The healthcare industry is increasingly going digital, with artificial intelligence helping diagnose conditions and patients with wearable smart devices being cared for at home.
But are these digital health initiatives actually improving patient care? And are they contributing to an already stressful environment?
Becker's reached out to healthcare leaders on the IT and clinical sides to get their perspectives on how the industry's digital shift is affecting patients and providers. In part one of this two-part series, we asked executives how technology had improved the patient experience.
In this second installment, Becker's asked digital executives:
How do you believe the clinical side perceives your organization's digital health initiatives, and what are you doing to ensure the initiatives are improving patient care?
Tony Ambrozie. Senior Vice President and Chief Digital and Information Officer for Baptist Health South Florida (Coral Gables): Physicians look after the well-being of patients — including easy access to care and medical information and overall good experiences. For example, getting into and out of an encounter. Digital experiences for consumers help with exactly that if A) they work well for patients and B) they preferably help clinicians in some way or another, but definitely do not create unnecessary challenges and overhead for them.
For digital experiences for physicians, there is a huge legitimate appetite for adoption to simplify their work, especially with EHR burnout and lack of specific collaboration tools. But again, the expectation is that any technology must solve real needs and must work well, which many solutions in the past have not done; as such, there is a healthy "trust but verify" skepticism until proven.
Sure, in the current challenging economic situation, with inflation and labor shortage challenges for all healthcare providers in the U.S., some digital investments have to be prioritized ahead of others, but involving everybody in that balanced prioritization is the way to gain support.
Tom Andriola. Chief Digital Officer at University of California Irvine Health: The pandemic exposed medical professionals to many types of technology-enabled interactions, many out of necessity. Reactions have varied. Some want to continue those practices, and some want to put them in a drawer and return to the practices of 2019.
For leaders who are attuned to the changes going on in the U.S. healthcare market, they clearly see the opportunity to have a robust strategic discussion around how these new models for virtual care, remote patient-monitoring, "'hospital at home," etc., will impact both the patient experience as well as the healthcare delivery model as we move toward more value-based care contracting.
We're using the opportunity to take a step back, evaluating our digital health initiatives that were implemented during the pandemic and engaging in a process of strategic planning — thinking about the future of our health system strategically and operationally. The conversation has brought together clinical, business and administrative leaders discussing how digitally enabled care fits into our strategic plan for current delivery capabilities and the future services that we see being expanded or coming online. The conversation has always included balancing quality, cost and access.
But post-pandemic healthcare is now also working with new definitions — expectations — around patient preference and experience. We also are evaluating the impact artificial intelligence technologies will have. It has been a good exercise for the organization in that it has forced the discussion and allowed us to reexamine our assumptions.
Zafar Chaudry, MD. Senior Vice President, Chief Digital Officer and CIO at Seattle Children's: At Seattle Children's we follow two paths to ensure clinical, patient, parent and caregiver stakeholders are actively and consistently engaged, and we also measure the satisfaction of our IT services using the Net Promoter Score. Our current NPS is +38.
For clinicians, we have our digital patient access, care and engagement team that works directly with them to provide digital solutions to help with their workflows. We ensure patient care is improving by measuring clinical outcomes using real-time dashboards — built on Microsoft Power BI and underpinned with IBM Netezza data warehousing technology — while multiple improvement projects are driven by our data lakes.
For our patients, parents and caregivers, we have formed an advisory group known as Parent Partners IT Children's Hospital, or PPITCH, to help us define and drive our patient-facing digital strategy. This group, combined with IT staff members, meets regularly to collaborate on how we can Improve the digital and technology experience for our patients and families.
Michael Hasselberg, PhD, RN. Chief Digital Health Officer at University of Rochester (N.Y.) Medical Center: One of the benefits of working at an academic medical center is the culture of inquisitiveness and creativity. We encourage our clinicians to bring forward the problems they are encountering, innovate and be part of the solution to advance care.
From the very beginning of our health system's digital transformation strategy, we made it a priority to include clinicians across many different disciplines in the governance process. It is our clinicians who prioritize our digital health initiatives and identify where early wins can be gained. In partnership with our informaticists, the front-line clinicians guide the integration of new digital tools into their current workflows and the electronic health record that they use daily.
Being data-driven and evidence-based are also pillars in academic medicine. To ensure that our digital health initiatives are actually improving patient care, we have invested significant data analytic resources around our strategy, while many of the researchers across our institution are studying the impact of these initiatives on health disparities and clinical outcomes. We have built data dashboards that provide feedback to our clinical, operational and technical teams that generate the insights needed to quickly iterate when we are not meeting our initiative goals. There is no question that healthcare is quickly moving into the digital age, and our clinicians at the University of Rochester Medical Center are engaged and excited for the future of patient care.
William Holland, MD. Senior Vice President of Care Management and Chief Medical Informatics Officer at Banner Health (Phoenix): Over the course of the first two years of the COVID-19 pandemic, we focused heavily on initiatives that helped support our goals of keeping our healthcare workers and patients safe. This included a significant increase in both inpatient and outpatient telehealth deployments, services and usage which allowed patients and clinicians to provide and receive care in the ways that worked best for them.
We are now in a different phase of the pandemic, one where we remain mindful of COVID-19 and also are intensely focused on driving organizational recovery from the impact of the pandemic. Our digital initiatives are transitioning from a COVID-19 focus to one of improving the overall experience of our clinicians through device integration, efficiency through documentation redesign, clinical improvements through advanced analytics and connectedness of care for our patients. Throughout all of this, we have been intentional about involving our front-line clinicians in identifying opportunities, leading and participating in design teams and creating an environment that welcomes open and transparent feedback.
We also leverage a combination of process, balance and outcome measures in each area to ensure that we are making progress in our work and that it has a meaningful and measurable impact on the quality and safety of care we provide.
Claus Jensen. Chief Innovation Officer of Teladoc Health: Traditional healthcare and digital health solutions are increasingly intertwined, and this is a trend that will be accelerating. Instead of asking which type of solution to use when, would it not be a better question to instead ask how we create a hybrid care model that brings the best of both and gives patients choice in a fully integrated and natively whole-person care model?
Our clinical leadership sees our digital health initiatives as the way to reach more people in more meaningful ways. And the way to make sure these initiatives Improve patient care is quite simply to work closely together and ensure that we fuse clinical and digital science effectively. We jointly believe that health equity, clinical efficacy and cost-effectiveness can all be addressed by the right blend of care components and resources.
Aaron Miri. Senior Vice President and Chief Digital and Information Officer at Baptist Health (Jacksonville, Fla.): We just went live on a brand new Epic electronic health record which is the direct result of listening to our caregivers on what they need to keep elevating the level of healthcare delivery. That's on top of investments in modernizing the technology stacks across the health system and ensuring that we block and tackle as much as we pursue items like healthcare artificial intelligence, ambient voice technology and other whiz-bang new stuff that are all the rage.
What I appreciate about Baptist Health is the laser focus on delivering the very best patient care possible versus an alternative approach of trying to act like a healthcare product vendor that dabbles in patient care. When you operate with that type of focus where you listen, respect, and engage in providing the highest quality patient care, it's only then that you can strive toward very advanced digital medicine therapies.
Aaron Neinstein, MD. Vice President of Digital Health at University of California San Francisco Health and Senior Director of the UCSF Center for Digital Health Innovation: We view digital health as a set of tools in our care delivery tool kit at UCSF that can help us advance quality care, Improve experience, Improve access to care and be more efficient in operations, allowing us to serve patients better.
Our digital health team works as part of cross-functional teams that include roles like operations, marketing, design, data science, engineering and product management, giving each team the full complement of expertise and perspectives to design, develop and deploy solutions that will positively impact these outcomes.
For example, for specialty referrals and patient scheduling, by deploying an improved patient web and mobile experience and more efficient back-end operations for handling referrals, we simplified and removed barriers to patients accessing care. Or, in deploying virtual care programs in lung transplant, inflammatory bowel disease and cancer patients receiving chemotherapy, leveraging wearable devices and mobile symptom assessment, our teams aimed to Improve patient experience, reduce their need to travel for in-person care and increase the frequency of touchpoints and engagement with care teams, which we hope will have measurable positive impacts on care quality outcomes.
One major advantage of thinking digitally is the goal of thoughtful and deliberate measurement built into every workflow and solution. So, a critical foundation for any of our programs is that each cross-functional team identifies the patient journey, builds in an ability to measure what is happening and continually analyzes those data so that we can see the outcomes and also see which points of friction the patient is experiencing that we can further optimize for. By baking detailed measurements into each program, we can also monitor the data on whether digital health tools are working as we hope, to reduce disparities in care, whether different populations are accessing or using the tools in different ways, or whether measurable gaps in use across populations appear.
Danny Sama. Vice President and Chief Digital Executive at Northwestern Medicine (Chicago): Our clinicians see the great opportunity for digital health to positively impact patients and themselves. However, they are wary about a potential added burden to their clinical workflows. We are constantly thinking about where and how to integrate digital tech into clinician workflows as seamlessly as possible. And every digital solution we consider is grounded in a value proposition to both patients and clinicians in the form of improved experience, increased efficiency or reduced risk.
Eric Smith. Senior Vice President and Chief Digital Officer at Memorial Hermann Health System (Houston): Our clinical providers are eager to adopt our digital initiatives, from online scheduling to virtual appointments — as long as the technology truly makes the experience better, easier and more efficient for our patients. With that in mind, we're working on initiatives designed to help patients have seamless, frustration-free experiences.
One of these is a platform that will allow patients to interact with us more digitally — by text, for instance — to remove the friction they might feel when trying to get information. We'll be able to remind them about preventive screenings, wellness exams and other regular appointments, encouraging them to schedule this routine care and follow up when necessary.
Finally, we're continuing to expand the options for patients to use our enhanced virtual health services when it makes sense for them to do so — helping them get the care they need in the way that is most convenient and readily available to them.
Jason Szczuka. Chief Digital Officer for Bon Secours Mercy Health (Cincinnati): BSMH's digital business (Accrete Health Partners) is unique in that we closely partner with our clinical teams to prioritize, validate and scale our digital initiatives so that we can ensure we solve existing problems, complement our clinicians' workflows and facilitate better experiences for our patients. We are proud of how our clinicians positively perceive and lean into our initiatives.
Prat Vemana. Senior Vice President and Chief Digital Officer at Kaiser Permanente (Oakland, Calif.): At Kaiser Permanente, we are building on our strong foundation as an innovator and continuously expanding our digital platform to deliver more personalized, seamless experiences for our 12.6 million members. Our clinical teams at Kaiser Permanente view our digital health initiatives as an integrated effort. Digital is applied in every area of our organization — from consumer engagement, physician workflows and optimization, to the clinical care setting. Our physicians and clinical teams are involved in designing our digital patient experiences and applying digital to their work in order to provide exceptional, integrated patient care.
To ensure our digital health tools are improving patient care, stakeholders from both the digital and clinical sides are involved in the entire process when developing digital experiences for our members. Kaiser Permanente's unique integrated model facilitates this collaboration and ensures that the right experts are at the table to think about the patient digital experience holistically. Program management, product managers, experience designers, clinical experts and health plan experts are involved from strategy to execution, empowering them to design and deliver successful digital solutions for both the patient and physician. The partnership and collaboration between these groups is essential to ensuring our members' needs and preferences are addressed by digital tools.
Kaiser Permanente is using artificial intelligence and machine learning technology to Improve the health outcomes for our members and patients. We are ahead of the curve on delivering machine learning-enabled solutions at the point of care. We gain rapid adoption of these solutions because we have cultivated strong relationships between our physicians, members and patients.
For example, our Advance Alert Monitor tool analyzes electronic health record data for medical-surgical inpatients, proactively identifies those with a high likelihood of clinical deterioration and activates a rapid response care team to develop a care plan. This is completed through a predictive model that uses algorithms created from machine learning and data from more than 1.5 million patients. A 2020 Kaiser Permanente study showed that our Advanced Alert Monitor tool is associated with statistically significant decreases in mortality [with between 550 to 3,020 lives saved over four years], hospital length of stay and intensive care unit length of stay, which shows us the positive impact our digital tools have in patient care and outcomes.
In 2019, the Trump administration brokered a deal allowing T-Mobile to buy Sprint as long as it helped Dish Network stand up a new 5G network to keep the number of national wireless carriers at four and preserve competition in the mobile market. You can say a lot about that deal, but it happened. And now, in 2022, Dish’s network — which is called Project Genesis, that’s a real name — is slowly getting off the ground. And it’s built on a new kind of wireless technology called Open Radio Access Network, or ORAN. Dish’s network is only the third ORAN network in the entire world, and if ORAN works, it will radically change how the entire wireless industry operates.
I have wanted to know more about ORAN for a long time. So today, I’m talking to Tareq Amin, CEO of Rakuten Mobile. Rakuten Mobile is a new wireless carrier in Japan. It just launched in 2020. It’s also the world’s first ORAN network, and Tareq basically pushed this whole concept into existence.
Tareq’s big idea, an Open Radio Access Network, is to break apart the hardware and software and make it so that many more vendors can build radio access hardware that Rakuten Mobile can run its own software on. Think about it like a Mac versus a PC: a Mac is Apple hardware running Apple’s software, while a PC can come from anyone and run Windows just fine or run another operating system if you want.
That’s the promise of ORAN: that it will increase competition and lower costs for cellular base station hardware, allow for more software innovation, and generally make networks faster and more reliable because operators like Rakuten Mobile will be in tighter control of the software that runs the networks and move all that software from the hardware itself to cloud services like Amazon AWS.
Since Rakuten Mobile is making all this software that can run on open hardware, they can sell it to other people. So Tareq is also the CEO of Rakuten Symphony, which — you guessed it — is helping Dish run its network here along with another network called 1&1 in Germany.
I really wanted to know if ORAN is going to work, and how Tareq managed to make it happen in such a traditional industry. So we got into it — like, really into it.
Okay, Tareq Amin, CEO of Rakuten Mobile. Here we go.
Tareq Amin is the CEO of Rakuten Mobile and the CEO of Rakuten Symphony. Welcome to Decoder.
Thank you, Nilay. Pleasure being with you.
I am excited to talk to you. Rakuten Mobile is one of the leaders in this next generation of wireless networks being built and I am very curious about it. It is in Japan, but we have a largely US-based audience, so can you explain what Rakuten is? What kind of company is it, and what is its presence like in Japan?
The Rakuten Group as a whole is not a telecom company, but mostly an internet services company. It started as one of the earliest e-commerce technology companies in Japan. Today, it is one of the largest in e-commerce, fintech, banking, travel, et cetera. These significant internet services were primarily built around a massive ecosystem in Japan, and the only missing piece for Rakuten as a group was the mobile connectivity business. That is why I came to Japan, to help build and launch a disruptive architecture for its mobile 4G/5G network.
Let me make a really bad comparison here. This company has been a huge internet services provider for a while. This is kind of like if Yahoo was massively successful and started a wireless network.
Correct. I mean, think of Amazon. What would happen if Amazon launched a mobile network in the US? This is the best analogy I could give, because Rakuten operates at that scale in Japan. This company with a disruptive mindset, disruptive skill set, disruptive culture, and disruptive organization endorsed my super crazy idea of how we should build this next-generation mobile infrastructure. I think that is where I attribute most of the success. The company’s DNA and culture is just remarkably different.
So it’s huge. How is it structured overall? How is Rakuten Mobile a part of that structure?
Of all the entities today, I think the founder and chairman of the company, Mickey [Hiroshi “Mickey” Mikitani], is probably one of the most innovative leaders I have ever had the opportunity to work with. I cannot tell you how much I enjoy the interactions we have with him. He is down to earth and his leadership style is definitely hands-on; he doesn’t really operate at a high level.
The fundamental belief of Rakuten is around synergistic impact for its ecosystem. The company has 71 internet-facing services in Japan — we also operate globally, by the way — and you as a consumer have one membership ID that you benefit from. The points/membership/loyalty is the foundation of what this company works on. Regardless of which services you consume, they are all tied through this unique ID across all 71.
The companies and the organizations internally have subsidiaries and legal structures that would separate all of them, but synergistically, they are all connected through this membership/points/loyalty system. We think it is really critical to grow the synergistic impact of not just one service, but the collective services, to the end consumer.
Today, Rakuten Mobile is a subsidiary of the group, and Rakuten Symphony is more focused on our platform business. It focuses on the globalization of the technology and architecture we have done in Japan, by selling and promoting to global customers.
When you say Symphony, do you mean the wireless network technology or the technology of the whole company?
Symphony itself is much more than just wireless. Of course, it has Edge Cloud connectivity architecture, the wireless technology stack for 4G/5G, and life cycle management for automation operations. In August of last year we launched Rakuten Symphony as a formal entity to take all the technology we have now and promote it to a global customer base.
I think one of the reasons you and I are having this conversation is because Dish Network in the United States is a Symphony customer. They are launching a next-generation 5G network and I have been very curious about how that is going. It sounds like Symphony is a big piece of the puzzle there.
To deliver you a bit of background, maybe we should start with the mobile business in Japan, because it is the foundation this idea initially started from. So, I would tell you, I have had a super crazy life. I am really blessed that I had the opportunity to work with amazing leaders and across three continents so far. My previous experiences before coming to Japan, which involved building another large greenfield network in India called Reliance Jio, have taught me quite a bit.
To be very frank with you, it taught me the value of the US dollar. When you go into a country where the economy of units — how much you could charge a consumer — is one to two US dollars, the idea of supply chain procurement and cost has to change. You have to find a way to build cost-efficient networks.
The launch of Reliance Jio was very successful and became a really good Cinderella story for the industry. I am extremely thankful for what Jio has taught me personally, and I have always wondered what I would do differently if I had a second opportunity to build a greenfield.
To deliver everybody listening to this podcast some perspective, the mobile technology industry has been about nothing but hardware changes since the inception of the first 1G in 1981. You just take the old hardware and replace it with new hardware. Nothing has changed in the way we deploy networks when the Gs change, even now in 2022. It is still complex and expensive, and I don’t think the essence of AI and autonomy exist in the DNA of these networks. That is why when you look at the cost expenditures to build new technology like 5G, it is so cost-prohibitive.
It was by coincidence that I met the chairman and CEO of Rakuten group, Mickey Mikitani, and I loved everything that Rakuten is all about. Like most people, I didn’t necessarily know who Rakuten was at the time. I only knew of them because I love football (soccer) and they were a big sponsor of FC Barcelona.
When Mickey started explaining the company fabric to me, about its DNA and internet services, I thought about what a significant opportunity he would have if he adopted a different architecture in how these networks are deployed — one that moves away from proprietary hardware. What would happen if we remove the hardware completely and build the world’s first, and only, cloud-native software telco?
Let me be really honest with you, this was just in PPT at the time. I conceived the idea thinking about what I would do differently if I were granted another opportunity like Reliance Jio. One of the first key elements I wanted to change is adopting this unique cloud architecture, because nobody had really deployed an end-to-end horizontal cloud across any telco yet.
The second element — which you have probably heard of because the industry has been talking about it excitedly — is this thing called Open RAN, which is the idea of disaggregating hardware and software. The third element, my ultimate dream, is the enablement of a full autonomous network that is able to run itself, fix itself, and heal itself without human beings.
This is the journey of mobile, and I think this is what differentiates us so much. I can’t say I had a recipe that defined what success would look like, but I was obsessed. Obsessed with creating a world-class organization with a larger ecosystem, and getting everybody motivated about this concept that did not exist four years ago.
Now here we are, post commercial launch. The world is celebrating what we have done. They like and enjoy the ideas around this disaggregated network, and they love the concept of cloud-native architecture. What I love the most is that we opened up a healthy debate across the globe. We really encourage and support what Dish is doing in the United States by deploying Open RAN as an architecture. I think this is absolutely the right platform to build resilient, scalable, cost-effective mobile networks for the future.
That is the high-level story of how this journey started with a super crazy, ambitious idea that nobody thought would succeed. If you go back four years to some of the press releases that were published, I cannot tell you how many times I was told I’m crazy or that I’m going to fail. As I said, we became fanatic about this idea, and that is what drove us all to emotionally connect to the mission, the objective. I am very, very happy to see the results that the team has achieved.
I want to take that in stages. I definitely want to talk about Jio, because it is a really interesting foundational element of this whole story. I want to talk about what you have built with O-RAN, and how that works in the industry. I also want to talk about where it could go as a platform for the network providers. But I have to ask you the Decoder question first. You have described your ideas as super crazy like five times now. You are the CEO of a big wireless provider in Japan, and you are selling that stuff to other CEOs. I have to ask you the Decoder question. How do you make decisions?
I know this might sound a little controversial, but I have to tell you. In any project I have taken, even from my early days, we have always been taught that you have to have a Plan A and a Plan B. This has never worked for me. I have a concept I call, “No Plan B for me.”
I don’t go in thinking, “This project will fail, therefore I need to look at alternatives and options,” so I am absolutely not panic about making big, bold decisions. I live by a basic philosophy that it is okay to fail sometimes, but let’s fail fast so we can pick ourselves up and progress. I am not saying people shouldn’t have Option A and Option B. I just feel that, for me personally, Option B might deliver my mind the opportunity to entertain that there is an escape clause. That may not necessarily be a good thing when working on ambitious projects. I think you need to be committed to your beliefs and ideas.
I have made some tough calls during my career, but for whatever reason, I have never really been panic about the consequences of failure. Sometimes we learn more from the mistakes we make and from having difficult experiences, whether they are personal or professional. I think my decision-making capability is one that is very bold, trying to make the team believe in the objectives that we are trying to accomplish and not worrying about failure. Sometimes you just need to be focused on the idea and the mission. Yes, the results are important, but that is not the only thing I am married to.
This is how I have operated all my life, and so far, I am really happy with some of the thinking I have adopted. I am not saying people should not have options in their lives, but this idea of “no Plan B” has its merits in certain projects. How can you adapt your leadership style when approaching projects, rather than thinking, “What is the other option?”
I think with deploying millions upon millions of dollars of mobile broadband equipment, it often feels like you have got to be committed. Let’s talk about that, starting with Jio. If the listeners don’t know, Reliance Jio is now the biggest carrier in India. It is extremely popular, but it launched as a pretty disruptive challenger against other carriers of 4G like Airtel. You just gave it away for free for like the first six months, and it has been lower-cost ever since. This is not the new idea though, right? It is not the open hardware-software disaggregated network that you are talking about now. How did you make Jio so cheap at the beginning?
I will tell you a one-minute prelude. I was sitting very comfortably in Newport Beach when I got a call from my friend. He asked me if I would be interested in going to India and being part of a leadership team to build this ambitious, audacious idea for a massive network at scale, in a country that has north of 1.3 billion people. My first reaction was, “What do I know about India? I have colleagues, but I have never really been there.”
It seemed like an interesting opportunity, and he encouraged me to go meet the executive leadership team of Reliance Jio. I remember flying to Dallas to have a conversation with three leaders that I didn’t really know at the time. One of them in particular, I have to tell you, the more he talked, the more I just wanted to listen. I was amazed by his ambition for what he wanted to achieve in the country.
What was his name?
Mukesh Ambani. I have learned quite a bit from him. India was ranked 154th in the world in mobile broadband penetration before Reliance Jio. The idea was, “Can we assemble an organization that brings ubiquitous connectivity anywhere and everywhere you go across the country? Can 1.3 billion people benefit from this massive transformation that offers cutting-edge services?”
At the time, LTE was the service that Jio launched with. I was really amazed by this ambition and how big it was. I said, “This is an opportunity I just cannot pass up.” It was much bigger than the financial reward; it was an opportunity of learning and understanding. I truly enjoy meeting different cultures. The more I interact with people from different parts of the world, the more it fuels the energy inside me.
So I picked myself up and I moved to India. I landed in the old Mumbai airport, and when I powered on my device, I saw a symbol I hadn’t seen in the US for a decade — 2G. I knew the opportunity Jio had if we did this right. I mean, think about it. 2G. What is really the definition of broadband? 256 kilobits per second? That’s not internet services. The foundation of Jio started with this.
I will tell you the big things that I have learned. Most people think the way you achieve the best pricing is through a process called request for proposals and reverse auctions, to bring vendors and partners to compete against each other. Sometimes there is a better way to do this. You find larger companies where the CEOs have emotion and connection to the idea that you are building, and are willing to work with you as a true partner.
One of the key, fundamental pillars I learned from Jio is that not everything is about status quo. How you run supplier selection, vendor selection, or requests for proposal, everything starts from the top leadership of partners you select. They need the ability to connect with the emotional journey — because it is an emotional journey after all — to do something at the scale of what Jio wanted to do. One of the biggest lessons I learned is the process of selecting suppliers who are uniquely different.
In terms of building a network at a relatively low cost, I will explain how this Open RAN idea came in. During my tenure at Jio, I really started thinking that in order to build a network at scale, regardless of how cheap your labor is, you need to fundamentally change your operating platforms for digitization. Jio would have north of 100,000 people a day working in the field, deploying sites. How do you manage them — deliver them tasks, check on the quality of installation they do, and audit the work before you turn up any of the bay stations, sites, or radio units?
I have driven this entire digitization and the digital workflows associated with it to connect everybody in India, whether it is Jio employees, contractors, or distributed organizations. Up to 400,000 people at any instant of time would come to the systems that my team has built. That changed everything. It changed the mentality of how we drive cost efficiency and how we run the operations.
This is where I would tell you that big building blocks started formulating in my mind around automation and its impact to operational efficiency if you approach it with a completely fundamental point of view from the current legacy systems you find in other telcos. Because of the constraint of financial pressure on what we call the average revenue per user, the RPU, which is the measurement of how much you charge a mobile customer, I wanted to find a different way to deploy the network.
When you build a network like Jio that has to support 1.3 billion, it’s not just about these big, massive radio sites you deploy. We need things called small cells, which are products that look like Wi-Fi access points, but you deploy lots of them to achieve what we call a heterogeneous design, a design that has big and small sites to meet capacity and coverage requirements.
I prepared an amazing presentation about small cells to the leadership team of Jio and I thought I kicked it out of the park. But then I was asked a question I have never heard in my life. Imagine! I am a veteran in this industry and have been doing this for a very long time. Someone said, “Tareq, I love your strategy. Can you tell me who the chipset supplier is for the small cell product?” I’m like, “What are you talking about?” I have never been asked such a question by any operator that I have ever worked for outside of India.
I was told, “Look, Tareq, money doesn’t grow on trees in India. You need to know the cost. To know the cost, you must understand the component cost.” That was the first building block. I said, “Okay, next time I come to this meeting, I am not going to be uneducated anymore.”
I took on a small project which, at the time, did not seem audacious to me. I said, “Look, if I go to an electronics shop in the US, like a Best Buy, I could buy a Wi-Fi access point for $100. If I buy an enterprise access point from a large supplier, it costs $1,000.” I wanted to know what the difference is, so I hired five of the best university graduates one could ask for, and I asked them a trivial question. “Open both boxes, write the part numbers.” I had a really great friend at Qualcomm, and I remember this gentleman saying, “Tareq, you are becoming too dangerous.”
