Home > Telco 2.0™ > Research & Analysis > The 2-Sided Telecoms Market Opportunity
  The 2-Sided Telecoms Market Opportunity
Realising Growth from the 'Platform Play'
Publication Date: March 2008
Subscription services, the traditional business model for fixed and mobile operators, are under pressure in all core products in mature markets – voice, messaging, broadband access.
Thus far, operators have looked to replicate this business model in adjacent markets. Fixed operators have moved into mobile markets; mobile and fixed operators have sought to make money in fixed broadband. Operators are also charging users for new services, such as content delivery, with the launch of IPTV and mobile TV. The larger players in mature markets are aggressively expanding into emerging markets, such as China and India, where subscriber growth is still available.
But, as we have shown in the preceding report to this on Broadband Business Models 2.0, this activity is not enough. All mature markets are becoming more competitive and emerging market growth will slow in the next few years. A new business model is required: one where operators make money from new customers rather than exclusively from end-users. For background on the 2-sided telecoms market opportunity, click here for a short presentation.
Some operators have begun to look at one 2-sided market: advertising. We cover this at length in our report Telcos' Role in the Advertising Value Chain. Many, however, have concluded that on its own it is not big enough to provide substantial revenue growth (or indeed to fill the gap left by declining subscription revenues).
This report is designed to help readers understand the nature and size of this new business model opportunity in its entirety. It looks beyond the advertising opportunity to other areas where operators could provide value and generate revenue. It lays out the key principles and strategies for success for fixed and mobile operators and recommends specific actions for moving forward.
This report uniquely answers 5 key questions:
- How big is the two-sided business model opportunity for operators?
- Which are the priority markets/industries where they should look to compete?
- Is each market discrete, requiring a separate strategic approach, or is there an opportunity to develop a coherent cross-market two-sided market play?
- How should operators go about realising the opportunity?
- How does the two-sided model fit with existing retail/wholesale market and organisation structures?
Background Context
Our belief is that the total two-sided market opportunity is of huge strategic importance for operators. Advertising is only one step for operators to add value to upstream customers (government, advertisers, merchants, application developers, content owners etc.) and end users (businesses and consumers):
- Identity, Authentication & Security: Management of user access to products and services.
- Advertising, Marketing Services & Business Intelligence: Provide merchants and advertisers with customer profiling information and contextual/behavioural data to enable targeted advertising. Ad-serving capabilities. Performance metrics.
- E-Commerce Sales: Managing of sales transaction.
- Order Fulfilment – Off-line: Processing of order and logistic/delivery support.
- Order Fulfilment – On-line: Electronic content delivery – games, music, TV, video, etc.
- Billing & Payments: Billing for products and services and cash collection.
A common set of underlying enablers is required to enable upstream players to interact effectively with downstream end-users:
- Breadth and depth of customer information – behavioural, demographic, contextual, financial, social interactions, commercial relationships -- anchored to robust foundation of user identity management processes and services
- Deep customer relationships – including the ability to bill customers and take payments, manage sensitive private data; a trusted brand
- A response channel for end-user customers so that they can interact with upstream customers
- Ability to package up access or content delivery with data, devices and applications and bill distribution costs to upstream partners (not ISP-based users) ("free postage and packing")
- Environment and platform within which operators can use personal data to personalise services on behalf of third parties without necessarily sharing that data externally
- The ability to offer interoperability across networks and operators so that scale can be developed and the network effect can come into play
- Strong end-user customer service support to deal with post-transaction issues and technical enquiries
- Sales, support and commercial framework for upstream partners
Operators have the necessary assets and competencies to build such a platform. Many exist in-house and where they do not there is an opportunity to develop organically or acquire or partner. Operators are also familiar with a model which requires high up-front investment and seeks to generate strong returns once scale has been developed and incremental investments are low - building and exploiting networks follows this path. The two-sided play has a similar risk profile.
