Apr 182006

Google API: Charges, Usage Fees, T&C changes

An open letter to Google on their recent changes to the Adwords API terms and conditions:

Subject: RKG: feedback on T&C changes

Hi Google Folks --

Several weeks ago xxx and xxx walked us through the upcoming changes to the Google API T&Cs and asked for feedback.

Given how we use the API today and how we plan to use it in the future, the most relevant T&C change to our company is the new API usage fee of the 25c per 1000 operations.

We agree the API shouldn't be entirely free – zero cost leads to resource squandering, the "tragedy of the commons".

Rather than charge for every unit, we favor the current system, where API users receive an appropriate included number of units based on ad spend, with the option to purchase more as needed.

An airline ticket comes bundled with permission to bring two standard pieces of luggage -- travelers needing more bags or weight can pay for it. By this policy, the airline offers a strong suggestion to the appropriate amount of luggage to bring on a trip.

By granting API users an appropriate included quota, with an option to buy more, Google sends a strong message as to the recommended number of API calls per month per dollar of advertising. This implicit message is powerful and important guidance.

Charging for every unit could encourage less sophisticated advertisers to reduce their usage too severely, yielding reduced advertising efficiency, which in the long run hurts the advertiser and thus Google.

Regardless of the structure of the fee, we strongly suggest Google tunes the fee to cover its marginal costs of providing API calls, rather than treat the API fees as profit center. Google wins when advertisers buy more ads, and advertisers buy more ads when those ads work, and ads work when advertisers use the bidding platform intelligently and appropriately.

Our hunch is the 25c per 1000 rate turns the API into a profit center, rather than simply covering costs. Lower this rate -- encourage advertisers to bid smarter -- in turn, they'll buy more advertising.

Finally, we suggest that Google adopt a fair and uniform API fee formula across all advertisers: agency or in-house, home-brew or commercial tool, partner or non-partner, large or small account. When a web company becomes a dominant market unto itself, it comes under public and regulatory scrutiny to provide a level playing field for market participants. (For example, to the best of our knowledge, all EBay sellers pay the same listing fees and commissions, regardless of their annual gross merchandise sales.)

To summarize:

  1. Agree: charge for API over-use
  2. Provide an included reasonable usage number of quota units based on spend
  3. Price the API to cover costs, not run as a profit center
  4. Uniform and public API pricing for all API users

Thanks for soliciting our opinion on these changes.


2 Responses to "Google API: Charges, Usage Fees, T&C changes"
APIs are a designed to streamline and automate user interfaces. We are encouraged to implement APIs to reduce errors, provide dynamic system integration and reduce resource overhead. The Google API charges, though initially a modest cost, do add up. On the surface, the Google API cost can be justified. If you consider that their advertising marketplace is an organic, market driven machine; any overhead costs should probably be isolated so as to not disrupt that equilibrium. Being that the Adwords user interface is free to use; it is an unfair disposition for API users. The proposal of imposing limits and penalties for over-usage makes sense in principle; however, the devil is in the details. Creating a cost and quota structure that is defensible and long-term sustainable is challenging. Amazons Web API's are a great model to follow. They have done a great effort to reducing everything down to a cost per CPU hour.
ann wang says:
I never heard of any large company to charge API usage for ads inventory to Google with no support, no good documentation, not even an email or contact number. How to estimate how many units and functions? ridiculous stipulation to charge developers money!

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