Right. You are the network operator. You’re their margin.
That is where everything started clicking for me. The chairman of Jio was not afraid to think the way I wanted to think, so I told him, “Look, I want to build our own Wi-Fi access point. If we buy an access point at $1,000, I am now convinced I could get you an access point at sub-$100.” A year later, the total cost of the Wi-Fi access point we built in Jio was $35.
This delta between $1,000 and $35 translates to a substantial amount of money saved, and it started by disaggregating everything. Jio enabled its cost structure, and it was able to offer it for free because it had an amazing partnership with suppliers that secured great business terms. Simplification of technology, LTE only, and an amazing process for network rollout all played huge factors in lowering the cost and economics for Jio.
Let me ask you more about that. Jio is a transformative network, and is now obviously the most popular in India. You were able to offer a much lower-cost product than the traditional cell providers with what sounds like very clever business moves. You went and negotiated new kinds of supplier agreements and you said, “We have to actually integrate our products, find lower chips at cost, and make our own products. We have to build a new, efficient way to deploy the network with our technicians.”
To your credit, those are excellent management moves. At their core though, they are not technology moves. Now that you are onto Rakuten and saying you are going to build O-RAN, that is a technology play. Broadly, it sounds like you are going to take the management playbook that made Jio work, and now you are lowering costs even further with the technology of O-RAN — or you are proving out a technology that will one day enable further lower costs.
There were two things I could not do in Jio, and it’s not really anybody’s fault, the timing just wasn’t right. If you look at building a mobile network, I think everybody now more or less understands that you need antennas, bay stations, radio access, and core network infrastructure. But unless you are in this industry, you don’t realize the complexity of the operation tools that one needs in order to run and manage this distributed massive infrastructure.
The first thing I wanted to change in Jio is the traditional architecture. This management layer is called OSS [operation subsystems], and it is archaic, to put it politely. If you work in an adjacent vertical industry such as hyperscalers, an internet-facing company, you will be scratching your head saying, “I cannot believe this is how networks are managed today.”
Despite the elegance of the Gs and changing from one to five, the process of managing a network is as archaic as you could ever imagine. The idea of a true customer experience management is aloof; it is still a dream that nobody has enabled. The first thing I wanted to do is to change the paradigm of having thousands of disaggregated toolsets to manage a network into a consolidated platform. It was an idea that I couldn’t drive in Jio. I will tell you why that is even more important than Open RAN. These building blocks are for new architecture, the next generation of OSS.
If we build these operation platforms on a new modern architecture that supports real-time telemetry, the idea is to get real-time information about every element and node that you have into your network. Being able to correlate them and apply AI machine learning on top of them requires modern-age platforms. It is so critical to my dream.
Our success will not be celebrated because of Open RAN, but the grander vision of having Rakuten talked about as a company that does what Tesla has done for the electric industry in terms of autonomy. Autonomy in mobile networks is an absolutely amazing opportunity to build a resilient and reliable network that has better security architecture and does not need the complexity of the way we run and manage networks today. That was the first building block.
The impact of these big building blocks is massive. Here is the second thing I couldn’t do in Reliance Jio at the time. If you look at a pie chart on the cost structure for mobile networks, you may say, “Where do we spend money?” Regardless of geography, regardless of country, 70 to 80 percent of your spending always goes into this thing called radio access. Radio access today has been a private club that is really meant for about four or five companies, and that’s it. There is no diversification of the supply chain. You have no option but to buy from Ericsson, Nokia, Huawei, or ZTE. Nobody else could sell you the products of radio access.
The radio access products are the base stations?
Correct. Those are the base stations.
That is the components of the cell tower.
Yes, and they contribute to about 70 percent of the capex [capital expenditure]. They are the one area that no startup has ever embraced and said, “You know what? Why don’t we try to disaggregate this? Why don’t we start to move away from the traditional architecture for how these base stations are deployed? Instead of running on custom hardware, custom ASICs, let’s use true software that runs on commodity appliances equivalent to what you would find inside data centers.”
This concept has been talked about, but nobody was willing to take the risk in any startup. Maybe I was wrong that your job is secure if you pick a traditional vendor. That is what I was thinking through, four years ago.
This is like “Nobody ever got fired for buying IBM.”
Something like that.
Let me ask you this. Is it because the initial investment is so high? There are not many startup wireless networks in the world. When they do start, they need an enormous amount of capital just to buy the spectrum. Are the stakes too high to take that kind of risk?
I think as an industry, we make the mistake of not rewarding and supporting startups the way we should. Our ability to incubate and build a thriving ecosystem that is built on new innovations, ideas, and startups is still a dream. I do not think anyone in telecom would argue with that. The reality is that everybody wants to see it happening, but we are just not there yet.
It was complex to do what we did in Japan. It was not simple, nor was it easy. When you have a running network carrying massive amounts of traffic, of course there are risks that you are going to have to take. The risk in that case is ensuring that you don’t disrupt your running base with poor quality services. Maybe the fear in people’s minds is that this technology is not ready, or integrating it into their networks is too complex, or they don’t have the right skillset to go into a software-defined world where they will need to upscale or hire new organization.
You said that right now the four vendors are Ericsson, Nokia, Huawei, and ZTE. You have moved to Open RAN, open radio access, in Japan. Do you have more vendors than those four? Are you actually using the commodity hardware with the software defined network? Or is it still those four vendors but now you can run your code on them?
The foundation of success for Rakuten Mobile today started by Rakuten itself enabling and acquiring one of the most disruptive companies in this Open RAN space. We bought a company in Boston called Altiostar, and I thought they had everything one could dream about, except nobody was willing to deliver them a chance. I diversified my hardware supply chain and purchased hardware through 11 suppliers. I mandated where manufacturing can happen, in terms of product, security, and chipsets. Also, the era that we entered focused on heightened security, especially around 5G. I felt really good about our ability to control manufacturing and supply chain.
The software Altiostar provided was the radio software for this entire open access network in Japan. Altiostar software is now running over 290,000 radiating elements. I mean, this is massive; 98 percent of the population coverage of Japan is served there.
I deliver huge credit to the large vendors. Nokia had a very big internal debate when I told them, “I want to buy your hardware, but not your software.” I know their board had to approve it, but this is the beauty of software disaggregation. Now, I buy one hardware aspect of the Nokia and Altiostar is running the radio software for that platform. We now have a diversified supply chain and we are no longer just counting on four hardware suppliers. We have a common software stack. The big building block, which is this OSS, has enabled our own platforms and tools.
Rakuten has purchased Altiostar from Boston. We have purchased an innovative cloud company in Silicon Valley called Robin.io for our Edge Cloud. We have purchased the OSS company called InnoEye and formulated this integrated technology stack that is now part of Rakuten Symphony.
You have described Rakuten’s network as being in the cloud several times. Very simply, what does it mean for a wireless network to be cloud-based?
To deliver you an image, four years ago I was asked to do a keynote in Japan on my first day there. Thanks to my translator, I think people understood the concepts I was explaining to them. I said, “Here is an image of what we don’t want to build.”
If I show you how to deliver voice and video messaging, most of the telecom networks across the world, even today, are still running into boxes of hardware. Having a cloud network means that your workloads are now moved away from proprietary implementation, to a complete network function software components. These software components run with the beauty of what is called microservices for software, and run with the elegance of things that cloud inherently supports, like capacity management, auto-elasticity, scale in, and scale out.
This is basic terminology. I’m not telling you about things that have been invented by Rakuten Mobile. It is thanks to Google, Microsoft, and Amazon, who have innovated like crazy on the cloud. I have just benefited from the innovation that they have done to deliver on scalability, resiliency, reliability, and a cost efficiency that one could never have imagined.
When it comes to the cost, this is a hyper-operation structure. There are 279,000 radiating elements, and the operational headcount in Rakuten Mobile is still sitting below 250 people.
As the number increases, there is no direct proportionality between the number of units in the network versus the number of employees in the network. There is absolutely no direct correlation whatsoever anymore. To me, that is what cloud is all about. All the things on top of it are modules that you need to derive to the operational efficiency that we did in Japan.
From an end user perspective, you have now architected this network differently. You have created a small revolution in the wireless industry from the provider level, where you can buy any hardware from 11 suppliers and run your software on it. Does the end user see an appreciable difference in quality? Or does it just lower the cost?
There is a huge difference from the end user point of view. One of the key reasons that Rakuten was encouraged and supported was because we were determined to enter the mobile segment in Japan. We felt that competition was stagnant, and the cost per user is one of the most expensive in the world.
To benefit the end consumer, we took a chapter from Jio’s strategy on lowering the cost burden economically. We did something that was so simple. At the time, the average plan rate in Japan was sitting about $100 US per user. We dropped that cost to $27 US, unlimited, no caps. When you go inside our stores, we change everything. We said, “Look, you don’t need to think about the plans. There is only one plan. That’s it.”
From a choices point of view, we made life super simple. We bundled local, we bundled international, we bundled everything under one local plan, and we tied it synergistically to the larger ecosystem of Rakuten. You acquire points as you buy things on e-commerce, as you buy things on our travel website, as you buy things from Rakuten Energy, or as you subscribe to Rakuten Bank. You could then use these points to pay off your cellular bill. The $27 could effectively be zero, because of the synergistic impact of other services you consume in Rakuten and the points you acquire from all of them.
Would Rakuten Mobile be profitable at $27 a customer? Is it being subsidized by the larger Rakuten?
We have to be profitable. Spectrum here is not auctioned in Japan; we are allocated spectrum, but there are conditions to it. You cannot just run a business that is not profitable standalone. So we will break even in Rakuten Mobile and make it standalone.
The way I think about it, it is not subsidized by the ecosystem. If I acquire you as a mobile customer, because of the impact I could bring to that larger sales contribution of you potentially buying from e-commerce or travel, I am using connectivity to empower the purchases of these 70-plus internet services, so we are actually contributing to the larger group. As long as the total top line revenue is increased because of mobile contribution, the group as a whole is going to be in good shape.
Even with standalone mobile, we are committed to our break-even point. We need to make it a profitable standalone business. The group as a whole has remarkable synergistic impact in our business. That is the benefit in value.
Now there is another benefit on the network architecture. Today we talk about the essence of marketing with Edge. The definition is so simple. It is all about bringing content as close to your device as humanly possible, to bring content close to you. I would always argue, if you have nothing but virtual machines or network functions that are software, the ability for you to move these software components from large data centers and all the way to the Edge is trivial. Hardware reallocation becomes more complex.
When the Edge use cases in Rakuten Mobile get delivered, you are hopefully going to hear some very amazing news about the lowest latency in the world delivered over the 5G network. This is the beginning of what is possible for new use cases for the consumer.
Think of cloud gaming. It has never been successful, at least in wireless, because networks could not sustain the latency that it would require. Speed, in my opinion, is a stupid metric to talk about. We should talk about latency, latency, latency! How do you deliver sub-4-millisecond latency on a wireless network?
It hasn’t happened yet on licensed spectrum, but I think you are going to see it very soon. There is an advantage to this software architecture and the creation of new age applications for cloud gaming. Even as we talk, people are getting excited about the metaverse, which will need these use cases to come alive in the mobile fabric.
So you have talked about Open RAN, how you have built it, how you have architected the network for Rakuten Mobile, how you have new software layers, and how you have new hardware relationships. You are also the CEO of Rakuten Symphony, which is the company inside Rakuten that would then license all these components to other vendors. Dish Network in this country is one of those providers, and they are at the beginning stages of trying to build a brand new greenfield Open RAN 5G network. If you were going to build an Open RAN network in the United States, how would you do it?
My focus would probably be a lot different than many people would think. It is not about technology. I have never in my life approached a problem where I think technology is the issue. We do not deliver ourselves enough credit for how creative we are as human beings and our ability to solve complex problems.
The first thing I would start with is structure, organization, and culture. What is the culture you need to have to do amazing, disruptive things? When I moved to Japan, I didn’t know anything about it. I always knew that I wanted to visit, but I didn’t know about the complexities and challenges I would have to face. I mean, imagine being in the heart of Tokyo, being largely driven and supported by an amazing leadership team that says, “The world is your canvas, hire from anywhere.”
I have brought in 17 nationalities — relocated, not as expats, as full-time employees in our office in Japan. Being this diversified, multicultural organization was the key. I did my own recruiting and handpicked my team. My focus was initially to find people with the spirits of warriors, that were willing to take on tough challenges and the bruises that came along with them, that would not get discouraged by people telling them something would not work.
Long story short, I would not build a network that has looked the same for 30 years. I would not build a network just because Rakuten has done it this way. I think networks of the future must have this essence of software and must have autonomy built into its DNA. This is not just about Open RAN, this is a holistic approach for fundamental transformation in the network architecture.
I ask this question a lot and the answers always surprise me. Most companies that I think of as hardware companies, once they make the investment in software, they end up with more software engineers than hardware engineers. Is that the case for you?
I have no hardware engineers at all. None. I think from the beginning, this was done by design. I knew that I could create an ecosystem in hardware, and I don’t want to be in the hardware business. From a fundamental business model, I had enough credible relationships in this industry to cultivate and create an ecosystem for people that just enjoy being in hardware design. But that is not us; it is not our fabric, not our DNA.
The more I look at the world, the more I see the success of companies that have invested heavily into the right skill sets, whether it is from data science, AI, ML, or the various software organizations that they have built. This is what I thought we needed.
If you go to Rakuten Symphony’s largest R&D center in India, we now have over 3,500 people that only do software. To me, that is an asset that is unprecedented in terms of the extent of capability, what we could build, what we could deliver, and the scale that we could deliver at. I don’t want to invest in hardware. I just think that it is not my business.
