Instagram, with only 20 employees, successfully grew into a company that Facebook deemed worthy of acquisition for USD 1 billion.

WhatsApp, with fewer than 50 employees, attracted 400 million users and that too within just 5 years. Facebook deemed it worthy of acquisition for USD 19 billion.

So what is the secret sauce for disrupting established corporations with minimal resources?

It’s not by reinventing the wheel but through the perfect orchestration of existing services to create an exceptional user experience.

Consider the case of Uber

Components required to make Uber’s services possible

1. Geographical location of the user & driver
2. Distance between the pick up & drop locations
3. Most optimal route
4. Real-time notification to alert the user about their ride
5. Cashless ride payment options within the app
6. Sending the receipt via email
7. Uninterrupted operations even during peak demand

If you were to develop each of these components from scratch, the process would be time-consuming, highly complex, and, most importantly, very expensive!

However, there are some specialized companies in the market that can provide you with the functions of each of these components via an API. So a startup can simply combine multiple API services offered by other companies to deliver an innovative and exceptional user experience, and that too in a very short time frame. Uber did exactly that!

Following is a list of the APIs they combined:

• Positioning by iOS & Android operating systems
• Maps and Route calculation by Google Maps and MapKit
• Real time messaging by Twilio
• Braintree for payments
• Mandrill to send the receipt via email

Uber is just one of many examples of a new type of company that leverages the power of the API economy to disrupt entire industries. This goes to show how APIs have become integral to building tech enabled businesses.

What is an API?

API is an acronym for “application programming interface.” It is a software intermediary that enables two software components to talk to each other using a set of definitions and protocols.

“API economy” refers to the set of business models and practices designed around the primary use of APIs, i.e., the controlled exchange of digital data and services in today’s digital economy.

APIs are considered a key to unlocking digital transformations; after all, they are used for powering everything from social media likes and online ads to cloud businesses.

Primarily, there are 4 types of APIs: open APIs, partner APIs, internal APIs, and composite APIs.

This is an extensive topic with many subtle nuances, but in the interest of keeping this article concise, we shall limit ourselves to the primary difference between Open and Closed APIs.

Open vs Closed APIs

Open APIs, also known as public APIs or external APIs, have the ability to share data openly. The ease of integration and lack of constraints entice external businesses to integrate with the app that owns the API. This quick leveraging of data not only makes the third-party software more valuable but also enriches the API.

Open APIs, also known as public APIs or external APIs, have the ability to share data openly. The ease of integration and lack of constraints entice external businesses to integrate with the app that owns the API. This quick leveraging of data not only makes the third-party software more valuable but also enriches the API.

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