telco 2.0 - introduction to 2-sided markets
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Business Model Innovation in the Digital Economy
The Two-Sided Telecoms Business Model
Martin Geddes, Chief Analyst, STL Partnersmartin.geddes@stlpartners.com
www.telco2.net
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Core messages
1. Future growth: Reliant on extending business model
2. New ‘platform’ business model grows from existing core consumer business
3. Moves from one-sided to two-sided market model
4. Execution requires partnership and collaboration
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Many successful two-sided market players
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Why you should pay attention
$375bn telco opportunityc.15% of global telecoms revenues in 2017
High-margin, high-growth business
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Introducingtwo-sided markets
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Betfair: Beats one-sided rivals
Bookies Punters
Joins two groups who want to interact
Punters
vs.
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Google: Two-sided master
Advertisers Audience
FREE!
Need to attract users that upstream party values
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Chicken and egg problem: need an audience
Buildaudience
Introduce revenue model
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Mastercard: Balancing two sides
“Acquiring” (Merchant)
Banks
“Issuing” (Customer)
Banks
Mirror of termination fee debate in telecoms
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A New Telco Proposition?
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New Telco Value Propositions
Now:
Bundled voice,messaging, video and
internet accessSupply Chain Platform
Personalised LogisticsServices for Data
Retail RelationshipPlatform
Media & Content Services ProviderECONOMIES OF SCOPE
ECONOMIES OF SCALE
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1. New Retail Platform
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Telco: traditional one-sided retail model
INVENTORY RETAILER VALUE PROP
“Connected lifestyle”
“Affordable fashion”
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Two-sided retail models
Rent shelf spaceProvide business intelligence
& payment services
Rent portal spaceProvide payment and
customer care services
No inventory risk No inventory risk
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Telco media services supply chain platforms
ODI
Innovation World
Web21C
Litmus
Live! + Betavine
Content Provider Access
What needs to change:
1.Emulation of leading retailers (e.g. Amazon, Tesco)
“Reviews, recommendations & rewards”
2.Investment in analytics, CRM
3.Permission marketing approach
“Trade and persuade” model for customer data and access
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2. Supply Chain Platform
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1. Distribution
CollectionMulti-Modal TransportDelivery
B2B VASTax & Duty ManagementDocumentation ManagementDenied Party ScreeningScheduling & Supply Chain ManagementSystems IntegrationTracking & Monitoring
DistributionCollectionMulti-Modal TransportDelivery
Supply Chain Logistics: Physical World
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Telco 2.0: New Wholesale + VAS
Wholesale DistributionCapture/OriginationMulti-Modal TransportDisplay/Termination
B2B2C VASIdentity, Authentication, SecurityAdvertising, Marketing ServicesEcommerceOrder FulfilmentBilling & PaymentsCustomer Services
Telco (2.0)
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New Wholesale Distribution
Platform
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Current Approach: One-sided Bulk Wholesale
Other Telcos (e.g. MVNO)
Consumers
$Enterprises
SMEs
Multi-Nationals
Upstream Customers
Revenue Side 1
Downstream Customers
Revenue Side 2
YourTelco
Customer relationship is with someone else
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Future Approach: Fine-grained Wholesale
Consumers
YourTelco
Partners can re-package minutes and messages to achieve higher margins
Who
lesa
le A
ggre
gato
r
£15/month
£20/month
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New Wholesale – Video & Data
Connectivity included with
the application
Tomorrow:Multi-modal delivery
Machine-to-machine
Wholesale VPN products
Packaged apps “comes with data”
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New B2B2C Value Added Services
Platform
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Help customers interact more easily
Developers
Retailers
Government
Brand Advertisers
Content Owners
Telco – Retail
Customers – Revenue Side 1
Customers – Revenue Side 2Barriers
Identifying Other Party, Authorisation & Security
Promoting Offer
Conducting transaction
Fulfilling Order
Billing & Payment
Service & Support
Millions of Customers
Thousands of Segments
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Telcos assets well suited
Developers
Retailers
Government
Brand Advertisers
Content Owners
Telco – Retail
Customers – Revenue Side 1
Customers – Revenue Side 2Barriers
Identifying Other Party, Authorisation & Security
Promoting Offer
Conducting transaction
Fulfilling Order
Billing & Payment
Service & Support
Telco Capabilities & Assets
Millions of Customers
Thousands of Segments
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Telcos have many valuable but latent data assets
MY PERSONAL DATA
MY STUFFMY IDENTIFIERS
MY INTERACTIONS
MY RELATIONSHIPS
MY CONTEXT
MY DEVICES
Name
Address Gender
ProfilePreferences
SIM SoftSIM
Serial NumberDevice details
Location Presence
On/OffRoaming
Pictures Videos
CalendarAddress Book
Bank School
FriendsWorkplace
Browsing History
.mobi domains QR Codes
MY CREDIT
Bad debt Demographics
Average balance
Number SIP address
IP AddressEmail
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Current Approach: Media & Advertising…
TelcoPlatform
Ecosystem
Brand Advertisers
Consumers
$ $Enterprises
SMEs
Multi-Nationals
Upstream Customers
Revenue Side 1
Downstream Customers
Revenue Side 2
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• Revenue from both sides: advertiser and users
Advertising & Marketing Example: Blyk
Source: STL Partners’ estimates and calculations; core assumptions not articulated here
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…but market is too small!
