MIDAS SHARE TIPS: Unleash a profit as tech firm Bango keeps cash flowing
In 2019, consumers worldwide spent almost £100 billion on subscriptions of one sort or another. By last year, that had more than doubled to £210 billion and experts suggest total expenditure will exceed £450 billion in the next three years.
Individual company fortunes may wax and wane. But overall the so-called subscription economy is booming as more and more firms offer their wares via monthly payments.
Music and movies led the way. Now, however, we can subscribe to online yoga and language lessons, loo roll, cheese and chocolate deliveries, even dog TV, designed to entertain Fido while his owners are out.
As the list grows, it becomes hard to remember what you have bought, how much you paid for it and whether you still want it. Bango helps to make the process easier.
Based in Cambridge, Bango is a clever technology company that makes it simpler for businesses to charge for goods and customers to pay for them.
Taking the lead: The £210 billion-a-year subscription sector includes TV channels to keep dogs occupied
The firm was founded in 1999 by entrepreneur Ray Anderson and initially focused on developing tools that would allow consumers to pay for music and video games through their mobile phone bill.
Anderson still chairs Bango, but the firm has expanded significantly, as citizens the world over increasingly use mobile phones for almost every aspect of daily life, from shopping to binge-watching Ted Lasso.
Bango customers include Amazon, Google and Microsoft, as well as major telecom companies, from Vodafone to Samsung to America’s AT&T.
Last year alone, Bango processed more than £7 billion of payments made by consumers across the globe, from Tokyo to Frankfurt to New York City. The firm also bought its main rival, Docomo of Japan – a deal expected to turbocharge sales and profits. Now Bango has a new division that allows consumers to see all their subscriptions in one place and makes it easier to add, cancel, upgrade or downgrade each and every one of them.
For mobile phone firms, the service helps attract and retain customers, as they can offer discounts or special offers along the way. For businesses, Bango’s network of telecom customers gives them access to millions of potential new subscribers and sophisticated data so they can offer personalised recommendations to consumers.
The service, known as super-bundling, has been taken up by several firms, including Verizon, one of the US’s largest phone groups, and leading Australian player Optus. Others are expected to follow suit.
A recent survey showed that 88 per cent of large phone firms here and in the US plan to offer super-bundling in the near future and Bango is the dominant player in the market, described by customers as leaps and bounds ahead of rivals.
Other companies are interested in Bango’s technology, such as Japanese employee benefits specialist Benefits One which is using it to provide added extras for millions of workers.
A first half trading statement last week was upbeat and brokers expect Bango to deliver substantial growth, with revenues forecast to rise 73 per cent this year to $49 million (£38 million) and a further 16 per cent in 2024 to $57 million.
Bango was loss-making last year, but profits of $3.4 million are expected this year, soaring to $14 million next year.
The firm, which reports in dollars because most of its contracts are denominated in the US currency, also won the first ever King’s Award for Enterprise for International Trade earlier this year.
Midas verdict: Bango shares are at £1.89, having been at more than £2.50 at the beginning of the year. The fall reflects wider unease about technology stocks rather than Bango’s own growth potential. Supportive brokers believe Bango shares could hit £3.15, as the subscription business expands and the group moves into profit. Buy.
Traded on: AIM Ticker: BGO Contact: bango.com or 01223 617 387