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It gives the API provider the opportunity to let others take the risk and build a market for a potential feature. Then if the market is there they just cut access to the API for the others and and build that feature into their own app. This way the API provider always reaps the benefits and pushes back any app before they start to compete directly.

And while less developers will be incentivized to use the API seeing this behavior, very few can actually afford to launch a proper competitor. So plenty will continue do develop with this philosophy in mind, knowing that if it's successful they will be cut off but hoping they make enough and then just pivot to the next thing.