Our investment is all about platform. I really enjoy seeing the advancements that we have enabled, though we are still early in this journey. I have a lot of other things I want to accomplish before I say that Symphony has succeeded.
Symphony is a first-of-its-kind company, since it is going to sell a new kind of operating platform to other carriers. Do you have competitors? Do you see this being the next turn of the wireless industry? Are we going to see other platform integrators like Symphony show up and say to carriers, “Hey, we can do this part for you. You can focus on customer service or fighting with the FCC or whatever it is that carriers do”?
To be very honest with you, I love the idea of having more competitors in this space. It challenges my own team to stay on top of their toes, which is really good. At the same time, having more entrants come into the space would help me cultivate the hardware ecosystem today.
Symphony is uniquely positioned; there are not a whole lot of people that could provide the integrated stack that Symphony has. Symphony’s biggest advantage is that it has a running, live lab carrying a large commercial customer base called Rakuten Mobile. Nobody tells me, “Don’t do this or that on Rakuten Mobile.” I could do disruptive ideas or disruptive innovation, and test and validate new products and technologies before giving them to anybody else.
It’s good to be the CEO of both.
I know. This is one of the reasons I accepted and volunteered. I thought for the short term, it would be important to be able to control these two ecosystems, because Japan is a quality-sensitive market. If I build a high-quality network, nobody will doubt whether Symphony’s technology stack is credible, scalable, reliable, or secure. We are uniquely positioned because of our ability to deliver on a robust automation platform, Open RAN software technology architecture, and innovative Edge Cloud software.
I don’t see many in the industry that have the technology capabilities today that Symphony offers. People have bits and pieces of what we have, but when I look at the integrated stack, I’m really happy to see that we have some unique intellectual properties and IPs that are remarkably differentiated from the market today.
So Dish is obviously a client. We will see how their network goes. Are you talking to Telefónica, Verizon, and British Telecom? Are they thinking about O-RAN in this way?
Since it’s public in the US, I can talk about it. As I mentioned before, it is not just about the O-RAN discussion for me, it is about the whole story. We announced in the last Mobile World Congress that AT&T is working with Rakuten Symphony on a few disruptive applications around the digital workflow on the operation for wireless and wireline, the same as Telefónica in the UK and Telefónica in Germany. Our first big breakthrough was an integrated stack.
In the heart of Europe, in Germany, we are the supplier for a new greenfield operator called 1&1. I told the CEO of 1&1 that my dream is to build Rakuten 2.0 in Germany, so we are building the entire fabric of this network. It has been an amazing journey to take all the lessons learned from Japan and be able now to bring them to Germany. We are in the early stages, but I am really optimistic to see what the future will hold for Open RAN as a whole for Symphony.
Rakuten Mobile and Rakuten Symphony have opened a well-needed, healthy debate in the industry about radio access supplier alternatives and diversification that we need in order to move away into a software-driven network. We feel that is a big accomplishment for us.
As you build out the O-RAN networks, one thing that we know very well in the United States is that our handset vendors — Apple, Samsung, Google, Motorola — are very picky about qualifying their devices for networks.
Is there a difference in the conversation between a traditional network and an O-RAN network, when you go and talk to the Apples and Samsungs of the world?
Yes. Before we were approved as a mobile company to be able to sell their devices, I have to tell you about the pleasure of working with the likes of Apple. I’m being really honest about this; I really liked it. Their burden to quality was really high, as was their ability to accept and certify a quality of network. I thought if we got the certification that we needed from them, that’s another third-party audit; I would have cleared a big quality hurdle.
The Apple engineering team is really strong. They really understood the technology, which was great. There are a lot of facets to do with it that are fascinating. No matter how great it is, I had to pass a set of KPIs and metrics for device certification. This was not trivial. I went through the same journey with Jio, so I kind of have some ideas about the burdens to acceptance from large device manufacturing companies. I also knew that this is a process of identifying issues, solving them, coming back to the device vendors, and continuing to reiterate in improving the quality.
I went through the same journey in mobile, but just slightly after our commercial launch, when we got our commercial certification on being able to sell Apple devices, that was a big relief for all of us. A big relief, because it means that we have reached a quality level that they deem is minimally acceptable to carry the device.
Of course we monitor the quality every day, so I’m really happy that we have done this. We have proven that the Open RAN network, especially the software that we have built in Japan, is running with amazing reliability. Rather than celebrating our courageous attempt to do something good for everybody, the early days of our journey were all about skepticism. Like, “This will not work. This will not work.”
Was Apple more skeptical of your network going into tests than others since the technology is different?
The device vendors were very supportive. The skepticism came from the fear, uncertainty, and doubt from traditional OEMs and vendors who wanted to tell everybody that this technology is horrible. It was to such an extent I ignored everything. I still do today. I say you cannot argue the benefit of cloud brought to IT and enterprise. There is an indisputable benefit to this. When it comes to telco, why would you argue the advantage and benefit of moving all your workloads to the cloud?
I think this debate is ending, and it is ending much quicker and in a better place for everybody. I have huge admiration for what Apple has done. It’s a really impressive company. The more that we continue to engage with them, the more we can tell that this company is obsessed with quality. I thought if we cleared the hurdle of getting their acceptance, then it shows another validation for us that we are running a high-quality network. They are a strategic, critical part of our supplier ecosystem today in Japan.
Let me flip this question around real quick. One of my favorite things about the Indian smartphone market is how wide open it is on the device side. This is something that happened after Jio rolled out, but I was friends with a former editor of Gadgets 360 in India, Kunal Dua, and he told me, “My team covers 12 to 15 Android phone launches a week.”
The device market is wide open, you can connect anything, there are dual SIMs, and the actual consumer experience of picking a phone is of unlimited choice. That is not the case in the United States or in other countries. What do you think the benefits of that are? I am quite honestly jealous that there is that much choice in that market.
I think a couple of things in India really benefit the country quite a bit. When you have massive volume, people are intrigued to enter these economies that exist. Certain things have changed in Japan as well. The government policies are mandating the support for open device ecosystems.
In our case, we even told them that 100 percent of our device portfolio will support eSIM, which gives you the ability and flexibility to switch carriers within one second. You can just say, “Oh, I don’t like this. I like this.” The freedom of choices is just unparalleled. We, as Rakuten Mobile, changed the business model. We said, “Look, we will enable eSIM. There are no fees for termination of contracts. There are no fees for anything. If you don’t like us, you can leave. If you do like us, you are part of our family.”
We made it really simple, because it is a dream for us to build an open ecosystem. We are trying to see if it is relatively successful to open up a storefront for open device markets, since we own a very large e-commerce website. Come in, purchase, and acquire.
The difference between India and the US is that India does not subsidize the device. As a consumer in the US, you have been trained that you can buy an iPhone by signing a contract, and the iPhone will be subsidized by the carrier. A consumer could benefit from this open device ecosystem, but there would have to be a mentality change. Will a consumer accept the idea that they have to buy a device? From a carrier point of view, I still argue that if they don’t subsidize, maybe they could lower the cost of their tariffs.
It is still an evolution. For us in mobile, we have pretty much adopted what India has done. We said, “bring your own device,” and we promoted all these devices that you are talking about in India. We brought them into our e-commerce site. In Japanese, it is called Ichiba. So we brought them to the Ichiba website, gave them a storefront, let them advertise, and let them market. Our website has a massive amount of daily active users that come to it, and we do not necessarily benefit from selling their devices, but we don’t want to subsidize any device. That is subjective.
What is the biggest challenge of O-RAN? You have a long history in this industry. I’m sure many challenges are familiar to you in building a traditional network. What is the biggest, most surprising challenge of building it in this way?
Let me tell you the part that I was surprised about. Some parts were easier, some more difficult. If I take you to a traditional base station and we examine what is really there at this radio site, we will find that almost 95 percent of every deployment is the same. Basically, there is a big refrigerator cabinet, and inside this cabinet there is something called the base band. This is the brain of the base station. This base band was built on custom ASICs that large companies needed to constantly invest into this hardware development for.
The first thing that we did was remove the software and make it more like an off-the-shelf appliance, like a traditional data center server. I recognize that the software only gets better; there are no issues with software. The difficult part was that the hardware components you need for the base station are really complex.
At every site, there is an antenna that has a transmitting unit, called either a remote radiohead, or massive MIMO in 5G. These products need to support a huge diversity of spectrum bands, because in every country there are different spectrum bands and different bandwidth. If you are a traditional supplier — say Nokia, Ericsson, Huawei, ZTE — these companies have invested in a large organization, with tens of thousands of people, whose entire job is to create this massive hardware that could support all these diversified spectrum bands.
My number-one challenge with Rakuten Mobile is to find these hardware suppliers, because there are not a whole lot of them for Open RAN. The hardware suppliers that could support diversified spectrum requirements — because country to country it will be different — turned out to be a really big challenge. The approach that we have taken in Japan is to go to middle-size companies and startups. I funded them and encourage them to build the hardware that we need.
My biggest challenge and my biggest headache is spending time trying to find a company that has capability and scale to become the hardware supplier for Open RAN at the right cost structure. The hardware you need for both 4G and 5G is not to be underestimated. I think it is easier to solve the issues around some of the RF units that one would need for these base stations. This is my personal challenge, and I know the industry as a whole needs to solve for this.
I know these are complicated products, but are these companies panic that it is a race to the bottom? Most PC vendors ship the same Intel processor, the same basic parts, and they have to differentiate around the edges or do services for recurring revenue. We talk about this on Decoder all the time. The big four that you mentioned sell you the whole stack and then charge for service and support. That is a very high-margin business. If you commoditize the hardware and say, “I am going to run my own software,” do those companies worry it is just a race to the bottom?
Let’s differentiate between large companies and new entrants. I think new entrants in hardware are comfortable and content, understanding the value they provide by being commodity suppliers. Let me deliver you an analogy. Let’s say Apple uses Foxconn to manufacture its devices. I am sure Foxconn will not tell you they are unhappy about this business model. It has built their entire strategy around high-value engineering, high-yield, and high-capacity manufacturing, because that is how they make revenue. They do not bundle support services.
I found that the new age manufacturing companies I was looking for were companies like Foxconn. Companies that understand the new business model that I want to create.
The most amazing thing that the US, and some companies are probably not aware of, is the elegance that we have in the United States around silicon companies. It is amazing how they genuinely are one of the most innovative in the world in terms of capability. It still exists in the US; we still control this. Today, Qualcomm, Intel, Nvidia, Broadcom, and many other companies, provide a lot of technology in a way that is needed for these products. We go and build reference designs directly with the silicon companies, and then I take that reference design, go to a contract manufacturer, and say, “Build this reference design.”
This new way of working seems like the future. Hopefully one day, for the hardware supply chain ecosystem, many companies like Foxconn will start to exist and will appreciate the value they need to build hardware for all suppliers. Maybe Ericsson or Nokia will one day have to look and evaluate a pivoting opportunity to go into a software world that may have a much better valuation.
Look at the stock price of traditional telecom companies today. Look at the stock price of ServiceNow, a digital workflow tool. Look at the difference between them. One is a complete SaaS model; one lives on a traditional business model. I don’t think the market appreciates and recognizes that this may be the right thing to do.
It seems like it is inevitable. It is just a matter of time for traditional vendors to start pivoting. I want this hardware to be commoditized. It is very important. The value you compete on has to be software, it cannot be hardware.
Rakuten Mobile is only a couple years old. It is the fourth carrier in Japan, and you have 5 million subscribers. Japan is a big country. KDDI has 10X the subscribers. Is the ambition to be the number one carrier, like Jio became the number one carrier in India? How would you get there?
I am really proud about what we have done in Japan. I think for many people that have been through this journey of building networks, they will know it is not a trivial process. We had two pragmatic challenges.
First, we had to prove to the world that a new technology actually works and delivers on cost, resiliency, and reliability. That’s a check mark; done. That is not just me telling you today, but audited by a third party. Look at the performance, quality and reliability we do. Second, if you are in the mobile business, I think you have one area that new technology cannot easily solve for you. You need to have ubiquitous coverage everywhere and anywhere you go.
I am not sure if you have ever visited Tokyo, Japan, but you should know this is a concrete jungle. It’s amazing. The density that exists in an area like Tokyo, the subways and the coverage you have to provide for them, and the amount of capacity you have to cater for, is not trivial. In two years, we have been able to build a network to cater for 96 percent of Japan coverage. I have never seen the speed that a network could be built at, at this scale.
So our ambition is not to be a fourth mobile operator in Japan. It is by far to be a highly disruptive ecosystem provider in which we want to take the number-one position in this country. The approach we take here is very simple. We need to ensure that ubiquitous, high-quality coverage is delivered anywhere you go in Japan. We are almost there.
I’m not just talking about the outdoors. High-rises, indoor, deep indoor, basements, subways. Anything and everywhere you go, an amazing network must be delivered. And second is the point/membership/loyalty that I talked to you about earlier. We think that’s a huge differentiator from the competitors, just to bring a much bigger value, and being obsessed about the customer experience and the services that we have offered.
From being an infant, to where we are today, I am really happy about what the team has accomplished, but we have a lot of work that we need to focus on to finish the last remaining 3 percent of our build. That percent is extremely important to achieve the quality of coverage that we need to really be at par and better.
I know my cost today is 40 percent cheaper in running my network than any competitor in Japan. I have an advantage that is virtually impossible for anybody in Japan to compete against today around network cost structure. So that gives me a leg up on what we could do, what business models we could experiment with, and the actions that we will take. You will see us very decisive in our approach, because we don’t want just to be another carrier in Japan. We want to be leading mobile operators in this country.
