APIs are how software systems communicate. Learn what APIs are, why they matter for your product, and how to evaluate API-related decisions without technical expertise.
January 7, 2025 9 min read
Your payment processor has an API. Your analytics tool has an API. Your development team mentions APIs constantly. But what actually is an API, and why should you care?
APIs are how software systems talk to each other. They're the reason your product can accept credit cards without building payment infrastructure, display maps without launching satellites, and send emails without running mail servers.
Understanding APIs—not in technical detail, but conceptually—helps you make better product decisions, evaluate development estimates, and communicate with your team.
What an API Actually Is
API stands for Application Programming Interface. The jargon obscures a simple concept.
An API is a contract between two pieces of software. It says: "If you send me a request formatted this way, I'll send you a response formatted that way."
Consider a restaurant analogy. You don't walk into the kitchen and cook your food. You interact with a menu (what you can request), a waiter (who handles the communication), and you receive your meal (the response). The kitchen's internal operations are hidden from you—you only see the interface.
APIs work the same way. Stripe's API says: "Send me a card number and an amount, and I'll charge the card and tell you if it worked." You don't need to know how Stripe talks to banks. You just need to know how to format your request and understand the response.
This abstraction is powerful. Your product can use capabilities from dozens of specialized services without understanding their internals.
Why APIs Matter for Your Product
Most modern products are built on APIs. Here's why that matters:
Build vs. Buy Decisions
Every feature you need raises a question: should we build it ourselves or use an API?
Building means full control but requires time, expertise, and ongoing maintenance. Using an API means trading money for speed and leveraging someone else's expertise.
Stop planning and start building. We turn your idea into a production-ready product in 6-8 weeks.
Payment processing is the classic example. You could spend months building a payment system, dealing with PCI compliance, bank integrations, and fraud detection. Or you could integrate Stripe's API in days and let them handle the complexity.
For most startups, API integrations are the right choice for non-core features. Payments, email, SMS, maps, authentication—proven APIs exist for all of these. Build what differentiates your product; use APIs for everything else.
Integration Possibilities
APIs determine what your product can connect to. A product with good API access can integrate with CRMs, marketing tools, analytics platforms, and enterprise systems.
This affects your market. Enterprise customers often require specific integrations. B2B products often need to connect with existing tools. APIs make these connections possible.
It also affects your architecture. A product built with API-friendly design is easier to extend later. APIs connect systems that weren't originally designed to work together.
Third-Party Dependencies
When you rely on an API, you depend on that provider. If Stripe changes their API, your payment flow might break. If an analytics provider goes down, your dashboards go blank.
This isn't a reason to avoid APIs—the alternatives are worse. Building everything yourself is slower and often lower quality. But it's worth understanding what you depend on.
Common API Patterns in Products
Different types of APIs serve different purposes.
REST APIs
The most common pattern. REST APIs organize requests around resources (users, products, orders) and actions (create, read, update, delete).
When your team says they're "calling an API" or "hitting an endpoint," they usually mean REST. Most third-party services provide REST APIs.
Example: Fetching user data might be a request to /users/123 that returns that user's information.
Webhooks
Webhooks are APIs in reverse. Instead of your application requesting data, an external service sends data to your application when something happens.
Example: When a Stripe payment succeeds, Stripe sends a notification to your application. Your application doesn't need to keep checking "did the payment work yet?"—Stripe tells you when it happens.
Webhooks are useful for real-time updates. Instead of constantly asking "anything new?", you receive notifications when relevant events occur.
GraphQL
A more flexible alternative to REST. Instead of fixed endpoints that return fixed data, GraphQL lets applications request exactly what they need.
Example: Instead of fetching a full user object when you only need their name, you can request just the name field.
GraphQL can reduce the amount of data transferred but requires more complex implementation. Some modern products prefer it; most established services still use REST.
Real-Time APIs
Some applications need instant updates—chat applications, collaborative tools, live dashboards. Real-time APIs (WebSockets, server-sent events) maintain persistent connections that push updates immediately.
Example: In a chat application, you don't want to refresh the page to see new messages. A real-time connection delivers messages the moment they're sent.
API Concepts Worth Understanding
A few concepts help you follow API-related discussions.
Endpoints
An endpoint is a specific address where an API receives requests. Each endpoint does something specific.
Example: A payment API might have endpoints for charging cards, refunding charges, and listing transactions. Each is a separate endpoint with its own purpose.
Authentication and API Keys
APIs need to know who's making requests. API keys are secret codes that identify your application to the API provider.
Protecting API keys matters. If someone steals your Stripe API key, they could charge cards on your account. Your team should never embed API keys in code that users can see or share them carelessly.
Rate Limits
APIs restrict how many requests you can make. This prevents abuse and ensures fair usage.