Revenue, $ Billions
20062010
$2,000bn
$2,490bn
$425bn $533bn
$30bn $62bn
Fixed and MobileTelecoms
Global advertising
On-line and mobileadvertising
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Upstream customers want more than just ads
• Authentication is crucial to Betfair’s business
• Betfair pays around $22 to verify the identity of each new customer
• Slow and expensive process
“There’s a tendency when building a platform business to do too much yourself - I come back to payments, I come back to authentication. People in this room [at the Telco 2.0 Executive Brainstorm in March] can do this for me. Operators have the skills and the relationships and I am willing to pay them for this service.”
Ed Wray, Chairman and Founder, Betfair
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Open up more markets for telco platform
$
Developers
Retailers
Government
Brand Advertisers
Content Owners
Telco – Retail
Millions of Customers
Thousands of SegmentsContent Owners
Telco Platform
Ecosystem$
B2B2C VAS
Distribution
Upstream Customers Downstream Customers
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Example: Customer Service
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Customer Service Example: The Problem
UserCall centre
Se habla español… Your name… Credit card security
code…
I’m sorry but David is unable
to take your call right now…
Freephone 1.0
Voicemail 1.0
INBOUND CALLS
OUTBOUND CALLS
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Customer Service Example: The Solution
“Live voicemail”
Form fill
Payment services
Identity & authentication
UserCall centre
Enter your PIN to release your name
and address to Acme Corp, and
authorise payment for £188.
Your delivery is scheduled for 7 July. To change
your order, press one.
Freephone 2.0
Voicemail 2.0
INBOUND CALLS
OUTBOUND CALLS
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Example:Identity
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Identity & Authentication Example: Banking
Operator
Transaction Request
Authentication RequestAuthentication Request
Digital Signature
Signature Validation
Transaction Result
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Example:Billing & Payments
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Billing and Payments Example: Paypal =
Safe payment solution: customer and merchant data never leaves Paypal
Compound Annual Growth
Rate: 39%
$$
Merchant Consumer
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Billing and Payments Example: Mobile =
Greedy operators killing the goose?
Source: www.gamemobile.co.uk
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Value of the opportunity
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$375bn from New Wholesale & VAS Platforms?
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B2B VAS revenue c. $125bn*
Identity, Authen-
tication & Security
Advertising Marketing Services & Business
Intelligence
E-Commerce
Sales
Order Fulfilment - Offline
Order Fulfilment –
Online (Electronic
content)
Billing & Payments
Customer Support
* Total W Europe & US Market, 2017: $125 Billion
* See new report, Sizing the two-sided market opportunity for a full analysis. http://www.stlpartners.com/telco2_2-sided-market/index.php
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Opportunity into perspective
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Summary
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Three different parts to the future Telco Operator
ConsumersRetailer $$
SMEs
Enterprises
Public Sector
1.Developers
E-tailers
Government
Brand Owners
Content Owners
Telco (Retail)
$$Wholesale Platform
Upstream Customers
2.
VAS Platform $$$$
3.
Downstream End Users
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Next Steps for Operators
Now
Develop a pilot/proof of concept with a major name upstream customer:
1.Build credibility in marketplace and internally
2.Road test demand for one or more service capabilities
3.Capture platform functional requirements
4.Validate business models and pricing
5.Create basis for volume estimates
Next 18 months
1. Develop a ‘joined-up’ strategy and business case for the new wholesale and VAS businesses
2. Engender Board-level support for the 3 businesses and the 2-sided business model
3. Create a separate dedicated organisation for VAS business
4. Develop expertise in two-sided business models and pricing strategies
5. Build downstream capabilities: CRM, data mining & data protection/privacy to support all 3 business models
6. Build upstream capabilities: Aggregation, distribution and integration partners for new wholesale and VAS businesses
7. Establish a process for operator collaboration
THANK YOUMore info on this topic at
www.telco2.net/blogwww.stlpartners.com/telco2_research-analysis.phpwww.telco2.net/event/
Business Model Innovation in the Digital Economy
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