12ContentBackground
Motivations & Approach

Analyzing the Market Growth in API Economy
using Time-evolving Model

Market Model
Evaluation Methods
Results

Hiroki Yoshikai,Arakawa, Tetsuya Takine, Masayuki Murata
Conclusion & Future work

Advanced Network Architecture Research Laboratory, Osaka University
October 30, 2023

3BackgroundAPI economy

4Motivations & Approach
Motivations

Economy that creates new value by connecting corporate services converted into APIs

Capture the behavior of a market
Expandedas the number of participants changes over time

Supply and consume services via APIs

Identify the sustainability conditions

Activated by indirect network effects

to expand the number of market participants

Strategy A
Strategy B

Equilibrium points under a certain platform strategy [4]Important in understanding the qualitative behavior of the market

Approach

Platform strategies differ for each phase of the market
Important to capture the behavior of a market
as the number of participants changes over timeAPI[4] S. Sen, R. Guerin-rich versus
minimalist platforms: A towACM SIGCOMM
Computer Communication Review, vol. 41, pp. 36 43, Oct. 2011.

weeks

Azure-type platform with API providers

APIExamples of market behavior

AWS-type platform with no API providers

PlatformAPI

Reached a peak

Modeling a time-evolving market

API

Comparison of market behavior across different platform strategies

APIAn example of API economy

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AWS-type platform
Platform provider

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Azure-type platform
Platform providers/Consumers

Collects usage fees

Similar to AWS-type platform

Rewards service providers

Service providers

Service providers

Develop services early by using APIs

Develop services using libraries provided by the platform

Easier development of diverse services andMany functions need to be developed on their own

Further reduce development costs

increasing development costs

API providers
Consumers

Develop diverse functions

Pay usage fees to the platform

Lower development costs by using APIs
in a complementary relationshipUse various services developed by service providers
AWS-type platform

Azure-type platform

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Market Model
Market participants

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Market Model: Platform: ProfitPlatform
Consumers: Source of the fee to Service/API providers

Service providers
API providers

State: Cost of capital investment in platform at timeof market participants at time

: Number of libraries held by the platform

Azure-type platform

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Market Model: Consumers: Number of consumers

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Market Model: API Providers: Profit

Amount of change in number of early adopters: Number of uses of API provided byAmount of change in number of majorities: Development costthe more complementary APIs they use
the more development costs decrease

Incremental model

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Market Model: Service Providers: Number of participants at time

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Evaluation Methods (1)Incremental model of consumers: Profit

Based on the number of premium members of Japanese service: Number of uses of service provided byComparison of market behavior
across different platform strategies
basic: allocates 35% of the fees collected from consumers
to service/API providers respectively: Development cost

Incremental model

high margin: allocates 10% respectively
the more APIs they use
the more development costs decrease: Number of participants at time

low margin: allocates 50% respectively
high usage fee: 10x usage fees for service/API providers

Expansion
Phase

MaturePhase

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Evaluation Methods (2)Perspectives of evaluation

14Results: Market Growth
Comparison of platform strategies

Market growth: Number of market participants at the end of mature phase

37% upHigh margin and high usage fee

Platform for coexistence: Profit of each participant at the end of expansion phase and mature phaseincrease platform profitability
decrease market participants
75%
down

Low margin

68%
down

increase profits for service/API providers
increase market participants
65% upComparison with an AWS-type platform
Lower development costs for service providers
End of expansion phase
End of mature phase

67% upDecrease in effectiveness of API providers
in reducing development costs

15% up

70% upwhen platform usage fees are highSimulation results

Results: Platform for Coexistence
Expansion phase

15Conclusion & Future Work
Conclusion

Coexistence can be achieved by basic strategy

Time-evolving market model with API providers

Azure-type platform are about 3%
more profitable for service providers

Observation of market behavior using the model
Results

Mature phase

Coexistence

Ensure profits for service/API providers
by low margin settings
Azure-type platforms are about 20%
more profitable for service providers

Market growth
Azure-type platform decreased the cost of developing services by 25% andincreased the number of market participants by 67%

Platform for coexistence
Feasible when the platform allocates 70% of its revenue to service/API providers
Azure-type platforms are more profitable for market participants during a mature phase

Easier to ensure profits for market participants
during a mature phase
More profitable forservice/API providers

Future Work
Model in which market behavior depends on strategies of each market participant

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