API (Application Programming Interface)
A set of rules and protocols that allows different software applications to communicate and share data with each other.
Definition
An API (Application Programming Interface) defines how software components should interact, specifying the requests you can make, the data you can send and receive, and how operations should be structured. APIs enable different applications to work together without sharing their internal code.
Modern web APIs typically use REST or GraphQL architectures, exchanging data in JSON format via HTTP requests. This standardization allows developers to integrate third-party services (payment processing, mapping, communication tools) without building those capabilities from scratch.
Why It Matters
APIs are the connective tissue of modern software. They enable the integrations that make business applications powerful—your CRM talking to your email platform, your website processing payments, your project management tool syncing with calendars. Without APIs, every tool would be an isolated island.
For businesses building software, providing APIs creates ecosystem value. Developers can extend your platform, integrations multiply your distribution, and partners build on your infrastructure—creating network effects that increase platform value and stickiness.
Examples in Practice
An ecommerce site uses payment gateway APIs (Stripe, PayPal) to process transactions securely without building payment infrastructure or handling sensitive card data.
A mobile app pulls weather data via API, providing users real-time forecasts without operating weather monitoring infrastructure.
A SaaS company's public API enables 200+ integrations built by customers and partners, becoming a key differentiator that locks in users and attracts new ones.