Do shares in Bango still qualify for IHT relief now that you have a US OTC listing?
OTCQX is not a dual listing, so does not impact IHT relief qualification. The trades still settle in London, which is one of the advantages of launching on OTCQX as it enhances the liquidity of Bango shares to the benefit of all shareholders. The fact the shares settle in London is part of the reason you may not see much volume reported against Bango on OTCQX despite trades originating from the platform.
The Digital Vending Machine is a key area of growth, can you talk a bit more about the growth trajectory of this business and what sort of market share you expect?
On growth trajectory, we previously planned to exit 2023 with $7M ARR. After closing 2022 with $5M ARR, we increased that 2023 guidance to $10M so you can already see the growth trajectory in the numbers but there is even more opportunity to go for.
The most prominent opportunity is in the telco space and that is our near-term focus. The digital vending machine fits perfectly in the intersection being created by a growing subscription economy that is being increasingly delivered by resale channels (like telcos). We want Bango to be the platform that allows that delivery.
The telco space is exciting for a few reasons. Firstly, they are good at bundling services, secondly, they are existing Bango customers, and thirdly, they have what is now a very dull utility service that they need to differentiate. The way to differentiate is to bundle third party services.
In terms of the market share we’re aiming for, we are targeting the majority of the telco market, because we want to be the one platform that dominates that intersection. That’s why markets like the US are so important because it is one of the leading economies. It is also a market where a standard platform makes a lot of sense because the streaming providers don’t want to have to integrate and implement their services across multiple platforms in order to reach the market.
There are adjacent markets we are targeting such as fintech, energy & employee benefits and we’ve seen some early traction in these sectors, as demonstrated with the Benefit One deal announced earlier this year.
Your headcount has grown significantly over the past year but mainly in technical & support. Why has marketing headcount not increased to help you take advantage of the opportunity available to you? Can you explain the balance of your staffing and why sales & marketing spend has not increased?
The headcount increase is largely due to the acquisition, so that has a big impact on the mix. When we talk about technical staff, that includes research & development – which is integration and delivery as well. Sales and marketing has increased, particularly as a result of the acquisition. The teams are larger than before and we’re investing more in new marketing campaigns. Jupiter recently published a piece of Bango-sponsored research on the ‘superbundling’ opportunity and we released a research piece earlier in the year about the subscriptions market in the US.
However, when we are thinking about engaging customers for newer products like the Digital Vending Machine, marketing is more a support activity. We have relationships with the vast majority of target customers because they are already a customer of another Bango Product. Marketing in this area is not used generate the leads, it’s a case of helping educate them on the market. That’s why you’ll see we are doing a joint panel discussion with Verizon in the US. We did a joint panel with Optus from Australia at Mobile World Congress. That sort of core marketing and, of course, speaking with operators is really one of the most valuable activities. It helps the other operators understand the appeal and opportunity of our products and fast track the business case so they fall through the sales funnel more quickly.
One of the unique things about Bango is the fact we’ve built a platform and an ecosystem which means we get extra help on promoting and marketing our products. For example, our big merchants, whether it’s Amazon, Google, Duolingo, McAfee etc, when they promote their products to mobile operators they bring our product with them because they are already integrated with us and vice versa with the operators and bringing on new merchants.
Could you explain why the acquisition came with a larger amount of cash than was announced at the time of the acquisition?
We closed 2022 with c.$12M in cash. €3.1 of Docomo Digital cash was in place when we completed the acquisition. We ended the year with a higher than expected cash balance as some of the costs that were expected to transpire as part of the deal were allocated as upcoming costs. We managed to reduce those costs and therefore keep money within our business. There was also some restricted cash, related to a discontinued business, in that $12M that should be discounted as it is not cash that is accessible to Bango. c.$3.2 million of cash that was within the accruals is allocated against the restructuring cost.
Can you talk about how the process of obtaining consent from your payment partners for the use of EUS is going?
It is going well. Clearly, we have recently acquired a large number of new partners following the acquisition, so the process of obtaining consent takes a little time. We continue to make progress and are focused on the key markets where there is high demand for Audience data, so; Korea, Western Europe, US & Japan.
Bango Audiences – when will you break out revenue?
There are a few variables – the first is that we are going through the process of getting those data agreements. Any data that is in the market compromises our negotiating position with operators on the fee we pay them for use of the data, so it is important the bulk of that is done to the final degree before we break out Audiences revenue.
The other point is that Bango Audiences is now doing two additional things it wasn’t doing previously. It is supporting the Digital Vending Machine, so there’s an increased linkage there between the two businesses which can make it harder to break out the revenue specifically attributed to Bango Audiences but the good news is it’s growing the collective Bango revenue.
The other point is that we are selling Audiences to advertisers marketing higher up the marketing funnel. We want to try and get to a reasonable scale in that area because we are using agencies as a sales channel, and, again, it impacts our ability to discuss fees with agencies if there is too much data in the market. Breaking out Audiences revenue is certainly something we are conscious of doing as soon as it is commercially viable to do so.
Why don’t you break out constant currency?
The challenge at the moment is that if we if we pin down spend in Japanese yen, people know which of our customers are in Japan and can use our data as a proxy to work out their performance in those regions. For that reason, we have made a commitment to all of our merchants not to reveal how their revenue is going. If we started to break out Japan based revenue every six months, which you could do by knowing it transacted in Japanese yen, it would mean that people could use that data to predict the performance of some of our customers. At some stage, we will have enough customers in each currency to avoid that problem. But it is a problem we have today, and we receive a lot of pressure from our merchants not to provide that information.