telco 2.0 - introduction to 2-sided markets

Business Model Innovation in the Digital Economy

The Two-Sided Telecoms Business Model

Martin Geddes, Chief Analyst, STL [email protected]

www.telco2.net

- 2 -© STL Limited • Proprietary and Confidential

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


Many successful two-sided market players


Why you should pay attention

$375bn telco opportunityc.15% of global telecoms revenues in 2017

High-margin, high-growth business


Introducingtwo-sided markets


Betfair: Beats one-sided rivals

Bookies Punters

Joins two groups who want to interact

Punters

vs.


Google: Two-sided master

Advertisers Audience

FREE!

Need to attract users that upstream party values


Chicken and egg problem: need an audience

Buildaudience

Introduce revenue model


Mastercard: Balancing two sides

“Acquiring” (Merchant)

Banks

“Issuing” (Customer)

Banks

Mirror of termination fee debate in telecoms


A New Telco Proposition?


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


1. New Retail Platform


Telco: traditional one-sided retail model

INVENTORY RETAILER VALUE PROP

“Connected lifestyle”

“Affordable fashion”


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


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


2. Supply Chain Platform


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


Telco 2.0: New Wholesale + VAS

Wholesale DistributionCapture/OriginationMulti-Modal TransportDisplay/Termination

B2B2C VASIdentity, Authentication, SecurityAdvertising, Marketing ServicesEcommerceOrder FulfilmentBilling & PaymentsCustomer Services

Telco (2.0)


New Wholesale Distribution

Platform


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


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


New Wholesale – Video & Data

Connectivity included with

the application

Tomorrow:Multi-modal delivery

Machine-to-machine

Wholesale VPN products

Packaged apps “comes with data”


New B2B2C Value Added Services

Platform


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


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


Thousands of Segments


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


Current Approach: Media & Advertising…

TelcoPlatform

Ecosystem

Brand Advertisers

Consumers

$ $Enterprises

SMEs

Multi-Nationals

Upstream Customers

Revenue Side 1

Downstream Customers

Revenue Side 2


• Revenue from both sides: advertiser and users

Advertising & Marketing Example: Blyk

Source: STL Partners’ estimates and calculations; core assumptions not articulated here


…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


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


Open up more markets for telco platform

$

Developers

Retailers

Government

Brand Advertisers

Content Owners

Telco – Retail


Thousands of SegmentsContent Owners

Telco Platform

Ecosystem$

B2B2C VAS

Distribution

Upstream Customers Downstream Customers


Example: Customer Service


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


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


Example:Identity


Identity & Authentication Example: Banking

Operator

Transaction Request

Authentication RequestAuthentication Request

Digital Signature

Signature Validation

Transaction Result


Example:Billing & Payments


Billing and Payments Example: Paypal =

Safe payment solution: customer and merchant data never leaves Paypal

Compound Annual Growth

Rate: 39%

$$

Merchant Consumer


Billing and Payments Example: Mobile =

Greedy operators killing the goose?

Source: www.gamemobile.co.uk


Value of the opportunity


$375bn from New Wholesale & VAS Platforms?


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

http://www.stlpartners.com/telco2_2-sided-market/index.php


Opportunity into perspective


Summary


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


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

http://www.telco2.net/blog

http://www.stlpartners.com/telco2_research-analysis.php

http://www.telco2.net/event/

telco 2.0 - introduction to 2-sided markets

Business

revenue model

bn telco opportunity

new telco proposition

services platform

business model innovation

new telco value propositions

customer data

customer care services