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Telefonica Strategy Hints At Future of E-Commerce

It's all about a managed API platform, not websites, the telecom's strategy declares. Netflix, AT&T, and Google already understand.

Telefonica is illustrating how APIs, not websites, are the future form of e-commerce.

Telefonica is the private company that supplies telephone service in Spain, the Czech Republic, and much of Latin America as well as mobile services under the O2 brand in the United Kingdom and Germany. To reach more customers, it's not upgrading its website. Instead, it's making its APIs easier to use by outside developers.

APIs are no big secret inside the world of programmers, but their transformative power to business is just becoming evident to business strategists. Through a well-designed and well-managed API, a company can selectively open the door to external (and identifiable, registered) developers, who in turn produce applications that make use of the company's services. External developers are often skilled at identifying and reaching new sets of customers.

The real power of making APIs available is that they hand off some of the programmatic control that used to be vested in the company's IT department to anyone outside who shows the skill to use it effectively. They have the potential to bring fresh human capital to the company at minimum expense.

Telefonica, the world's fourth-largest telecommunications company, is offering its APIs through a developer platform which makes them easier to understand and use. The platform is provided by its technology subsidiary, BlueVia.

Instead of customers needing to hunt up a Telefonica website and work to find a pathway to something they want to do, they use an application on their computer, smartphone, or tablet to go straight to the service they want. BlueVia's APIs for Telefonica make available short message service (SMS) for text messaging and multimedia messaging service (MMS) for more complex messages. Other BlueVia APIs provide contextual information on users, based on the phone company's subscriber data, advertising services, and location services.

Once an API gains wide use in many applications, BlueVia manages the API traffic generated by all the application users through a management console from Apigee, a Silicon Valley specialist in APIs. When wide API adoption is married to Apigee's management methods, BlueVia will be able to handle millions or billions of additional calls a month for Telefonica services without risking data center overloads or service outages. In many cases, the extensive processing that an API requires to set up a service response is done outside the data center in Amazon's EC2 cloud.

"Whether it's done in a data center or outside depends on what kind of company you are," said Chet Kapoor, CEO of Apigee, in an interview. Some companies do not want their data or application logic getting accessed from the cloud, while others, like Netflix, intend their content to be accessed that way.

The alliance of a BlueVia API development platform and Apigee API management console was announced Wednesday by both companies. "BlueVia is giving developers access to powerful network services ... while allowing them to monetize their ideas more easily," Kapoor added.

In one sense, Telefonica is just following in the footsteps of AT&T, which also uses Apigee's management console. AT&T has concentrated on making its telecom services easily accessible to developers through its AT&T Developer Program, which has ranked at the top of U.S. developers' preference list for telcos in surveys of programmers. Research firm Evans Data says AT&T has been at the top of the list for five years.

Much of the iPhone's early success can be attributed in part to AT&T's ability to make APIs available for its data and network services to become incorporated into applications produced by legions of external iPhone developers. Another example is the publicly available API for Google Maps; it allows the mapping service to frequently appear in iPhone and other applications. Even the Amazon cloud is basically a result of the API phenomenon. The retail operation decided to make compute cycles available through an easily accessed API.

Telefonica also said it will make 10% to 50% of the revenue generated by transactions through an API to developers, although how it would decide to distribute revenue wasn't immediately clear. Nevertheless, the revenue-sharing promise is a new way to attract developers to a company's API set. In addition, if a developer's application is sold to consumers in a Telefonica online store, BlueVia will give the developer 70% of that revenue, in a manner similar to iPhone application sales in the Apple iTunes store.

An independent developer needs to only master one API in order to interface his application to multiple mobile devices, instead of needing to know the details of each device.

With mobile devices proliferating, Kapoor wrote in a blog last year, "We are moving beyond the browser to the 'API Web,' where much of your company's Web traffic will come from a non-browser source."

Kin Lane, API evangelist at the automated printing service,, blogged on Jan. 19, "Those of use in the tech community who work with APIs talk a lot about the API economy ... Behind the scenes, APIs are an integral part of social networking--APIs were the driving mechanism behind Twitter and Facebook's community ... Amazon Web Services, a leader in cloud computing, started as ONLY an API."

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