All right, Tareq. That was amazing. I feel like I could talk to you for another full hour about this. Thank you so much for being on Decoder.
"The first demo from the oropharynx tested negative, but we asked to take it again from the skin lesion fluid," Rondonuwu noted here on Thursday afternoon.
Oropharynx is the central part of the pharynx connected to the oral cavity and functions to allow air, food, and liquid to pass through.
According to Rondonuwu, taking the oropharynx demo is one of the procedures for diagnosing monkeypox in suspects. The process is continued with checking the skin lesion fluid, so that the analysis will be more accurate.
Meanwhile, during an interview session at the Vice President's Palace on Thursday, Health Minister Budi Gunadi Sadikin stated that one suspect of monkeypox in Pati District, Central Java, was identified on Tuesday, July 19, 2022.
"On July 19, (the suspect) had the symptom of fever; while on July 21, he was taken to the hospital; and on July 23, there were spots (lesion fluids observed on the suspect)," Sadikin revealed.
According to the minister, the genome sequencing method is needed to distinguish smallpox from monkeypox viruses, which generally took about three to five days after sampling.
Furthermore, Sadikin said his side had conducted tracing for close contacts of a monkeypox suspect in Central Java.
"We have traced the others (the close contacts), and we have taken the blood serum," he stated.
Based on the Health Ministry's report, a total of nine monkeypox suspects were detected in Indonesia, and all of them tested negative where they experienced smallpox.
In the Southeast Asian region, three countries have reported monkeypox cases as of July 2022: Singapore, with 11 confirmed cases; Thailand, with two cases; and the Philippines, with one case.
Related news: Airport staff should watch out for monkeypox symptomatic passengers
Related news: MPR chief urges gov't to form monkeypox task force
BigCommerce Holdings, Inc. (NASDAQ:BIGC) Q2 2022 Earnings Conference Call August 4, 2022 5:00 PM ET
Daniel Lentz - Head of IR
Brent Bellm - President, CEO & Chairman
Robert Alvarez - CFO
Conference Call Participants
Gabriela Borges - Goldman Sachs
Clarke Jeffries - Piper Sandler
Daniel Reagan - Canaccord Genuity
Koji Ikeda - Bank of America
Samad Samana - Jefferies
Matt Pfau - William Blair.
Brian Peterson - Raymond James
Ladies and gentlemen, thank you for standing by, and welcome to BigCommerce Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded.
I'd now like to turn the conference over to your first speaker today, Daniel Lentz, Head of Investor Relations. You may begin Sir.
Good afternoon, and welcome to BigCommerce's second quarter 2022 earnings call. We will be discussing the results announced in our press release issued after today's market close. With me are BigCommerce's President, CEO and Chairman, Brent Bellm; and CFO, Robert Alvarez.
Today's call will contain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition and our guidance for the third quarter of 2022 and the full year 2022.
These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, will or similar words. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements.
Forward-looking statements, by their nature, address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission.
During the call, we will also discuss certain non-GAAP financial measures, which are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures as well as how we define these metrics and other metrics is included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.bigcommerce.com.
With that, let me turn the call over to Brent.
Thanks, Daniel, and thanks, everyone, for joining us. On today's call RA and I will review our second quarter results and discuss our priorities and approach to managing through the current conditions of market turbulence. RA will also provide detail concerning our view on the back half of the year in his discussion on updated guidance.
First and foremost, I'm pleased to share the second quarter was one of the best in our history, a result that encourages us given the macroeconomic climate. Our team continues to deliver on our mission to be the leading open SaaS eCommerce provider, empowering B2C and B2B merchants around the globe. Let's discuss the details.
In Q2, total revenue grew to $68.2 million up 39% year-over-year. This was our 10th consecutive quarter of posting 30% or higher revenue growth, which was bolstered by strong results from the Feedonomics acquisition in Q3 of 2021.
Our non-GAAP operating loss was $13.7 million, which was also ahead of our guidance last quarter. We concluded Q2 with an annual revenue run rate or ARR of $296 million up 41% from last year that represents a sequential growth in ARR of $15.5 million. This increase was driven by our continued success in the enterprise segment. Enterprise account ARR was $206.6 million up 68% year-over-year. That marks our 15th consecutive quarter of 40% or higher enterprise ARR growth.
Q2 delivered the largest sequential growth in ARR in our history, excluding the quarter of the Feedonomics acquisition. It was better even than during the height of the pandemic when we saw strong transaction driven tailwinds to partner revenue, subscription upgrades and enterprise plan order adjustment. As I said, our strongest growth is coming from the enterprise segment, which now represents 70% of our total company ARR compared to 52% just before our IPO only two years ago.
I am often asked about my views on our current progress and where I feel this business can be in three to five years. I am also asked how we need to operate in a challenging climate to deliver sustainably high revenue growth while hitting our commitments to investors about spending and profitability.
What I want to emphasize from the start is this. Our underlying business momentum is strong. We are winning bigger, more complex merchants every quarter. We are delivering a product roadmap we believe is best in class and industry analysts and merchants are recognizing our emerging enterprise leadership. I have never been more confident about the prospects of this business than I am now.
Over the last few years, you have heard me talk often about our upmarket journey from serving SMB to mid-market and enterprise merchants. I've given updates on our steps to develop new products and add APIs and GraphQL capabilities as part of our differentiated open SaaS approach.
With the launch of our multi-store front functionality to all enterprise merchants in the second quarter, we now offer the key functionality and flexibility that the world's most sophisticated merchants need to be successful. We have crossed a transformational line in our journey as a company to become the world's most modern enterprise eCommerce platform.
We at BigCommerce are not the only one saying this. Forrester, a leading global market research company named us a strong performer and placed us closest to the leader designation of our relevant competitive set. For B2B eCommerce, Forrester rated us the third highest in terms of the strength of our current B2B offering. Meanwhile, [indiscernible] in Europe named us the top enterprise B2C platform. And we won 2022 Australian Solution Provider of the Year from retail global's vendors and partnership.
Just last week, we received high honors as a top solution in paradigms B2B combine for both mid-market and enterprise receiving 22 out of a possible 24 total medals. We earned six more medals in last year, and that marks the third consecutive year we improved our B2B ranking with Paradigm.
On the three continents that comprise our top markets, the experts are ranking us at the top of their platform evaluations. Now that we are officially launched in Mexico and South America, we look forward to competing in those markets as well.
While there is no doubt macroeconomic challenges are facing our industry and global markets more broadly, we believe we are still at the front end of a long term upward curve. IDCs most exact forecast, estimated $8 billion in worldwide digital commerce application revenue this year. That has projected to decline to $12 billion in 2025 and the good news for us is that spending for on-premise applications is projected to decline whereas spending on SaaS solutions like ours is projected to grow at 20.8% CAGR. New enterprise store acquisition drives our growth, and we continue to see strong demand.
With our exact acquisitions of long-time technology partners, Bundle B2B and B2B Ninja, BigCommerce has expanded its native B2B eCommerce functionality to provide a dynamic platform for all B2B merchants that is easier to use, faster than legacy B2B solutions and more flexible and powerful than other SaaS platforms at a time when B2B eCommerce is growing faster than B2C.
In Q2, our international expansion efforts made further progress. Adding to our operations in the, our international expansion efforts made further progress adding to our operations in the largest Western European economies. We launched our formal presence in the Nordic countries of Denmark, Sweden and Norway, and further expanded into the dock region with the addition of Austria. We built on our exact launch in Mexico with expansion to Peru, our first country in South America.
In the coming months we'll launch in additional Latin American countries. We're supporting new languages, adding new geographies and integrating new payment methods for local markets. We're in the early innings of global expansion and our growth rates in EMEA, APAC, and non-US Americas deliver us confidence that expansion will pay off in the near and long term.
We continue to add new enterprise merchants to our platform in the second quarter. Mountain Equipment Company, Canada's largest supplier of outdoor gear, launched its headless integration using BigCommerce checkout support storefronts in English and French. Well Pharmacy, one of the UK's largest pharmacies is now selling over the counter and prescription medications on its BigCommerce store, leveraging our open SaaS and headless capabilities.
Australian Motorcycle Helmet brand foresight helmets is leveraging headless to create its beautifully designed storefront. Lifetime Brands, a leading global designer, developer and marketer of a wide range of household products from KitchenAid, Farberware and other brands, launched a new store using B2B addition.
Tile Warehouse, a subsidiary of major UK tile brand Topps Tiles, launched a pop-up storefront to sell clearance tiles directly to consumers, leveraging a fulfillment partner to pull through real-time inventories and providing custom URLs for product categories and attributes. Finally Zumnorde, the popular German shoe retailer, turned to BigCommerce to internationalize and relaunch its web shop on a modern platform that doesn’t require constant upkeep and that can be customized to provide an incredible customer experience.
I'd now like to share some thoughts about the current operating environment, which is challenging for us as it is for others. Although the majority of our subscription-based business is not directly dependent on the GMV trends of our merchant stores, we are impacted in other ways by downturns in eCommerce spend that can be caused by the economy, return to shopping and physical stores and/or other adverse economic changes. Specifically, reduced growth rates in our merchant sales impact our partner and services revenue, balance of subscription upgrades and downgrades, order-based enterprise fees and trendline for customer retention and bad debt.
We try our best to make decisions to balance the achievement of our near-term financial goals with the maximization of our long-term business and shareholder potential. We believe we need to lead with humility, grounding decisions and our understanding of customer and partner needs and our mission to make open SaaS the best solution for the next era of e-commerce. Along the way, we have had to respond to unforeseen challenges and occasionally make new bets on opportunities that earn our conviction.
Halfway into this challenging year, we've managed to achieve our goals so far. Thanks to our management team's collaboration and adjustment we continue to believe that we will achieve the top line and bottom line guidance we set at the beginning of the year, despite the impact current market conditions have on select components of our P&L.
We understand that the market is focused on potential risk areas created by current economic headwinds. Nearly all e-commerce companies have been talking about these risks to their businesses. We too face these risks, but on balance, I believe the strengths of our business model are demonstrated well in this market. And I'd like to dive deeper into why that is.
First 70% of our revenue mix comes from enterprise merchants, which are predominantly established successful businesses from a wide range of categories, geographies, and B2C and B2B use cases. Similarly, but separately, 70% of our revenue comes from recurring subscription revenue, which provides a stable, predictable top line.
The combination of durability from enterprise customers and predictability from subscriptions makes us less vulnerable to short term economic swings then would be a consumption or GMV-based revenue model. Second, the components of our subscription plans that do adjust with GMV tiers or order counts are calculated using a trailing 12 month look back. This has a moderating effect against short term and seasonal fluctuations in consumer spending. Sharp movements upward take time to be fully realized in our pricing and revenue, which we saw during the pandemic, noting that a revenue did not increase as fast as total e-commerce GV did.
On the flip side, sharp short term movements downward are also dampened by our trailing 12 month convention. For us, the most immediate direct impact to our revenue from our customer's GMV fluctuations occurs in partner and service revenue, the biggest component being rev share from our payments partners. We are doing our best to account for eCommerce spending risk in our outlook and RA will speak to that in detail shortly.
Third, nearly all of our direct sales occur in US dollars today. Foreign exchange risk is limited to partner share like in payments that are earned in non-US GMV, essentials plan subscription upgrades prompted by GMV earned in foreign currencies and are non-US operating expenses. These FX sensitivities impact a small percentage of our total revenue and expense base today. We do not believe a strong US dollar is a material risk to us at this time.
Finally, our product is considered mission critical buyer merchants success in eCommerce is imperative to all businesses strategically and financially, especially post COVID. exact CIO surveys indicate continued robust spending and software, and we offer a material total cost of ownership advantage over legacy enterprise software competitors. As merchant budgets tighten our platform should remain attractive and mission critical for most of our customers.
Shifting gears now to our board of directors, as we announced earlier this week, we've added two fantastic new directors to our board. Sally Gilligan, Chief Growth Transformation Officer of the Gap and Satish Malhotra, Chief Executive Officer of the Container Store. Our goal was to enhance our board with the experience and perspectives of retail veterans. Sally and Satish respectively represent the technical and CEO retail buyer personas to whom we sell while also bringing deep functional expertise to our board governance. We're excited about all they will contribute.
Meanwhile, I want to sincerely thank Steve Murray and Jack McDonald for their years of service on our board. Steve was a partner at the venture firms who led our series C and D rounds and served as our lead independent director. Jack is iPod and ran two successful public software companies and served as a valued mentor to me through our process. They were instrumental in our growth to public company status and were grateful for their leadership and service to BigCommerce.
As I wrap up, I would like to reiterate my belief that our team and business performed very well. This past quarter, we delivered strong results in a challenging operating environment. Investments made across our strategic priorities, continue to deliver customer and business value. We're increasingly viewed as a true leader in the e-commerce industry, and I'm especially grateful for everything our employees and partners have done to earn that during times of dramatic change.
With that, I'll turn it over to RA.
Thanks Brent. And thank you everyone for joining us today. During my prepared remarks. I'll walk through details on our Q2 results. In that discussion, I'll also speak to how some of our metrics are derived so that investors could more easily understand the underlying trends in revenue and bookings. In addition, I'll provide details on how current conditions are impacting the business. Efforts we are taking to optimize our spending. And finally I'll provide greater detail on our guidance on back half revenue and profit assumptions.
