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Blyk marches on

Emeka Obiodu

Blyk marches on

We recently attended an analyst roundtable hosted by Blyk, the UK ad-funded MVNO. One year after it launched services, CEO and co-founder Pekka Ala-Pietila proudly announced that the company had signed up 200,000 users by early September 2008 - double its initial target for its first twelve months of operation. However, by proving that mobile advertising can attract users, Blyk is goading the much larger MNOs to move towards mobile advertising.

Blyk has started off strongly

For a company that has barely operated for twelve months, Blyk has already made a name for itself, proving emphatically that some mobile users are prepared to receive adverts in return for free call minutes and texts. The company doubled its UK subscriber target and has run over 1,000 cumulative advert campaigns without spending a penny on advertising its services. Although it would not tell us how its members were using their free call minutes and SMS messages, Blyk insists that it enjoys good feedback from them and operates with a churn rate similar to other players in the market. Blyk prides itself unashamedly on being a 'youth media'. By focusing on the 16-24 age group, the company has managed to cultivate a loyal customer base with 25% of those who receive ads responding to them. Its advertisers pay £0.50 per response, giving Blyk one of the most cost-effective response rates in the advertising industry. Blyk would not give us an update on its finances, but it has outlined a vision for further expansion across Europe, exposing it to 23.5 million potential customers in the UK, Netherlands, Belgium, Germany and Italy.

There are bigger worries ahead

Beyond the 'successes' outlined above, Blyk's biggest success story is to prove that the mobile advertising concept works. And therein lies the catch-22, as the Finland-headquartered company has become a 'guinea pig' for the mobile advertising business model. We put this to Pekka Ala-Pietila and the other Blyk executives and they conceded they were much more focused on what they did rather than worrying about what rivals do. Regardless of this, competition is intensifying and Blyk will have to fight with much bigger players. For example, Mobistar is launching a Blyk-like offer in Belgium, testing the ground for its parent Orange group and pre-empting Blyk's scheduled launch in Belgium. Blyk's unique selling point is its ability to channel adverts to a narrowly focused demographic. However, other players like Mobistar and Virgin Mobile enjoy greater exploitable patronage within the same group.

Similarly, Nokia is concocting a mobile advertising business and, together with its Ovi platform, potentially poses the biggest non-MNO challenge to Blyk. Both MNOs and Nokia are eager to stake their claim on every potential revenue source from mobile data services. Unfortunately for Blyk, that means that the more it succeeds in mobile advertising the more likely it is that those bigger rivals will invade its space.

Blyk will have to evolve to survive

Given the circumstances it faces, Blyk will soon have to evolve its business to survive. Its direct link to the audience through its user profiles is a massive asset. However, its current strategy is hardly scalable; it has only signed up about 2.7% of the estimated 7.3 million 16-24-year-olds in the UK. An MVNO, especially one targeting only 12% of the UK population, is not going to be the Coca-Cola of mobile advertising. MNOs sit on a pile of generic customer data and can easily entice their customers to create the sort of user profiles that Blyk's strategy depends on. Now that MNOs are seeing money in mobile advertising, the stakes will get even higher; Orange wants to generate 15% of its revenues from advertising by 2010, up from 6% today. Does this mean Blyk could be bought out? Maybe, and unsurprisingly we got little illumination when we asked its executives whether that was their core strategy. Alternatively, with its growing expertise in provisioning mobile adverts, Blyk could metamorphose into an aggregator for mobile advertisements and supply ads to all of the MNOs in the market. Indeed, the choice is there: to remain as part of the long tail of mobile services or to become the blockbuster of mobile advertising content.

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