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Vodafone business model: Increasingly ‘two-sided’

Sumary: Vodafone chief Vittorio Colao presented investors with a vision aligned with core Telco 2.0 principles: providing new asset-based enablers to upstream customers, embracing openness, and integrating with social networks.

Here's a fascinating slide from Vodafone CEO Vittorio Colao's presentation to a Goldman Sachs investors' conference in New York this week. Note that Vodafone's future strategy seems to be getting more and more Telco 2.0 - they want "efficient pipes", i.e. a broadband network that's cheap to run in the radio, transport, and core elements, "smart pipes" as wholesale services, and top-level products for the consumer market.

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The first is a prerequisite of any telco strategy, which doesn't make it any less important. The second and third roughly represent the two sides of Telco 2.0 - one facing the end user with traditional integrated services, and the other facing the upstream customers with disaggregated APIs providing access to key telco capabilities. Upstreamers who wish to sell to the end users can benefit from telco services, and the telco can profit from this trade, without there being a direct relationship between the telco and the end user.

Further, as new applications emerge to meet user needs, an app store or Litmus-like model can allow the operator to bring the most compelling ones on board and into the suite of services they market to end users. It's well worth noting that Colao's remarks during the presentation were enthusiastic about third-party partners, and he suggested that they might include developers who used only their billing and charging infrastructure.

It's also well worth noting that, according to Colao, social network applications are outstripping video as a driver of traffic growth on Vodafone's networks; a timely reminder that it's communication, not "content", that is the industry's fundamental value proposition.

Of course, it's not going to be easy to convert the biggest, baddest vertically integrated telco on the block into a Telco 2.0 operator. But we've been following their impressive progress closely - here, here, and here. There is, after all, $125bn in incremental revenue up for grabs.

We're supporting this industry evolution through our continuing research into the subtleties of 2-sided business models, and most of all, through our forthcoming Use Cases project, which aims to document a wide range of two-sided opportunities in practice. Later this year, we're going to be debating these issues with strategy executives from the entire industry, including several from Vodafone Group, at our European and American Executive Brainstorms.

Here's a presentation that should tell you more about the Use Cases project: