) your business will need to pivot or die. When you build on top of someone else’s API you are creating a situation where the fate of your company is not entirely in your control. That’s ok, if you can tolerate and plan for that risk (a great way of mitigating this threat is to have multiple sources of data). If you are, however, a control freak, like most Silicon Valley leaders, there is an evaluation that needs to take place when using an external API. Here are the 3 questions you should as yourself before integrating with an external API:
- What happens to my business if I lose access to this data?
- Will I threaten the parent of the external API before I achieve my growth goals?
- Can I do this myself and can I tolerate the slower rampup time?
If you have strong answers for those questions, you can build a business utilizing an external API. If you can’t, I wouldn’t recommend it.
What happens to Voxer now?
I believe Voxer doesn’t need Facebook to survive but it will hamper their revenue growth targets. My impression is that Voxer is moving to pursue the SMB and small Enterprise markets but I don’t know how they’re going to fare without a bridge to the corporate infrastructure. It will be interesting to see how their utilization numbers change due to these Facebook shenanigans.
Disclaimer: I run marketing for an open-source API-based Telecom Infrastructure company. We make stuff ring. Check it out at http://www.2600hz.com
If you enjoyed this article, check out my piece on Twilio and AT&T regarding their API debacle. It’s a doozy.