Analysts are buzzing about Rakuten's "AInization" strategy, the triple 20 initiative, and the potential for its Open RAN software to disrupt the telecom industry. But buried within the Q1 2024 transcript lies a revelation, a subtle shift that hints at the true engine powering Rakuten's resurgence: a laser focus on customer lifetime value (LTV) and the strategic monetization of its vast ecosystem.

This is not just about cutting unprofitable customers, although that plays a part. It's about understanding the complex interplay of services within the Rakuten universe and leveraging that interplay to cultivate high-value, loyal users who drive sustainable growth across all segments.

The evidence is in the numbers. While analysts fretted over a slight decline in Rakuten Ichiba's GMV, a deeper dive reveals a strategic recalibration. By focusing on attracting and retaining high-quality customers, those who engage with the broader ecosystem, Rakuten is fostering a powerful feedback loop.

Consider this: Rakuten Mobile subscribers are 55% more likely to shop on Rakuten Ichiba, and their spending on Rakuten Travel nearly doubles after subscribing to the mobile service. This translates to a whopping ¥10 billion contribution to group profits and ¥6 billion to EBITDA, a significant chunk of the mobile segment's impressive ¥4 billion adjusted EBITDA for the quarter.

"These figures underscore a crucial point: Rakuten Mobile is not merely a standalone telecom venture. It's a strategic gateway, a potent onboarding tool drawing users deeper into the Rakuten ecosystem, where their engagement and spending multiply across e-commerce, fintech, and digital content."

This LTV-centric approach is driving strategic decisions across the board. The recently announced "Saikyo Family" program, for example, isn't just about grabbing market share with aggressive pricing. It's about locking in entire families, boosting individual ARPU through data usage and, crucially, enticing them to explore and utilize other Rakuten services through generous point incentives.

Further strengthening this strategy is Rakuten's commitment to building a robust "super app" experience. The Rakuten Link app, initially a communication tool, is evolving into a central hub, seamlessly integrating Rakuten Pay, targeted advertising based on user data, and direct access to e-commerce offerings. This creates an unparalleled platform for maximizing user engagement and driving cross-service monetization.

The company's focus on LTV is also reflected in its approach to corporate customers. While these customers might not generate the same point-driven frenzy as individual subscribers, their LTV is significantly higher due to lower churn rates and minimal point redemption. This reinforces the notion that Rakuten is prioritizing long-term, sustainable profitability over fleeting gains in subscriber numbers.

What makes Rakuten's approach truly unique is its ability to weave together seemingly disparate services into a compelling, value-driven customer experience. The company understands that in the digital age, customer loyalty is not merely a function of price or product. It's about building a cohesive ecosystem that anticipates needs, simplifies interactions, and delivers consistent value across a spectrum of services.

Hypothetical Growth in Rakuten Ecosystem ARPU

The chart below illustrates a possible scenario for Rakuten's ARPU growth, driven by increased ecosystem engagement.

This quiet revolution, driven by a focus on LTV and ecosystem monetization, is the secret sauce setting Rakuten apart from its competitors. As the company fine-tunes its AI strategy and expands its Open RAN ambitions, this underlying focus on building enduring customer relationships will be the true measure of its long-term success.

Rakuten Mobile Ecosystem Impact - Q1 2024

While product revenue fluctuates, services have consistently delivered double-digit growth, quarter after quarter. This is fueled by the rapidly expanding installed base in these regions, creating a fertile ground for paid subscriptions and deeper engagement with Rakuten's ecosystem.

"Fun Fact: Rakuten's name originates from the Japanese word "Rakutenchi," which means "optimistic land." This embodies the company's philosophy of empowering people and creating a positive impact through innovation and technology."