Why Do Companies That Sell APIs Have Such Low Churn Rates?

May 28, 2021

You would expect otherwise. An API is a stationary target - stability is a key value driver. It has well-defined inputs and outputs (which are not IP according to the Supreme Court). In theory, this makes it an easy target for competitors to offer a drop-in replacement.

Yet, companies like Twilio have below-average churn. Why? In practice, there are other aspects that increase vendor lock-in. Authentication and authorization, data gravity, and undocumented behavior.

I suspect the right narrative is one around the factors other than churn that drive net dollar retention, the ultimate SaaS metric. APIs integrate with core infrastructure, and that often opens the opportunity for revenue expansion through cross-selling or upselling. Maybe it's these services that are the ultimate value driver rather than the API.