I attended a Mashery event held earlier this year where Best Buy, eBay's Paypal, and Netflix discussed why and how these companies are using APIs to drive engagement and commerce. A key takeaway that has stuck with me from the presentations is that apps and APIs aren't mutually exclusive, and that almost ever firm can benefit from an API, while not necessarily from an app.
This event made me realize that many companies are creating customer-facing mobile apps to drive engagement, regardless of whether it makes sense. Meanwhile, Adam Kleinberg, from the interactive agency Traction, made a solid case for why every brand needs an open API for developers.
Firms do need an engagement strategy that leverages mobile. However, consumers can only use so many apps. There are hundreds of thousands of iPhone apps, but according to Nielsen, iPhone users download an average of 48 apps. According to Localytics, a Boston-based software company, 26% of all apps downloaded in 2010 were used just once.
If there is a plethora of apps and a good chance that a consumer will skip past your app, a company should answer several hard questions before it embarks on a mobile app project. Why would a customer download your app? When would they use it? Is it a novelty or would they use it more than once? How much would you have to spend building a mobile app and what type of engagement would it drive? How difficult and costly will it be to maintain these apps when it needs to be extended to support multiple operating systems and numerous devices? Keep in mind that the support might even have to extend beyond smartphones to cars, DVRs, TVs, etc., as apps gets embedded in more devices. For example, Netflix discussed how its API supports content access from a wide range of devices from tablets to gaming consoles such as Xbox. Businesses must now consider how they will drive communication, interactivity and commerce over a broad, ever-changing range of connected devices.
In rare cases of commerce apps, such as eBay's, multiple brands are represented and the application delivers high value. But in most cases an app is about a one-to-one mapping of your brand to a customer, requires the consumer to actively think of your brand to use it, and normally doesn't generate greater brand affinity or purchases. Kleinberg gave an example of how Kraft created an iPad app called Big Fork Little Fork that offered games, recipes, and videos to help parents teach their kids about healthy eating and discover ways to use Kraft products. Kleinberg asked, Does it sell product? Was there a more effective way to integrate Kraft into the "point of consideration"?
An API, on the other hand, is about embedding your product, service, and content into other sites to increase commerce and branding opportunities. It creates greater business opportunity by engaging your customers wherever they are. Successful apps will frequently combine APIs from numerous companies to drive a rich set of information.
Paypal discussed how its API allows it to be the backend payment engine for a wide range of businesses. Best Buy's Kumar Kandaswamy also provided an example of what this might look like. Best Buy created several APIs around product information, recommendation engines, and commerce. These APIs are embedded into the Citibank Card Thank You Rewards program. A rewards member can research, select CE products, and redeem points to purchase these items at Best buy--all without leaving the Citibank experience. It's a win-win-win. Best Buy gets branding and a sale. Citibank can provide rich product information and commerce without building these services. The customer doesn't have to leave the process to research a product, and also gets a product delivered faster than the previous six to eight week process that most reward programs offered.
The market is moving quickly. Device and service popularity is changing rapidly. Apps make sense if it is the best way to provide your customers and prospects with information and transaction capabilities on the go. But a mobile website might provide just as much functionality and allow it to be used on different platforms. It is important to remember that there is more than one method of driving customer engagement--from apps, mobile websites and mobile Web apps, as well as APIs. As a business ponders building apps, it should also consider building for the mobile Web and look at how the business can use APIs to unlock innovation around its data. Successful firms will employ a mix of these methods to be successful.
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