APIs Make Money For Amazon

Not all application programming interfaces are created equal. Some, like the map APIs offered by Google, Microsoft, and Yahoo, have spawned clever marriages of data and geography that generate traffic and advertising income.

But the resulting "mash-ups," which might, for example, combine Google Maps with U.S. Census data, aren't easily monetized by creators or API providers, except through online ads.

Amazon Web Services, on the other hand, is built to make money. Launched in 2002, Amazon's program to offer access to its technology platform and product data counts more than 120,000 developers. The company has more than 975,000 active seller accounts that have sold at least one item in the past year, many of whom use AWS. All told, third-party sellers generated 28% of Amazon's second-quarter unit sales, up from 24% during the same period last year. That's $490 million for those keeping score. Amazon doesn't disclose the percentage of earnings attributable to AWS.

For the cost of exposing its data and paying affiliate referral fees, Amazon gets applications that improve the shopping experience for customers and enhance sales efficiency for sellers and affiliates. "Associates get tools that make their affiliate sites more dynamic," Amazon spokesman Drew Herdener explains via E-mail. "Sellers get tools that help them more efficiently manage pricing, inventory, and other listing information. Shoppers get tools for making informed purchase decisions that Amazon itself doesn't offer or to shop in different ways."

United Kingdom-based software development startup Inside C, a member of the Amazon Associates program, has created a mash-up of sorts called Inside Messenger that combines AWS with instant messaging. "We make use of Amazon Web services by querying their available transactions, looking for products in the various categories and filtering their XML that they give us back into the conversation that we have on instant messaging," says Riaan van Schoor, owner of Inside C.

Inside Messenger is an automated chat interface of either AOL Instant Messenger or MSN Messenger. It allows users to search for and purchase products on Amazon.com through an IM chat format. Users add the chat bot to their contact list like any live contact and initiate a conversation. "Typically, people say 'Hi' or 'How are you?'," van Schoor says. "They greet the product, which is kind of strange. But they start the conversation like that."

It may sound strange, but it appears to work. Van Schoor claims that some 20% of customers who use the software make an Amazon purchase, up to 10% of which goes to Inside C as a referral fee. For van Schoor, AWS is "absolutely vital" to Inside Messenger, developed at a cost of about £100 000 (about $177,112).

What makes the Amazon APIs particularly valuable, van Schoor says, is that they include programming logic. "[Amazon] could have just exposed numbers and numbers of inventories," he says. "But they didn't do that. They very cleverly tied up the APIs with some of the Amazon logic."

Thus, users typing, say, "Steven King" into their IM client looking for a book by their favorite horror author may find their spelling mistake corrected and see query results related to the author's correct name, Stephen King.

Van Schoor explains, "That's adding quite a lot of value of their API." To say nothing of the value added to Inside C.

This story was updated Oct. 20.