Example: An API might allow 1,000 requests per minute. If your application exceeds this, requests get rejected.
Rate limits affect product design. Features that require many API calls might need caching or smarter request patterns.
Response Formats
APIs return data in structured formats, usually JSON. This standardization lets different programming languages process the data consistently.
You don't need to read JSON, but knowing that APIs return structured, predictable data helps you understand what's possible.
Evaluating API Dependencies
When your product depends on an API, evaluate these factors:
Reliability
Does the service stay up? What happens to your product when it goes down?
Look for status pages and uptime guarantees. Services that promise 99.9% uptime still mean about 8 hours of downtime per year. Critical integrations need fallback plans.
Documentation
Good documentation makes integration faster and reduces bugs. Poor documentation means your developers spend time experimenting rather than building.
Before committing to an API, ask your team: "Is the documentation clear? Are there examples for what we need?"
Pricing
API pricing varies widely. Some charge per request, others by data volume, others by active users.
Understand how pricing scales with your usage. A cheap API at 100 users might be expensive at 10,000. Get estimates for multiple growth scenarios.
Support
When something goes wrong, how quickly can you get help? Enterprise APIs often include support contracts. Free or cheap APIs might offer only community forums.
For critical integrations, good support matters more than minor price differences.
Lock-in and Alternatives
How hard is it to switch if the API provider changes pricing, quality, or terms?
Some integrations are easily swapped—switching email providers is usually straightforward. Others create deep dependencies—switching database providers might require significant rewrites.
Understand your options before committing to deep integrations.
API-Related Decisions You'll Face
Several product decisions involve API considerations.
Which APIs to Integrate
For each capability—payments, authentication, email, analytics—you'll choose a provider. These decisions involve:
Feature fit: Does the API do what you need?
Price: What does it cost at your expected scale?
Developer experience: How easy is it to integrate?
Reputation: Is this provider reliable and well-established?
Lock-in: How easy is it to switch later?
Your development team should lead these evaluations, but you should understand the trade-offs being made.
Exposing Your Own API
Should your product have an API that others can use?
APIs enable integrations, automation, and platform strategies. They also require design, documentation, and ongoing support.
For early-stage products, building an API usually isn't priority. As you grow, APIs become more valuable—customers may require them for enterprise deals or automation.
API-First vs. API-Later
Some products are built "API-first"—the core functionality is designed as an API, and the user interface is just one client of that API.
This approach creates flexibility. The same backend serves web, mobile, and third-party integrations consistently.
Other products build the interface first and add APIs later. This is often faster initially but can create inconsistencies.
Neither approach is universally correct. API-first suits products with anticipated integration needs. Interface-first suits products focused on user experience.
What to Ask Your Development Team
When APIs come up, these questions help you engage productively:
For new integrations:
"What does this API cost at our expected scale?"
"How reliable is this service? What's our fallback if it fails?"
"How hard would it be to switch providers later?"
"How long will this integration take to build?"
For building APIs:
"Who will use this API? What's the business case?"
"What resources are required to maintain an API?"
"How do we document and support API users?"
For API issues:
"What's causing the problem—our code or the external service?"
"How can we prevent this from affecting users?"
"Do we need a different provider or a different approach?"
Common API Pitfalls
Awareness of common problems helps you ask better questions.
Underestimating Integration Time
"It's just an API integration" often understates the work. Handling errors, edge cases, and testing takes time beyond the basic connection.
Ask your team for realistic estimates that include error handling and testing, not just the happy path.
Ignoring Rate Limits
Products that hit rate limits fail in confusing ways. Early designs should account for rate limiting on critical integrations.
Skipping Error Handling
APIs fail. Networks have problems. Graceful handling of failures is part of good integration, not an optional extra.
Ask: "What happens if this API is slow or unavailable?"
Hardcoding Assumptions
APIs change. Providers deprecate features and modify responses. Good integrations are designed to handle change gracefully.
This is a technical concern, but it affects how much work API changes create for your team.
Missing Cost Projections
API costs can surprise. Project costs at different growth levels before launching features that depend heavily on paid APIs.
Key Takeaways
APIs are how software systems communicate. Understanding them conceptually helps you make better product decisions.
APIs enable build vs. buy decisions. Use APIs for non-differentiating features; build what makes your product unique.
API dependencies create risks. Reliability, pricing changes, and provider stability all affect your product.
Evaluate APIs on reliability, documentation, pricing, and lock-in. Not just whether they technically do what you need.
Ask about error handling and failure scenarios. What happens when the API is slow or down?
Project costs at scale. Cheap APIs at launch might be expensive as you grow.
At NextBuild, we integrate dozens of APIs into client products, selecting the right providers and implementing robust error handling. If you're planning a product and unsure about integration strategy, we can help you think through the options.
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