The API Wars Are Here

To quote one of the funniest TV shows of the last decade: “This is the darkest timeline.” Ever since social networks started being a thing, services like MySpace or Friendster (that should tell you just how long ago we are talking about) had APIs for third parties to play around with.

Permissive APIs allow for very creative plug-ins and adjacent apps created by the tech-savvy community. It’s the lifeblood of your service when your team isn’t providing continuous delivery. Power users build something that caters to their preferences and share it with the community at large, other users latch onto it, and some even build on top of it to provide a more refined experience.

A BairesDev client in the home healthcare sector required creating an API for video consultation scheduling. Three BairesDev engineers not only developed the API but also improved the integration of healthcare interoperability resources into BigQuery. This boosted the speed of report and data delivery to partners and patients, resulting in a remarkable product NPS increase to 9.67/10.

If APIs are such a good thing, and they have been the industry standard since its early days, how come two of the biggest social media companies, X and Reddit, have suddenly decided to make a 180° turn and close down the gates—to the point of killing services and adjacent apps that were loved and widely used by the community?

Well, put on your fedora hats and grab your best magnifying glasses because today we are going to explore the reasoning behind these decisions and the impact they may bring to the wider industry. Let’s delve into the great 2023 API wars.

Changing Policies

Companies migrating to a different policy is nothing new. Perhaps the most egregious example is Google. Initially, Google embraced open source principles for Android, but as it gained market dominance, it gradually shifted away from open-source ideals. Further development and features were added to a close-sourced alternative. Without a devoted team of community developers, the app will end as abandonware

Google was not in the wrong here. When they released Android, it was against the titans that iOS was at the time. With no market share, the most important step was to gain a foothold, no matter how small. The target at the time was a geekier and more tech-savvy crowd, in stark contrast to Apple’s fantastic UX and more welcoming experience.

But that was then, and now with over 70% of market share, it’s pretty clear that Android is in a very comfortable position. Android reached a point where it got so big that leaving the whole thing open source was going to create its competition. So it was time to bring it in-house.

US market share as of August 2023. Source: StatCounter

We love open, and from our perspective, open solutions make for better products. A bigger community means that we have more eyes to find bugs in the code and more people tweaking and playing around with it, stretching its limits.

But at a certain point, a company has to start thinking about its competitors—not the developer community in general but rather other names from Big Tech ready to take a bite out of the pie. It’s the nature of the business. If you have a good product, others will try to learn from it, be it by looking at your code or by headhunting developers. Open solutions are fantastic and empowering, but they can eventually become a liability business-wise.

Just What is an API

API stands for Application Programming Interface. In simplest terms, the API serves as an intermediary that allows two applications to communicate with each other. For example, the Twitter API is a set of functions provided by Twitter (now X) that allows developers to access and interact with certain features of the platform.

The X API works as an information channel, allowing users, especially developers, to retrieve X data or send requests for certain actions. It’s like a waiter in a restaurant who takes your order and delivers your food to you. The X API takes your request, delivers it to the Twitter server, and then brings the server’s response back to you.

For instance, when we use a third-party application like Hootsuite that needs to display tweets, it sends a request to the X API for tweets. The API then retrieves the tweets from X’s server and provides them to the third-party application.

There are various uses of the X API. One of the most common examples is automated tweeting. Here, we can use the API to schedule tweets ahead of time or automatically tweet content from an RSS feed. Another application is trend analysis. We can use X’s API to gather data about what’s popular or trending on X at any given time, analyze this data, and use the insights to make strategic decisions.

Features of Social Media APIs

How AI Started the API Wars

OpenAI turned the world upside down with its public release of ChatGPT. It wasn’t the first language model, it wasn’t even the first implementation of GPT-3 (it was for 3.5, but that’s the foundation of 3), but it was the demo that got people’s jaws dropping at the sheer refinement of text generation.

ChatGPT became the app with the highest and fastest adoption rate in history, dethroning Instagram. This sounded the alarm for companies that looked at what OpenAI was doing and decided to up their game. In the following months, Amazon, Meta, and others entered the race to build LLM solutions. Meanwhile, others were asking questions.

So, you have a fantastic model with billions of parameters, but where did the data used to train that model come from? According to a paper from Lambda Labs, the performance of a language model scales off model size, dataset size, and the amount of computation following an exponential relation.

