Case Study: how to grow when your core market shrinks

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Summary: Only the fit survive market changes, and evolving the business model to adapt is key. Strategy lessons for telcos and vendors alike from Boungiorno, a content aggregator that evolved to beat the shrinking portal services market.

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As traditional revenue streams come under threat, operators are starting to look at new business models. But how should they make the transition? The case of Buongiorno provides some clear lessons as it has successfully moved from being an aggregator of basic mobile content to a strategic partner of operators seeking to deepen their retailer capabilities and their customer intimacy.

For Operators, building such CRM capabilities will help maximise the value of the existing business model and provide a stepping-stone to new sources of value. It will provide operators with substantial near-term revenue growth as they will be able to offer more appropriate content and applications to their customers and will open up a $125+ billion medium-term growth opportunity by helping other upstream service providers interact more effectively and efficiently with their customers via a Telco platform.

Buongiorno's success

Buongiorno has successfully circumvented the decline experienced in ringtones and other portal services since 2007, it's core market only a few years ago, and moreover has continued to grow.


As well as promoting greater customer interaction, Buongiorno has employed a systematic and sustained acquisition strategy that has clearly added substantial revenue to the business over the last several years (including around €130m from iTouch in the 2008 figures). It is not realistic therefore to suggest that all of Buongiorno's success is derived from its increased customer interaction strategy.

Nonetheless, the company has successfully repositioned itself from being a content aggregator to being a strategic partner of operators seeking to deepen their retailer capabilities and their customer intimacy, and fundamentally changed it's position and role in the value chain - which is the key strategy parallel for Telcos.  We analyse Boungiorno's repositioning and transformation strategy below.

Background History - the fundamental problem of growing in a shrinking market

Buongiorno was founded in 1999 as a content aggregator for the mobile market, providing a distribution platform for developers and media companies, and acting as a wholesale provider for operators. The company usually ‘white labels’ its services so that operators can use their own brand when retailing to their customer base. It initially focused on basic mobile content such as music, games, video, wallpaper and ring tones. Buongiorno enjoyed strong growth in its early years. However, by 2004 management could see that revenue growth from many of these basic services was going to slow down for four principal reasons:

  • Alternative ways of downloading content for free or more cheaply – peer-to-peer networks on PC followed by sideloading on to the device;
  • Excessive pricing of ring tones by operators and other retailers;
  • Hidden subscription charges for some services – reflected in fines being levied on some content providers;
  • More sophisticated devices that enabled, for example, ring tones to be created from music stored on the device.

The company therefore then faced the same problem as operators increasingly do now: how to generate greater  revenues from end users at a time when revenue growth from core services was starting to dry up?


Strategic Solution: A focus on being a better retailer

In 2004-5, Buongiorno management decided that in addition to the existing assets (content and a technology platform) the company needed to grow its CRM and marketing capabilities. This would better enable them to support operators seeking to strengthen their relationship with customer bases that were spending increasing amounts of time and money off-portal. In so doing, they would also provide pull through for Buongiorno content.

The company had launched an advertising and digital promotion company, Buongiorno Marketing Services, in 2002 but the focus of the much bigger Consumer Services company now also shifted towards database building and management, CRM and consultancy, all underpinned by a flexible technology platform.

The first part of the strategy was to introduce CRM capabilities to the content platform so operators could better understand the buying patterns of their customers. This enabled operators to automatically provide targeted advertising and marketing, including personalised offers based on users' past purchasing and click histories. Buongiorno thereby aimed to help operators be more relevant to their customers to encourage on-portal activity and increase loyalty, resulting in:

  • Increased ARPU;
  • More inactive users converted into buyers;
  • Reduced customer churn;
  • Reduced off-portal activity.

Example Operator Retail Campaigns: O2 'Extras' and 'Top-Up Surprises'

Buongiorno helped O2 in the UK create O2 Extras, an opt-in ‘club’ that provides update texts, bespoke advertising, free downloads and location-based services for its 1m+ members. The results below are clearly impressive, showing a tangible difference in value for O2 between O2 Extra customers and the rest.

To read the rest of the article, covering:-

  • Results from 02's Extras Programme 
  • Boungiorno's Interactivity Strategy
  • O2's Top-Up Surprises Programme
  • Future Strategy Options - moving to a 'two-sided' business model
  • Implications and lessons for Telcos and Vendors

...Members of the Telco 2.0TM Executive Briefing Subscription Service please see the full article here. Non-Members, please see here for how to subscribe, or email or call +44 (0) 207 247 5003.