API (Application Programming Interface)

Definition

The programmatic interface that lets developers send prompts to an AI model and receive responses. Model vendors like OpenAI, Anthropic, and Google monetize primarily through API access, priced per token.

Why it matters

APIs are how AI models become products. Without an API, a model is a research artifact; with one, it is a revenue-generating platform. The design of an AI API, its pricing, rate limits, latency, and feature surface, determines who builds on it and how. API economics are the foundation of the entire AI business model: every wrapper app, every enterprise integration, and every agent framework depends on API reliability and pricing. Understanding API economics is not optional for anyone building with AI. Your margin is their API call.

In practice

OpenAI's API serves billions of requests daily across hundreds of thousands of developers. Anthropic's Messages API supports streaming, tool use, and vision in a single endpoint. Google's Gemini API and AWS Bedrock provide multi-model access through a unified interface. The trend toward standardized API formats (OpenAI-compatible endpoints) has created a de facto standard that even open-source serving frameworks like vLLM and Ollama implement, making it easy to swap between providers, which in turn increases competitive pressure on pricing.