We always strive for transparency when discussing our results and outlook. So we want to take extra steps to provide clarity in this current macroeconomic environment. In Q2, total revenue was $68.2 million up 39% year-over-year. Subscription revenue grew 51% year-over-year to $51.3 million, driven by our mix shift to enterprise accounts. Supported by strong results from our Feedonomics acquisition, we have now posted 10 consecutive quarters of 30% or higher total revenue growth and 15 consecutive quarters of 40% or higher enterprise ARR growth.
Partner in Services Revenue or PSR was up 12% year-over-year to $16.9 million. Though platform transaction volumes have largely been in line with the conservative expectations we set at the beginning of the year, we saw slightly lower than expected volumes in GMV in Q2. Overall, we have been encouraged by the durability that we are seeing in transaction volumes thus far in the year, but given the economic climate, we are taking conservative approach to our PSR outlook in the back half of the year. And I'll discuss this in more detail later in the guidance section of my remarks.
Revenue in the Americas was up 41% in the quarter while EMEA revenue grew 42% and APAC revenue was up 18%. Our international progress is strong as we entered five new markets in July, and I'm proud of the traction our teams are delivering overseas. I'll now review our non-GAAP KPIs.
Our ARR agreed to $296 million of 41% year-over-year, driven by continued strength in our enterprise customer base. That represents a sequential growth in total ARR of $15.5 million, which is the highest growth in our company history, excluding the quarter of our acquisition of Feedonomics. In particular, I would draw your attention to the composition of that big sequential growth in ARR.
As a reminder, we calculate ARR at the end of each month, as the sum of two things. First, it includes our end of period, monthly recurring revenue multiplied by 12 to prospectively annualize subscription revenue. We often refer to this as our subscription ARR. Second, we then add the trailing 12 months of PSR. The sum of subscription ARR, and the trailing 12 months of PSR is our total ARR.
When looking for leading indicator trends in net bookings, investors often look to either changes in deferred revenue or remaining performance obligations or RPOs. These metrics are not good indicators of BigCommerce's booking trends because most of our merchants today are billed month-to-month and we also see large multi-year partnership agreements in deferred revenue or RPO that can make period to period comparisons challenging.
Instead, one of the best ways to see the underlying trend in our net bookings is by looking at the quarter-over-quarter sequential change in subscription ARR. That difference is a reasonable indicator of our change in net bookings in the latest quarter. In Q2 subscription ARR increased by $13.7 million, which was 29% higher than our previous record increase in Q4 of 2021 and also higher than any quarter during the height of the COVID 19 pandemic.
What this means is that we posted our highest sequential growth in ARR in our history and that growth was driven by gross new subscription bookings growth in enterprise and omnichannel, even as we are seeing less tailwind to PSR and pricing adjustments due to current macroeconomic conditions. Those conditions are largely outside of our control. But what we have tried to control is winning new deals, launching merchants on time and providing the best level of service for our merchants, which is how we manage to exceed our gross new targets and set an ARR record even the midst of this type of economic uncertainty.
At the end of Q2, we reported 5,418 enterprise accounts, up 1,503 accounts or 38% year-over-year, including Feedonomics. ARPA or average revenue per account for enterprise accounts was $38,133 up 22% year-over-year. Now that our enterprise accounts represent 70% of our total ARR, we will continue to share details and accounts with greater than $2,000 in annual contract value or ACV in our quarterly filings through the end of the year, but we will not review them in our earnings calls.
I'll now shift to the expense portion of the income statement. As a reminder, unless otherwise stated, all references to our expenses, operating results and per share amounts are on a non-GAAP basis. Q2 gross margin was 77% up 131 basis points from the previous quarter. Meanwhile, we reported gross profit of $52.3 million up 33% over the prior year. In Q2, sales and marketing expenses totaled $31.2 million up 56% year-over-year. This spending represents 46% of revenue up 481 basis points compared to last year. This increase was driven by additional head count, particularly due to investments in international expansion and enterprise.
Research and development expenses were $19.4 million or 28% of revenue, up 144 basis points from a year ago, driven by additional hiring to support our investments in our key strategic initiatives. Finally, general and administrative expenses were $15.5 million or 23% of revenue up from 21% of revenue a year ago. We expect to see growing operating leverage from G&A as we moderate hiring and other expenses in the coming quarters.
In Q2, we reported a non-GAAP operating loss of $13.7 million, a negative 20.1% operating margin. This compares with negative $4.2 million or a negative 8.6% operating margin in Q2 2021. Adjusted EBITDA was negative $13.2 million a negative 19.3% adjusted EBITDA margin compared to negative 7.1% in Q2 of 2021. Non-GAAP net loss for Q2 was negative $14.1 million or negative $0.19 per share compared to negative $4.2 million or negative $0.06 per share last year.
We ended Q2 with $360 million in cash, cash equivalents, restricted cash and marketable securities. Year-to-date, operating cash flow was negative $35.9 million declining from negative $17.4 million a year ago. We reported free cash flow of negative $39.3 million or a negative 29% free cash flow margin. This compares to negative $19.1 million and a negative 20% free cash flow margin in Q2 2021.
As we discussed in our exact Investor Day, we are committed to reaching breakeven by mid-2024 and continue our path to Rule of 40. Again, 70% of our revenue mix comes from enterprise merchants and separately 70% of our revenue also comes from consistent recurring subscription revenue. More than 60% of our total cost sits in staffing, which allows us to moderate spending where necessary by controlling our pace of hiring and thereby generate improvements to operating leverage behind our durable recurring revenue stream. This is a strong growing enterprise business and we are confident we can grow profitably behind our strong merchant base and healthy unit economics.
I'd now like to review some measures that we are taking to optimize and prioritize spending. First, we are prioritizing high ROI investments in the enterprise segment and focusing on the key strategic initiatives, we believe will increase our leadership position over time.
Over the past four years, we have seen an average LTV DAC ratio of eight to one for our enterprise business compared to two to one for our non-enterprise business. We have shifted dollars from non-enterprise marketing activities to prioritize enterprise. And we also rolled back Fremont promotions on non-enterprise plans during Q2 as well.
Consequently, we are seeing fewer new small business signups, but we are seeing improved cohort health and retention, higher revenue and improved profitability. Second, we have materially slowed down our pace of hiring. We exceeded our hiring expectations over the last nine months, even in the midst of a competitive hiring landscape. And we have brought on key roles needed for our investment plans in omnichannel international expansion, B2B headless, and largest enterprise.
We are confident we can continue our momentum and capitalize on the benefits of the significant investments we have made in our employees. Even as we moderate our pace of hiring, we estimate that this will generate an exit rate savings of six to 8 million heading into next year. I am confident that this and many other cost savings initiatives currently underway will keep us on pace to meet the timeline to profitability that I affirm previously over the course of the last six months, I've also received many questions about how inflation is affecting our business.
And I'd say we are seeing its effect most directly in labor costs. Thus far, we are taking necessary steps to offset this through tight budgeting, geographically, diverse hiring, and other cost savings initiatives. We are also managing pricing closely to ensure that we are seeing the full benefit of the value we provide our merchants. We will continue to take actions as necessary to manage and offset cost pressure in the coming quarters to deliver break even by mid 2024.
In conclusion, let's shift to our guidance and outlook for next quarter in the full year 2022 for the third quarter, we expect total revenue in the range of $68.3 million to $71.2 million implying year-over-year CAR over year organic growth rate of 15% to 20% with Feedonomics now in the 2021 base for Q3. Our non-GAAP operating loss is expected to be $14.4 million to $16.4 million for the full year 2022.
We expect total revenue between 277 million to $282.9 million translating to a year over year growth rate of approximately 26% to 29%. We expect a non-GAAP operating loss between $48.9 million and $52.9 million. This reflects a little less than a 1% change to full year revenue at the midpoint to risk adjuster remainder of the year compared to our prior quarter guidance. Despite this, we are holding consistent to our prior quarter guidance on non-GAAP operating loss for the year and tightening our range based on the cost containment efforts we've already taken.
Now I'll provide more context with respect to our current thinking for the back half of the year. First, let me address our assumptions around transaction volumes and their impact on PSR and subscription pricing adjustments. Thus far, transaction volumes have been largely in line with the conservative expectations on which we based our plans at the beginning of the year.
However, additional consumer spending headwinds in the back half could impair year over year growth in transaction volumes and GMB. We anticipate that this could have a potential negative impact of three to 4 million to revenue, primarily in revenue share. We capture in PSR, but also subscription revenue due to potentially fewer pricing upgrades and more downgrades and churn, which we have now factored.
In second, we expect the level of competition to remain high to the back half of the year. And we could see some additional headwinds to new merchant growth should sales cycles lengthen that said, we also see significant total cost of ownership and product advantages against legacy enterprise competition.
That could actually be a tailwind in a tight merchant spending environment. We are prioritizing these enterprise merchants and we expect to see a smaller, absolute number of new merchant ads in the back half due to the removal of our non-enterprise free month promotions. However, we expect to maintain healthy and growing ARR driven by a strong enterprise bookings mix and higher APA consistent with our Q2 mix of new merchant wins.
Third, we will continue to invest against our strategic priorities while we will continue to make the crucial investments needed to fuel long term durable revenue growth. We are also taking steps to pay, spending closely with revenue growth, to deliver our profit commitments. Our profit guidance has included the anticipated impact of those efforts throughout the back half. And we expect those efforts to begin showing additional momentum and improving operating loss results.
As we exit the year. Finally, I'd one skin like to thank all of our incredible employees, merchants and partners. We are delivering strong results, even in the midst of a challenging operating environment. I'm so proud of the work and dedication of this team and the level of commitment and character that continues to shine bright each and every quarter.
With that, Brett and I are happy to take any of your questions. Operator?
[Operator instructions] First question comes from Gabriela Borges, Goldman Sachs. Please go ahead.
Good afternoon. Thanks for taking the question. For Brent to start, I'm curious if you're seeing any change in the cadence of free platforming cycles and willingness for customers to invest in technology, putting aside the paw a services business, and really focusing on the subscription solutions business.
So two questions in that; one is any change in willingness to invest in the cadence platforming cycles and two, are you seeing any change over the last quarter in the number of RFPs you're being invited to, or your win rates because of the new technology upgrades you've announced in multi hub and multi inventory.
Hi Gabriela, the trends we're seeing in Q2 are consistent with the last couple of quarters, meaning a healthy continued demand in mid-market and enterprise for new and replatform decisions. This is in exact quarters of course, down from the first year of the pandemic, when there was a mad rush by companies caught flatfooted or late to adopt, but in terms of replatforming cycles, we continue to see that demand be healthy.
For small business, the demand is not what it was anywhere close to the peak of the pandemic, but for mid-market and enterprise it's strong. We are noticing ourselves getting into additional and healthy RFP opportunities as a result of the strong tech analyst ratings we've been getting of late, including Forester for both B2B and B2C from Paradigm for B2B i.e. Merck in Europe for B2C. Those are seemingly getting us into additional incremental consideration cycles and it's too early to say what those win rates will be because the RFPs tend to take some time to work their way through to a decision, but we're optimistic that our win rates could be assisted by this as well. Thanks for the question.
That makes sense. Thank you. The follow up is for RA, would love to hear a little bit about the impact that pricing adjustments or upgrades have historically had on your business over the past two to three years. And how do we think about the potential magnitude for downside to the extent you see downgrades in your ability to manage through that?
Yeah. Hey Gabriela, a lot of cases some of the upgrades like the upgrades we did in Q1 for pro plans was really just to get the merchants on the right plans. Yeah, there could be some increase in upgrades, but really is to get them the service entitlements and level of service that we feel those merchants need. So they can grow into really large enterprise merchants.
I would say in hindsight, over the last two to three years, our upgrades as we move from an SMB platform to enterprise platform in large part has hasn't been material in terms of our overall revenue. It's being basically putting merchants on the right plans. And so going forward, I think our enterprise pricing is pretty well fine-tuned at this point.
Our go to market is pretty fine-tuned at this point. Upgrades for us last year, obviously was impacted by the in increased transaction levels with COVID this year now we're moderating that a bit especially in the back half, but hope, hope that answers your question.
Appreciate the color.
Thank you. Our next question will be from Clarke Jeffries, Piper Sandler. Please go ahead.
Hello. Thank you for taking the question. First is maybe you could help us walk through the deal composition the quarter and maybe the occurrence of larger deals. A couple of new metrics this quarter, trying to understand what drove that big sequential growth in subscription ARR and what seems like maybe one of the lighter quarters in terms of raw net ads on the enterprise account number.
Yeah, I'll start Brent, but Q2 represented a great quarter in terms our ability to win large deals on both big commerce and Feedonomics both sides closed deals north of a $1 million of ACV, which is super encouraging 12 months into the Feedonomics from the Feedonomics acquisition, I'll tell you, we just couldn't be more impressed by the team and the product, the use cases of Feedonomics back 12 months ago, versus what we're seeing today are greatly different.
I think Feedonomics with BigCommerce we're able together to expand the total addressable market opportunities. When we think about just Q2, some of the notable wins for Q2 and in Feedonomics was new enterprise merchants, leveraging them for marketplace channel management, including listings on Amazon, Walmart, Target Plus, we had a very large win with a leading same-day delivery fulfillment partner in the US and in Latin America, them syncing real time local product information for millions of products.
Also a large win with a global affiliate and advertising platform, transforming data at scale for millions of products. So I share that with you because I want to deliver everybody a sense that these use cases go well beyond just commerce. I think what we've learned with Feedonomics plus BigCommerce, there's a lot of opportunities in terms of aggregation, syndication, data transformation at scale for merchants, but also for our agencies, our channel partners, our technology -- and technology companies.
So when you look at that sequential increase, a third of that increase was Feedonomics subscription and two thirds of that was BigCommerce. So both sides had a really great quarter and two several really large deals.