This report explores where and how other platform players have been successful (Akamai, Google, Amazon, Ebay, Monster, iTunes, The London Stock Exchange, Betfair, Maersk (logistics) and identifies a way forward for operators:
- Develop a business case which considers more than just short-term market (advertising)
- Collaborate to develop interoperability between Telcos (similar to SMS or ATM system in financial services). Rich wholesale model
- Invest heavily in building the commercial capabilities to make this work particularly focusing on the details of the business model for upstream and downstream relationships
- Build a best-in-class CRM capability FAST:
1. So the right services can be delivered to end-users
2. So the right customer information can be given to upstream players to enable them to provide the right services
Who Should Read
This report is for anyone who has a direct or indirect interest in the future success of the Telecoms, Media and Technology market. This should be essential reading for:
- CxOs, Strategists, Marketers, Product Managers, Technologists, Operations Managers, Regulators within
- Fixed and Mobile Operators, Network Equipment Providers, IT Vendors, Media Companies, Industry and Government Bodies
Key Questions Answered
This report seeks to help operators and vendors maximise future opportunities from operator services by answering the following questions, in addition to those above:
- What is driving pressure on operators’ current business model?
- How quickly will this become a significant problem?
- Why are current strategies inadequate?
- How big is the future opportunity?
- How much investment should operators make in the two-sided opportunity?
- Which market should operators develop first?
- What should be the strategy for further successes?
- What assets are required for success?
- Which do operators currently possess and how should others be gained – organic development vs. acquisition vs. partnership?
- Who should operators partner with?
- What can be learned from the successes and failures of other platform players?
- What is the real threat or opportunity offered by Google and Microsoft?
- How should operators move forward?
- What role needs to be played by individual operators, partners and industry bodies?
- What are the regulatory implications and issues presented by this new strategy?
Contents
1. Executive Summary
2. Introduction
- Current Telecom Operator Challenges
- Current Operator Strategies
- Introducing 2-sided Markets
- Role of this Report
3. Telco Two-Sided Business Model Options – Scope to Grow & Grow
- Defining the Scope - Top Down Approach
- Key 2-sided Market Options
- Conclusions & Implications
4. Sizing the Platform Opportunity – United we Stand; Divided we Fall
- Sizing the 6 Horizontal Capabilities:
- Identity, Authentication & Security
- Advertising, Marketing Services & Business Intelligence
- E-Commerce Sales
- Order Fulfilment – Off-line
- Order Fulfilment – On-line
- Billing & Payments
- Sizing the Top 4 Verticals:
- Financial Services
- Government & Education
- Wholesale & Retail Distribution
- Printing & Publishing
- Every Day Business Process Examples from Other Industries
- Sizing the Every Day Business Process Market
- Fit with Existing Telco Skills and Assets
5. Case Studies – Telecoms is lagging other Industries
- Case Studies from Telco
- Case Studies from Other Industries
- Google
- Amazon
- Ebay
- Monster
- iTunes
- London Stock Exchange & Betfair
- Maersk (logistics)
- Implications for Sizing the Platform Opportunity
- Other Conclusions & Implications
6. Conclusions & Recommendations
- Develop a long-term Strategy & Business Case
- Collaborate to Develop Interoperability
- Build Commercial as well as Technical capabilities
- Build CRM capability
7. Summary
8. Glossary & Appendix
Pricing and Payment Options
* Dedicated license for 1 named individual.
** License for a group of up to 5 employees within a named organisation.
*** License for all employees within a named organisation.
NOTE: UK VAT at 17.5% is chargeable on orders from all UK customers and from non VAT registered customers in other EU Member States. Please supply your EU VAT registration number or add 17.5% UK VAT to your remittance.
Accompanying Workshop Module
STL is expert is running in-house workshops to help teams process the ideas contained in the report.
We cover issues such as:
- How does the 2-Sided Telecoms Market Opportunity fit into the bigger Telco 2.0™ picture?
- What's the best 2-Sided strategy for your business?
- How to plan and implement 2-Sided propositions and business models?
- What are the organisational and process implications of moving forward?
- How to build upon your existing ad-funding activities?
- Who to partner with and how to work with partners?
- What are the longer-term opportunities going forwards?
- What are the practical steps needed to migrate your business?
Our ‘Mindshare’ approach combines stimulus presentations, projective exercises and collaborative technology to help your teams create consensus on what needs to be done.
Workshops can be half day, full day, or 1.5 days, on site at your offices.
Price on Request.
For information about purchasing and payments, please contact us at contact@telco2.net or call + 44 (0) 20 3239 7530.
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Updated 14 April 2008
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