Strategy 2.0: $375 Bn ‘two-sided’ market opportunity update (Part 2)

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Summary:  An update on the potential of new ‘two-sided' business models to increase shareholder value, leverage customer data assets, and create a valuable position in delivering consumer services. (October 2009, Executive Briefing Service, Telco 2.0 Transformation Stream)


The first part of our review (October 2009), Strategy 2.0: The $375 billion opportunity - update (Part 1), focused on the macro broadband distribution aspects of the ‘two-sided' telecoms business model opportunity. As a preview of our Executive Brainstorms in EMEA (4th-5th Nov) and AMERICA (9-10th Dec), we highlighted some of the key strategic issues that need to be addressed in order to create sustainable new business models at the intersection of the telecoms, media and technology sectors.

This article, the second of the series, covers:

  • Introduction - key questions to resolve re the ‘Two-Sided' telecoms business model
  • Strategy & Finance 2.0 - Role of Business Model Innovation in Increasing Shareholder Value
  • Customer Data 2.0 - Exploiting telcos' most valuable asset
  • Consumer Services 2.0 - Re-engaging with the 'digital generation'

Introduction - key questions relating to the ‘Two-Sided' Telecoms Business Model

Our regular readers know that ‘Two-sided' telecoms business models have the potential to provide enterprises of all sizes across multiple industries with more efficient ways of interacting with their customers. In return, telecoms companies could generate $375 Bn of new revenue, $250 Bn in new voice and broadband distribution services, and $125 Bn in new B2B platform value added services.

'Two-sided' Telecoms Business model

 The Telco 2.0 ‘Two-Sided' Business Model

Earlier this year we presented the following framework for thinking about this new telecoms ‘platform':


In discussions with the industry we identified a set of key questions to consider:


We've since structured our research and event agendas around the topics outlined below.

The rest of this article covers:

  • Strategy & Finance 2.0 - Role of Business Model Innovation in Increasing Shareholder Value
  • Customer Data 2.0 - Exploiting telcos' most valuable asset
  • Consumer Services 2.0 - Re-engaging with the 'digital generation'

Subsequent articles will cover:

  • Digital Money 2.0 - Mobile Wallet and Payments in Mature Markets
  • Digital Advertising 2.0 - Re-energising the marketing industry
  • Broadband Access 2.0 - Economic challenges/opportunities of mobile broadband
  • Media 2.0 - Licensing Content over Broadband
  • Digital Home 2.0 - M2M opportunities in Healthcare & Utilities
  • Voice and Messaging 2.0 - Comms-Enabled Business Processes for SMEs
  • Cloud Computing 2.0 - Enterprise-grade Cloud Networking
  • Pilot 2.0 - Fast-tracking Telco 2.0 Services using Legacy Systems
  • App Stores and APIs - Cross-Operator Models for Monetisation

Strategy & Finance 2.0 - Role of Business Model Innovation in Increasing Shareholder Value

Earlier in the year, in our popular series on telcos and the economic crisis, we reviewed the strategic problems and opportunities facing the Telecoms-Media-Technology (TMT) sector from the perspective of the Financial Markets. We've also been working on the business case for ‘two-sided' telecoms business models and been tracking some of the M&A activity.

While the Credit Crunch and subsequent recession has adjusted our view on how the ‘two-sided' telecoms business model could play out, it has also served to increase the need for enterprises in all vertical markets to increase their efficiency and streamline their costs using communications enabled business processes ("CEBP" - NB there will be a section on this in the next report).

Telecoms has also become a relatively attractive investment sector, as other sectors have suffered.

However, while being a ‘defensive' sector over the last year has been a good position for telcos to find themselves in, the danger is that moving forward telcos are treated as ‘utilities' by the major investment funds.  Will investors ever again buy a significant growth story for this sector? Are ‘smart pipe' or ‘experience provider' positions really credible, or will investors force telcos to focus on network access and leave service innovation to others? What should the price-earnings ratio for a telco be? And with governments taking a more proactive position on planning ‘national communications infrastructure', could telcos' best investment return be on political lobbyists rather than app stores or mobile advertising...?

The Telco 2.0 Initiative is working with trade bodies, financial analysts, and investment banks to show the potential of new telecoms and media business models with the aim of defining more exciting and credible growth stories. The first panels at our upcoming events focus on the connection between shareholder value and new business models.

Customer Data 2.0 - Exploiting telcos' most valuable asset 

Telcos have a highly valuable but under-exploited asset: the vast hoard of social network data thrown off by their daily operations. We call the opportunity to make use of this asset "the customer data revolution".

Banks, retailers and, indeed, Google already exploit customer data in an acceptable and secure way. Telcos actually have even more valuable data as categorised in the diagram below:


The opportunity to exploit telco customer data to improve the efficiency of 3rd party business processes is real enough. ‘Upstream' enterprises consistently tell us that they would pay telcos good money to be able to take advantage of this data. But the clock is ticking; the window of opportunity is closing. The falling price of GPS hardware and Google's excellent location services are eroding the value of telco location data. Rival communications platforms such as Facebook are gathering huge amounts of user data, and enjoy the active support and participation of their users.

There are, of course, considerable privacy issues to be managed. Many telcos have been scared off by high-profile PR traumas, such as Phorm. However while telcos dawdle, other innovators are making use of this asset. Two leading players - Sense Networks and Atigeo - have been helping us with our new ‘use case' work and will be stimulating both upcoming Telco 2.0 events.

Consumer Services 2.0 - Re-engaging with the 'digital generation' 


How can service providers address the increasingly digitally-literate and independent-minded customers that our Serving the Digital Generation report identified? The spectacular success of ‘platform businesses' like Facebook, QQ in China and Marketplace suggest that the classical retailing model is no longer a sufficient guide. How can we go beyond retailing and enable more self-sustaining market spaces?

Earlier in the year we introduced the Telco 2.0 Customer Participation Framework, and looked at the business models of media darlings Twitter and how Google makes money from YouTube.


We've also been investigating other important market developments, such as Vodacom's Grid, Google's strategy, Spotify's music service, the world of Second Life and MMORPG's (Massive Multiplayer Online Role Playing Games) like EveOnline, and how/if new telco services like Vodafone 360 can generate real long-term value. All of this activity demonstrates the wave of innovation possible in new consumer communications services. But thinking effectively about ‘value' and ‘control' is critical to define a successful business model.

If you'd like to join the debate, there's still time to register for our next Executive Brainstorms in EMEA (4th-5th Nov) and AMERICA (9-10th Dec). You can also email us at or call us on +44 (0) 207 247 5003. (NB if you can't travel, distance participation packages containing the outputs are available.)