Excellent, helpful color. Sounds like Feedonomics is really executing. Second follow-up is just tightening the range on the profitability guidance, but roughly holding the midpoint. Sounds like there was some commentary about a flowing of hiring $6 million to $8 million. I'm just wondering if there were any investments that are actually going up and offsetting the slowing and hiring to get to you to sort of keep that in line of operating income guidance.
No, thankfully I think we, we really got ahead of it, Clark. I mean, we went into the year knowing that it was an investment year for big commerce. We feel great about our execution in terms of staffing up our key strategic initiatives, but we also went in the year knowing that next year we needed to show leverage, because we've always had a goal to get to break even by mid 2024.
So I feel great about how we staffed up. We executed really well when we look at the five strategic initiatives that we covered at our analyst day. I think we've we we've executed extremely well across all five. And so if I take a step back and think about our progress, as Brent mentioned we believe we are the most modern e-commerce platform in the market today in our goal is that we want to be a clear leader in the enterprise category over the five years over the next five years.
And these are these investments that we're making are how we're going to get there. So, make no mistake we're investing for the future, but with the changing macro environment, we're also taking a hard look at the entire business. We're making sure that our spend is focused on the highest ROI areas. And then we're also looking at optimizing our cost structures to make sure that our unit economics Improve over time.
And our profitability also improves, but we went into the year knowing that we were going to drive leverage, starting to drive leverage in the back half. So I feel pretty, really, really good on our ability to kind of get ahead of it. And we don't feel like we got ahead of our skis, so really proud of the team.
Thank you. Next question from Terry Tillman of Truist. Please go ahead.
Hey guys, this is actually Connor [ph] on for Terry. Thanks for taking my question. First one for me just on international expansion. So congrats on growing your presence in Europe to Nordic [ph] I know international expansion is one of your key investment areas this year. Could you maybe just remind us what you look for in terms of ROI entering new geography and have these regions been mostly consistent with the US in terms of enterprise merchant demands? Or is there maybe a little bit more slow down there? Yeah, go ahead. Brent,
Why don't you take the ROI part of it RA and I'll answer the second part.
Yeah. Connor, we covered this on the analyst day, but you know, we're basically we know that we're going to invest in the first year. We look for a, a payback anywhere from 18 to 24 months. Sometimes when we make heavy heavy investments, it could be up to 30, but on average, you know, we're kind of make, want to make sure that these expansion costs, we get paid back in kind of 18-24 months and the markets that we enter into we, we test and learn a lot before we make these investments.
We know they're strong product market fit. We've identified agency partners, tech partners, to make sure that our product can be ready in those markets. And so much like the markets that we've seen such great success in, we try to replicate that model. And I could say that that holds true for the markets that we entered into in Q2.
Yeah. And in terms of performance in market to market, none of them should be benchmarked against native English speaking countries like the us, which by the way, was our second market, not our first Australia was our first way back when or the UK. I mean the UK just was a rocket ship, but even when we formally entered the UK, we already had more than 3000 stores there.
We just didn't have a marketing website or employees. It's very new to enter foreign language countries, Italy, France, Spain, Germany. What we're seeing Netherlands, what we're seeing in general is that our markets are in line with our, sort of first year, second year performance, but there's variability from country to country that can have a lot to do with the early traction or lack thereof that we get with local agency partners and just how strong they are and how heavy they go in with us.
An example of a market that's off to spectacular success is Italy. And if every new launch country where like Italy, then we'd be way ahead of all of our targets. But in general, we're on track and that's true in Europe. It's on, it's true in Mexico as well. Thanks for the question.
Thank you. Next question comes from Daniel Reagan, Canaccord Genuity. Please go ahead.
…forecast for the business, just given the macro backdrop, which verticals or cohort types were you seeing the most risk in, and then also as volumes come under pressure, how should we be seeing about risk of downgrades? Any color there would be great.
I got most of the question. I don't think, I got the beginning, but, I think I got the gist of it. So, what we've seen in our aggregate GMV volume, in the first 18 months to 24 months of COVID, we saw a sizeable step up in our aggregate GMB. We have not seen a deterioration of that. We've seen growth rates that have come down a little bit. But in terms of aggregate GV volume, pretty much across every major category we've seen growth and we continue to see growth.
There's some categories growing faster than others, but overall they're all growing off of a much larger base than they were, you know, 12 or 18 months ago. When we think about the back half, we AC, obviously have to factor in GMV assumptions for same store sales.
We also have to factor in the launch of new accounts and I'm really excited about the back half because we're actually launching one of our largest accounts ever in, in hi in our history. And it's going to once fully launched, it'll be north of a billion dollars on our platform. So when we think about and look at the GMV by category, we're seeing growth across most categories.
We're also factoring in the launch of new accounts with much higher GMV. And just like in Q2, as we sign larger and larger merchants, we're going to be able to add that GMV on top of the aggregate GMV. That's been stepped up over the last, 12 to 24 months. So as I think about the back half of the year, you know, we're looking at same store sales assumptions discounting that slightly, and then adding the impact of, you know, large accounts that you know, we're really excited to launch.
Got you. Super helpful.
1 thing I'll also add there as our mix is now 70% enterprise these are businesses, often national brands. These are companies with a wide product catalog that have kind of the durability, I think that will allow, their GMV to continue to increase on big commerce.
So as that mix continues to shift even further and further to enterprise as, and then you add on top of that large enterprise, accounts that are a million dollar in ACV and accounts that have a $1 billion running through the platform. That's definitely going to help us, I think navigate any fluctuations in same store sales or near term economic uncertainty.
Got you. Super helpful. And just as a follow up and circling back to the replatform cycle, as we think about the Magento displacement opportunity with sun-setting of M1, can you just talk a little bit about how your approach acquiring these customers has evolved now that you have probably a little bit better way of the land? And then secondly, what levers can you pull to accelerate? Any agency efforts here? Thank you.
Yeah, with time, we keep trying to get better both at the core demand generation tactics that we're already good at, which I will highlight as well as add new tricks that have higher ROI. So the things that we already are well experienced at digital marketing outbound and inbound sales development rep sort of lead cultivation account targeting, and especially one of the things I think we're best in the industry at is working with our agency partners.
We're very good at co-selling with agencies building joint value proposition with agencies, but one of the big opportunities we have is to expand our agency network, both within established markets and new markets. And particularly at the high end, if you go to the very high end of large enterprise, you know, historically we were competing in mid-market in the lower end of large enterprise and the types of agencies that were doing the multi-million dollar installs and implementations, weren't working with us, they were working with in years past the Oracle ATGs and IBM WebSphere of the world, even though those aren't sold anymore or at Magento enterprise, maybe Salesforce SAP, and now that many of the tech analysts are actually rating us ahead of those platforms.
And far ahead of our more SMB centric platforms, we're entering the consideration set. And in fact, the priority set of, of many of these top agencies. And so we're trying to compete for the full spectrum of opportunities. And some of these sales can be very big and needle moving for us if and when we win them, there are also a bunch of other technology partner tricks and you know, working with our existing merchant base to expand our opportunity, set that our new tricks for us, we're trying to work on. And you know, and finally we want to increase our presence at events eCommerce events, industry events.
We want the word to get out that we are the world's most modern enterprise eCommerce platform and be in the consideration set for every relevant decision that big companies and small companies are making
The only that's great. Brent, the only thing I would add to that point is we launched an omnichannel certified agency partner program. That's getting a lot of great interest in traction and essentially that allows our agency partners to help merchants on their omnichannel initiatives regardless of what platform they're using. So regardless if they're on Magento or anything on other platform they're able to work with, Feedonomics it's a great example of how big commerce and Feedonomics are working together.
They call Feedonomics leveraging our ecosystem of amazing partners, our partners, being able to leverage their technology to transform millions of skews of data and syndicate that to a lot of feeds at a scale that they just couldn't do on their existing platform.
So I think feed Andos and our omnichannel initiatives in this partner program could be a really good way to incentivize merchants to start working with Feedonomics and then, hopefully migrate over to big commerce sooner rather than later.
Thank you. The next question will be from Josh Beck with KeyBanc. Please go ahead.
Hey guys, this is Mattie on for Josh. Thanks for taking my question. My first question for you is what are going to be the key factors bridging what today's 15% to 20% organic growth outlook is here to your long term model expectations. Thanks.
Yeah, so I'm happy to take that. I I'll just point to enterprise. So even with Feedonomics in our base period in Q3 we still feel like we could grow our enterprise ARR potentially over 40%. Enterprise and Feedonomics, as we've mentioned before, we expect both segments to grow at a pretty high clip at a very comparable clip.
Knowing we've got some lapping effects this year it still gives us a ton of confidence that with the large mix of our revenue tied to subscription that large mix tied to enterprise the deals that we're winning today and that we have great pipeline to win in the second half we still stand pretty confident that, over the next five years, this is a business that, will deliver a 25% to 30% CAGR.
Awesome. And for my follow up, I'm curious if you guys could deliver an update on how B2B Ninja and B2B Bundle acquisitions are tracking and then just overall B2B momentum. Thanks.
Yeah, they're tracking consistent with their trend line pre acquisition, which is a very healthy trend line. And we shared some of those B2B growth rates in our analyst day in Q1. I should say in in May, the most important thing to note is with bundle B2B. There's a fair amount of work that we do to now bring that product native into the platform and Improve the architecting and the compatibility of it with all themes with multi-store front additional geographies.
So there's refactoring of the product that they have to make it more usable with the best capabilities, both and both functionality and openness at big commerce. And we are fixated on that in the short term, continuing to sell it very successfully. And then, maybe after a year after acquisition, we'll start turning our attention to the addition of additional functionality in this.
We're just very pleased though, with where we are at B2B in general. For paradigm that it's mid-market and B2B combines to recognize us as an award winner in 22, out of 24 categories, that shows that the product is quite well rounded and mature as it is, and it's only going to get better.
Thank you. Next question will be from Koji Ikeda of Bank of America. Please go ahead.
Yeah. Hey. Hey, thanks guys. Thanks for taking the questions. Just a couple from me. I wanted to ask the first question on the guidance and RA appreciate all of the color on the call regarding the guidance and the way to think about it. I guess my question is really about PSR regs, really thinking about how we should be thinking about this segment's growth in the second half. I clearly understand the factors that were driving the guidance there, but real short question is, could PSR revenue growth be flat or even down in the second half?
No, we don't think so. Koji. When I think about the second half you know, we do start with our same store sales assumptions. And then we add on the impact of, you know, the large accounts that we launch and the impact to PSR. We do expect that impact in the kind of part of Q3, most of Q4.
So Q4, I suspect PSR kind of in the mid to high teens based on that remember we also have a mix of non GMV related revenue items in PSR. But when I think about Q4, I can see that kind of in the mid to high chains. When I think about Q3, we do have to lap a deal, couple of partnership deals that we signed Q2 of last year that could put Q3 in the single digits, but overall for the back half.
No, I don't, I don't see that being negative. If anything, I see it slightly down in Q3 just for the lapping effect of those deals from last year and then outpacing based on the large merchant launches in Q4.
Okay. Got it. Thanks RA. And then just, one follow up there. So thinking about the subscription side of that, that equation, the little bit of a slower growth rate there just that's the subscription component for potential downgrades, affected by the GMB with the commentary that you said earlier in the call, is that the right way, right way to kind of think about the growth algorithm here.
You got it. Yeah because the GMB assumptions affect PSR obviously, but definitely touches on assumptions around upgrades, downgrades and potential churn. The good news is, you know, with our large mix of enterprise, our retention metrics still look really good. But again, when you're kind of scenario planning and what if planning around that it does touch on churn a little bit, but since our mix is so heavily weighted to large enterprise merchants, we feel pretty good about that, but it does affect upgrades and downgrades.
Got it. Thanks guys. Thanks for taking the questions.
Thank you. Our next question will be from Parker Lane with Stifel. Please go ahead.
Hey, it's Max on for Parker, just staying right there on the potential churn, thinking about this strong enterprise traction and kind of the way you're shifting away from some S and B free trials and stuff. What do you think the churn will be for those smaller customers or is, is it just a matter of new small customers not coming on? And is there an idea of what you think the overall percentage of enterprise should be in the long run?
Yeah, it wasn't so long ago that we were saying that enterprise could be 70% and we're here already. I think in our analyst day I mentioned that I think there is a clear path to 80 potentially 90% of our revenue could be enterprise on the small business side. I don't want anyone to think that we're not still winning small business merchants or not seeing revenue from small business merchants, that promotion what we found when we dug into it was, a lot of signups, but really low conversion after the promo period. So in terms of effective kind of P&L management, didn't make a lot of sense to have that hanging out there where you have gross new signups that don't convert to revenue.
What we're seeing now is we're getting signups and they're converting and they're paying and the revenue from the signups that we're getting now for small businesses are, is actually much greater than the revenue we were getting when the promos were in place.
So I think with the promos we attracted probably small businesses that, you know weren't real businesses or weren't serious about e-commerce what we're seeing now is small businesses that, you know, are serious, have real businesses and you know, are growing on our platform. So I think overall I would characterize it as a win in terms of attracting small business merchants that, you know, do drive revenue.
And we expect that that two to one LTB to C will get better. Now that we're doing a better job of identifying those merchants, signing up those merchants and not spending too much money on acquiring merchants that won't convert.
Got it. That makes a lot of sense. And then thinking back to the strength you mentioned in Feedonomics and how well it's performing, are you still intending on investing around $5 million to $6 million that you mentioned during the analyst day, or is that potentially going to be lower as you look to cut some costs or is it potentially going to be higher given the success?
