This Week In AI Business: The Booming API Economy [Week #23-2025]
The API economy is the underlying layer that enables AI to be embedded everywhere.
Indeed, while the consumer side of AI, or the adoption of tools like ChatGPT, Gemini, Perplexity, and DeepSeek, makes most of the noise, a significant transformation in computing infrastructure is happening via the API economy.
That is why understanding these layers - Infrastructure, Model, API Distribution, Application Integration, and End-User Experience - provides crucial insights into where value is created, captured, and potentially disrupted.
The interconnections between layers create network effects and platform dynamics that determine competitive advantage while emerging technologies like edge computing and agentic AI promise to reorganize the entire structure.
This analysis examines how each layer operates, evolves, and influences the broader AI economy.
The weekly newsletter is in the spirit of what it means to be a Business Engineer:
We always want to ask three core questions:
What’s the shape of the underlying technology that connects the value prop to its product?
What’s the shape of the underlying business that connects the value prop to its distribution?
How does the business survive in the short term while adhering to its long-term vision through transitional business modeling and market dynamics?
These non-linear analyses aim to isolate the short-term buzz and noise, identify the signal, and ensure that the short-term and the long-term can be reconciled.