In other words, more data and more parameters equals better performance, reaching the point where these models are even able to make educated guesses related to subjects they weren’t trained with. Now consider that GPT-3’s dataset and model size are about two orders of magnitude larger than those used for GPT-2 and you start to get an idea of just how much information was fed to the model. Spoiler—it was 300 Billion tokens.

Companies soon realized that these tokens had to come from somewhere (e.g., their services via their APIs). That might’ve been fine when OpenAI was a non-profit organization working with donations from other companies, but the minute they estimated a revenue of $200 million from ChatGPT in 2023 and $1 billion for 2024, it was time to ask for a piece of those profits.

If you’re interested in improving your product by integrating new applications, learn more about BairesDev mobile and web development services.

It Is Always About the Money

As the adage goes, if you can’t see how a company is making a product, then you are probably the product. Social media is a complicated business; they live or die on their active user base, and nothing brings people in like a free product. Social media has to offer some level of free tier to get people in the ecosystem.

First, because they are your content creators, people log on to social media to see what other people are making. And once you get them in, it’s a lot easier to promote a subscription service. The second, and most important reason, is that you can monetize your free users. But what about publicity? All of these companies have ads and promotion partners that pay based on their outreach.

Remember when we said that third-party applications are built by power users looking for a better experience? What better experience than not having ads on your feed? For example, in Reddit’s case, the API filtered those ads so users wouldn’t have to cope with special offers and other interruptions during the browsing experience—not the best idea if you are trying to increase your profitability before going public.

Unfair… for the Small Businesses

Twitter was the first one to paywall their API and raise prices considerably with a three-tier system:

• The free tier only allows 1,500 posts per month
• The basic tier costs $100 a month, aimed at what they call hobbyists. It allows posting 3,000 tweets per month at the user level or 50,000 tweets per month at the app level. The read limit is 10,000 tweets.
• And then there is the enterprise tier, which doesn’t have a price range, but some professionals have estimated it could be about $42,000 a month for a low use case.

It feels like something is missing, right? Why isn’t there a tier for students? Or for small projects? The original Twitter used to be one of the most open and welcoming APIs on the market; it was a godsend in contrast to the hoops one has to jump through to work with other companies like Meta.

And then there is Reddit. Ironically, the company stated that their API would charge fair prices, nothing compared to what Twitter was doing. Then a few weeks later, they released their plans, and all hell broke loose.

Reddit killed the whole application ecosystem that supported it. Apollo, one of the most famous alternatives to the lacking Reddit client, had to shut down because the developer would have to pay over $20 million a year for an average of 7 billion API requests.

If you feel like that’s a lot, well, it is. Apollo was almost the standard for mobile Reddit. And it was a pleasant source of income for a small-time developer. And when Selig had to shut down his app, the users were furious, and it got so bad that Redditors started a protest against the changes, but to no avail.

Fortunately, the first piece of good news is that no other company seems to be on the warpath, as of right now. It’s still too early to tell if other companies will adopt a similar approach, especially since everyone is craving data to keep training and refining their models. This serves as a harsh lesson for startups that want to leverage APIs from a service provider.

Advice for Startups

All right, so, you are a startup and are looking for opportunities to work with APIs, even if they are pricey. What do you do? Here are 5 few tips that might point you in the right direction:

1. We advocate for thorough due diligence before investing in a costly API. This means scrutinizing the API’s functionalities and capabilities and assessing whether it matches your business needs. A good illustration of this would be a startup looking to leverage the power of AI.
2. We urge startups to consider the scalability of the chosen API. As your startup grows, will the API be able to keep up with increased demands? Will your business still be viable as your user base grows? Contact API expert development services if you’re unsure of these answers.
3. We recommend running a cost-benefit analysis. The expense of using the API should be balanced against the potential profits and efficiencies your startup can gain.
4. We urge entrepreneurs to negotiate terms with the API provider. Many companies have various pricing tiers or offer discounts for budding startups. Square’s API payment gateway, for instance, is known to provide flexible pricing plans for small businesses.
5. We suggest optimizing your usage to manage costs, especially for APIs that charge per request. Prioritizing necessary requests and economizing your data traffic can make a significant difference to your overall expenses.

We don’t have a Magic 8 Ball to know what the future holds, but for better or worse, these changes seem to be leaving behind one of the best aspects of the internet, a community of smart people with very little budget but a lot of heart and creativity. Let’s hope that in the future we can find a middle ground where everybody wins.