It wouldn't be higher. Feedonomics is now part of our omnichannel strategy. I mean, they just came off a quarter where they signed the three largest deals in their history. So that no reason for us not to continue to invest in Feedonomics and in our omnichannel initiatives, omnichannel in a lot of ways, if you think about a potential tightening spending environment we believe BigCommerce provides an excellent ROI total cost of ownership advantage for merchants around eCommerce.
We also believe Feedonomics is super attractive for merchants who want to increase in their return on ad spend increase in conversion. And so both of our Feedonomics business and big commerce business, I think that there is some really, really strong advantages to what we offer for merchants. If they're taking a hard look at mission critical investments that they need to make,
I appreciate the color. Thanks.
Thank you. Our next question will be from Samad Samana of Jefferies. Please go ahead.
Hi. Great. Thanks for squeezing me. Hi, RA. Hi, Brent. Maybe just first question just with your existing larger merchants, you know, they're usually planning for multiple years, even if things are maybe a little bit slower in the, in the short term
So I guess, Brent, I'm curious when you think about multi-store, are you seeing customers still adopted and at least still launching new stores with the eye that is a transitory change in behavior, and that e-commerce is still going gain share over time, or just, how are you seeing the behavior of existing customers, even as they're thinking beyond let's call it the next couple of quarters and as they're -- as they're building their business for long term?
After the pandemic, every business views online and eCommerce as strategically essential to their future, what's so powerful about multi-store is it lets businesses add brands and or customer segments like B2B and or geographies in a far easier and more seamless way than they ever could before because they can do it all within one account and leveraging a common set of tools and backend integrations.
When we first went into general availability at the end of Q1, it was available only to new stores and therefore our existing customers were sort of salivating for when it would be ready for them. And then last quarter we launched it now for existing enterprise stores and we're seeing very healthy demand for this among them.
It's too early to say, like at what point, what percentage of our customers will have multiple stores using multi-store front? You could, many of them already had multiple stores that were redundant or, or sort of independent accounts, but now having single account multiple storefronts, we don't know what long term maturity will be in terms of penetration and number per, but I think it will be quite large because most of our mid-market enterprise customers are big.
They are complex, they do have multiple brands, geographies and or segments to sell into. And, and so we think we're early days of a long term adoption trend there.
Great, appreciate that. Thank you.
Thank you. The next question comes from Emil [ph] of Barclays. Please go ahead.
Hey thanks. Well for me to, for squeezing me and more bigger picture question if you think about the things going on in the industry and we just saw the big news at Shopify. How do you think it from an industry perspective now? Are we still on the kind of the hangover to some degree from the pandemic and the big boom in eCommerce and we kind of everyone kind of scaled up too quickly and now kind of suffering from that or are we kind of be way beyond that and this is now more Preparing for what's going to happen to the economy? Like, could you just kind of see how you frame it in your mind?
Thank you. Yeah. And, I've received this question probably more than any other question over the last couple of years and my answer's pretty consistent. If you look at the data and just take the us the best official slash public data source is the us census, which comes out with its quarterly eCommerce estimates for B2C in 2020, the year of the pandemic B2C grew 32% in the us if trendline growth rate had been 13% to 15%.
All right. Let's just say that average is 14%. Well, 32% isn't even one and a half years of accelerated growth. Then when you got to 2221, so, alright, you've accelerated by about a year and a half in terms of eCommerce adoption and the height of the pandemic. Q1 continued to have growth rates north of 40% because they were overlapping some months pre pandemic.
But then by the end of the year, you dropped down to 10% growth rates in the last couple of quarters of last year and the year average 14%, which was smack dab, normal pre pandemic. So you're already back to pre-pandemic levels. You've only booked about a year and a half worth of acceleration. And you're now growing at a rate lower than you were pre pandemic as you lapse the highs, Q1 was 6.6%. Q2 is not yet reported.
My point is that the net of all of this is that B2C has accelerated by about a year through these two plus years of pandemic. It's our expectation by the end of this year, that the laughing of the peaks from a year ago and the return to store will be done, will hopefully be back to normal growth rates in that, you know, call it 12 to 15% range at the end of this year, but it was never a five to 10 year acceleration.
And we didn't run our business as if it were we're eager to see those growth rates return. I think the, the biggest thing happening right now is just the softness in the economy. And anybody would say, well, if we were 10% growth-ish in Q3, Q4 of last year, but 6.6% in Q1 of this year, there's reason to believe that the softness in the economy is responsible for several of those points of GMV reduction.
And at some point the economy comes back, growth comes back, we cycle through all of this in the long run the expectation at a macro level, at a global level, it's going to continue to be one to two points of total share gain per year of online, relative to offline and that's likely to persist for many years to come. So again, you won't find in economic history, many bigger, larger transformations over time, it's happening at a quite steady rate. It was almost a metronomic 13% to 15% growth rate a year pre-pandemic. And if we can get back to those growth rates everybody will look at this as a very attractive, predictable long term macro trend.
Okay. Yeah, it makes total sense. Thank you. And then Robert, like one quick, last question for me, like, as we go into macro downturn and like, obviously you talked about like some of the enterprise contracts that might not hit the volumes, et cetera. Can you and, and hence then kind of get, get stepped down, et cetera.
Can you remind us, like how tightly are these contracts negotiated? Was there a lot of buffer in there or are they kind of close to where they are, they kind of relatively realistically negotiated in? He there's a, you know, there's quite a few step downs. Like how should we think about that?
Thank you. Yeah. I would characterize it as we try to build in kind of a good estimate as we negotiate them in the of what they expect, what we expect in the first 12 months in terms of number of orders.
Remember our enterprise contracts are based, are order based. Now if they're, if volumes are elevated, they could get there faster. And again, we're using kind of a trailing 12 month view to kind of moderate or, or, or temper down any kind swings in the near term. In terms of like the next tier of orders, it's really based off the first tier that we negotiate.
So some of our contracts are, low average order value high, average order value. So you really have to do it. It's merchant specific, and it's really working with the merchants in terms of what they're expecting to sell and what their history of sales have been.
Thank you. Next question will be from Matt Pfau of William Blair. Please go ahead.
Thanks Brent for fitting me in guys appreciate it. Wanted to just follow up RA and your comments around competition. Was there any changes in competition that drove those comments and then if there are any changes, are they specific to any of your segments? Thanks.
Yeah, I don't think the usual suspects are still the same. I think what we're finding with the omnichannel, you know, partner program that we've launched is we're finding ways to allow merchants and our partners to leverage our omnichannel capabilities, that's platform agnostic. So you don't even have to be on big commerce to take advantage of that. And I think it's for us, what we're seeing is there's a high demand.
If you're a, if you're on an old legacy e-commerce platform if you're on a platform that doesn't have the capabilities to optimize feeds and drive great transaction flow through all the different channels you're very frustrated because you need to grow your business and you want to look for ways to do that. And Feedonomics is I think a clear leader in their ability to help merchants with that.
And so our ability to work with them, our ability to open up our ecosystem, have our partners sell Feedonomics into their base of merchants is I think for us just a really pleasant surprise. It's not something that we thought we would have an opportunity to do 12 months ago, but we have a strong opportunity to do that today.
Thank you. Next question will come from Keith Weiss - Morgan Stanley. Please go ahead.
Hi, this is actually Ryan [ph] for Keith Weiss. Thanks for taking my question. Maybe just first you've talked before about that cross-selling feed doo's into your install base provides an average lift of 20 to 40%. And then at the time of the acquisition you had maybe 1000 customers overlapping how has this trended since and where could this go over time now? You've got a better view in the business.
Yeah, we still feel really good about those stats. I would say that the teams have really leaned in are, couldn't be more proud of our big commerce team leaning in with Feedonomics I'll tell you, you know, 12 months after the acquisition, it's pretty rare that the teams are intact, are excited, are motivated. The culture at Feedonomics is real, super strong. The excitement within big commerce to self EDOs is incredibly high and merchants, our enterprise merchants are, are, are really interested.
So we're seeing good pipeline, we're seeing good adoption but we had to build the cross sell motions. So operationally, we had to get that motion in place, the system in place. And, once we did that, I feel like we're seeing some, really good demand signals to stand behind those stats that you mentioned.
I'd add to that. I'd add that the other big opportunity is when we release selfer versions of Feedonomics, which are targeted at small and mid-market merchants, but frankly, even a larger merchant could start taking advantage of a subset of Feedonomics capabilities at reasonable initial cost. Once we have that version out. So when we have self-serve for Feedonomics.
we'll target a few initial channels to be announced, probably advertising channels that are most popular and most widely used, and that could drive the count of adoption up very substantially once it's released.
Oh, thank you. And maybe on that kind of same line of thought, have you kind of evaluated what the average uplift is for cross selling multi-store front omnichannel B2B in those other areas you talked about that could drive growth of 10% of revenue over time?
I don't think we have a number off the top of our heads to share or even if we've thought about it exactly that way but…
No, nothing, no, no specifics to share there on that front. What we are seeing is continued strong pipeline in B2B. We often see merchants that come to big commerce for B2B and they realize how strong our B2C offering is, and they can run everything on one platform.
So, we still see a large number of opportunities that, that fit that use case. I thought we've talked a lot about omnichannel headless typically is a new deal, new sale, new opportunity when we respond to RFPs or when merchants really want a headless solution. But I'd say overall across kind of all those initiatives, we're, we're really seeing, you know, strong demand and signals that, that deliver us a confidence that those are areas we'll, we'll need to continue to invest in.
Thank you. Helpful. Appreciate your time.
Thank you. Next question will be coming from Brian Peterson, Raymond James. Please go ahead.
Hi, thanks for taking the question. This is John on for Brian. Just a follow up on the international expansion question asked earlier, given you've officially expanded into call it 11 plus nations over the last year, as we think about 2023 and beyond. How should we think about the pace of international expansion and the investments there?
And then just as a quick follow up, maybe clarify a bit of the comments from earlier on longer sales cycles thus far, are you seeing any length fitting in sales cycles? And if so, are they tied to any specific geos? Thank you.
In 2023, I think the balance of our emphasis and investment will be growth in the markets that we have already expanded into building out personnel potentially in language customer support in, in select countries and building our marketing and sales effectiveness in those countries.
We have a weight model that we call test and learn, which can involve putting up a marketing website that doesn't involve the same investment in actual people and infrastructure in market. And I think we will ramp more of that up relative to big full country launches in 2023.
So the rate of announcing countries will determine as we finalize our plan, but I'm looking at geographies like Asia and Africa, where we don't have many flags planted and still see a lot of long term opportunity there. All right. You want to take the second question?
Yeah. In terms of our sales cycles, we look at it with our mid-market team and our enterprise team. We're not seeing a lengthening of cycles. Some of the deals that we are now working on are just much larger deals. So the nature of those deals likely take a little longer, but when we kind of take a step back and think about alright, if we are going to have to face that headwind, could there be a little bit longer sales cycles potentially.
But, if that happens, if those sales cycles lengthen for those reasons, then there's also reasons where our TCO advantage is really going to shine. So I think what we're hearing and what we're seeing from our agency partners and the merchants that we're working with that, that TCO advantage is, is really, really powerful in a tight spinning environment.
Like I know at BigCommerce, we're looking at our, our spend on software and the mission critical software. And if you can provide me software that is 30, 50% cheaper and is better and more flexible and more modern than, you got my attention. So I think who knows what, how it's going to play out, but I think any lengthening of sales cycles could be balanced out with, maybe even higher pipeline.
Perfect. Thank you very much.
The next question will be from Ken Wong of Oppenheimer. Please go ahead.
Hi, this is Nancy [ph] on for Ken. Thanks for squeezing me in here at the end. Just one quick test question from me. You highlighted it Analyst Day that had list sales through 34% last year and accounted for about 9% of new sales MRR in the year. Can you deliver us a little color on how headless is trending in 2022 and our new sales for headless still growing around three times faster than other use cases?
That was a one-time disclosure. I'm not sure we'll update it on a quarterly basis, but I can absolutely confirm that headless demand stays very strong at BigCommerce and it's at all sizes. It's both at the low end of the market. Maybe customers are creating a front end on WordPress to the high end of the market where they're using leading CMSs like content stack content, full bloom reach, or sort of custom frameworks in react. And next.
It's really fantastic. The user experiences that businesses are creating. And it's our belief that this approach to composable or headless is viewed as sort of the leading edge and the most modern approach for companies that are capable of pulling it off. And certainly the tech analysts are saying the same thing. So, demand is strong and I'll leave it to RA when we next provide formal data updates on that. Thanks for the question.
That concludes our question-and-answer session. I would now like to turn to call back over to Mr. Brent Bellm, President, CEO and Chairman for closing remarks.
Great, thanks everybody who listened in. I want to conclude with three quick takeaways worth emphasizing. The first is Q2 again was our largest and best ever quarter of subscription ARR growth and we did that in a market environment that's not the most favorable. I think that's a great indication of just how strong our core business momentum is.
We also now have posted two quarters where we're so far this year where we've beat on the top line and bottom line guidance while holding firm to our full year guidance to the street. This is in a context where many other eCommerce players have disappointed or seen their own trend lines fall behind. And so we're really confidence in the underlying strength of our business and the things we have done to adapt to it, to stay true to our full year guidance because we certainly see headwinds in parts of our P&L as we outlined in the prepared remarks.
And then the third thing is we're really excited about the increasing recognition we're getting from tech analysts and experts that BigCommerce is today, the world's most modern enterprise eCommerce platform. We're hoping that increasingly leads to ever more consideration and adoption in the quarters ahead. So thanks again everybody for joining in. we thought it was a good quarter and we look forward to talking to you again in three months.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.