Comment by tasuki
7 days ago
I work for a tiny company. Most of the revenue is from paid API access.
I don't think I'm authorized to share any of the specifics, so will keep it generic.
The API is a world-class machine learning model for a specific scenario. There's a public price list, and various customers manage to negotiate various discounts.
Our biggest challenge is that Google Lens (while much worse than us for our specific domain) is becoming good enough for the average potential customer.
I think one of the regrets is only doing the ML API and not the end-user apps. It turns out the people creating the front end pocket most of the money.
> It turns out the people creating the front end pocket most of the money.
Well, yes. They're solving a pain-point for the paying customer. You're solving a pain-point for someone who is solving a pain-point for the paying customer.
You're one (or more) degree's removed from the source of the revenue.
You're not surprised. I'm not surprised either. And yet: at a company of a handful of people working part time, I think the choice made sense: focus on the core competency.
I mean, the common advice is to “sell shovels”, no? I think it’s non-obvious that in this case the correct strategy could be “go dig for gold”
You can sell shovels to people who think they might find gold. That doesn't sound like the product area given by the parent.
> I think one of the regrets is only doing the ML API and not the end-user apps. It turns out the people creating the front end pocket most of the money.
I'm curious why this is not preferable? You can focus on your core competency and I imagine you have enough apps using your API that it more than makes up for getting only a small slice of revenue from each.
> It turns out the people creating the front end pocket most of the money.
Would you be able to elaborate on this? I don't fully understand this statement.
You create hotdog / not-hotdog API. It reads an image and returns hotdog or not-hotdog.
You set API pricing at 1.5 cents per image analysis.
Another company creates an Android hotdog/not-hotdog app. They price it at $5/month. Each app user does an average of 60 food queries per month.
You get 60 API calls = $0.9 revenue. Let's say half of that gets used for compute costs. You're left with $0.45/month profit per user.
The company that made the frontend around your API gets ($5 - 30% app store cut - $0.9 your API cut) = $2.6/month profit per user.
Exactly this, thank you!
>> It turns out the people creating the front end pocket most of the money.
> Would you be able to elaborate on this? I don't fully understand this statement.
the economic player with direct contact to the customer "owns" the customer and has a lot of power in negotiation with suppliers. the customer-facing players have the most information about their customers, and can offer adjacent products (want fries with that?)
Uber and Lyft make big money, not their drivers. Amazon and Ebay make big money, not their sellers. McDonalds makes more money than their food suppliers, and franchisees.
The exception is with something like intellectual property, let's use movies as an example. The owners of the content want to sell it widely and will do a variety of distribution deals for different distribution channels. However, if any distribution channel starts taking a big slice of the money pie, the terms of the contract renewal will be changed because without the content they are dead.
> I think one of the regrets is only doing the ML API and not the end-user apps. It turns out the people creating the front end pocket most of the money.
I think this generally means you chose too small a market for your API. If the API is 1:1 an app, then sure build the app. But if the API supports a dozen apps which make some money but your API flounders, then I think you never had a chance. The market wasn’t really ever there.
It's a small market yes. Our solution can be packaged as a stand alone app, but also has other relevant uses.