How Twilio, Zapier, And Cloudflare Make Billions Through An API Licensing (Complete Guide)

5 min readDec 10, 2022

Whether you book a cab, pay for a product, or send an email, there is a very high chance you will be using some form of API.

What is an API?

APIs (Application Programming Interface) is a software intermediary that allows two applications to talk to each other.

Example: Google Map APIs, Paypal APIs, etc

Uber uses Google Map APIs to track driver's location, calculate fair, etc
Gmail uses google Authentication APIs to send and validate emails.
Your favorite e-commerce app uses payment APIs to accept payment.

API: Explained Like I’m Five!

Imagine you go to a Pizza place. You check the menu and order through a waiter who takes your order to the kitchen and brings back your pizza.

The menu is your application. You are sending a request by placing your order.

Waiter act as the API which is the intermediary that takes your request to the kitchen — the back-end system.

You get the pizza or the response from the kitchen through the waiter or the API.

In short, these APIs are the building blocks of complex programs which take a request and send you back the response.

How do APIs work (From a techy mind)?

Our mobile connects to the internet and sends our request to the remote server.

This server then collects the data from the database from your request, processes them, and sends them back to your mobile phone.

The application will convert that data into a readable response and display that through the user interface.

Now Instead of starting from scratch developers uses these available APIs and save time writing new programs again and again.

So if you are building a grocery app then you can use the APIs for the following purpose

Twilio — To send SMS to your customers.
Mailchimp, SendGrid — Send Emails every time they log in and place an order.
PayPal and Stripe to accept payment from customers.
Segment and Mixpanel for product analytics and feature usage.

Types of APIs business model

Free: Simplest API-driven business model which allows app developers to access APIs freely.
For example Facebook, Google Translate, and government and public sector.
Developer Pays: This model operates in a form where application developers have to pay for the services provided.
Ex AWS, Stripe, Twilio, etc

3. Developer Gets Paid: In this model, Developers get paid for their API usage.

4. Paid Indirectly: The free use of your API will lead to increased revenue because third-party developers will implement it on top of your API.

2.APIs where Developer Pay?

This model operates in a form where application developers have to pay for the services provided
Ex AWS, Stripe, Twilio, etc

Pay as you go — You only pay for the no. of APIs request with no minimum price defined.
Ex: AWS charges you based on fetch requests from their s3 container.
Tired — Just selected your suitable plan based on your consumption like API calls, subscription applications, etc. Ex Gitlab
Freemium — Developers can use the services for free with basic features but require a premium version to use additional features.
Ex GitHub, HubSpot, Mailchimp
Unit-based — This offers different features(units) at different prices.
Ex Twilio
Transaction Fee — This model is mainly used by payment APIs where developers have to pay a percentage of the transaction amount happens through the API.

3.APIs where Developer Gets Paid

In this business model, the Developers get paid for their API usage on their platform.

Revenue Share — Developers get paid a share of the total revenue generated from the purchases coming through customer referrals.
Ex-Google AdSense Ads on the website.

Affiliate — Here people get paid from the Affiliate commission either from the sale or driving the traffic.
Ex CPA(Amazon Affiliate Program) and CPC(Infolink’s) Sign-up Referral (Skillshare for One-time and Medium for Recurring).

4.APIs Where you are Paid Indirectly!

The free use of your API will lead to increased revenue because third-party developers will implement it on top of your API.

Content Acquisition — Motivates users to write more quality content that will result in more sales/values to the platform Examples :
Google Maps or Any website that allows users to write reviews.
Content Syndication — Here the goal is to spread the content to as many users as possible to drive content syndication by making it easy for third-party apps to consume and distribute it.