Mobile Advertisement - Blyk Test Case

The MVNO Blyk defines itself as "the new mobile network for 16 – 24s that's funded by advertising. Blyk links young people with brands they like and gives them free texts and minutes every month. For advertisers, Blyk is an innovative, new media channel, providing direct access to the 16-24 year old market."
An MVNO (Mobile Virtual Network Operator) provides mobile voice service to users without deploying a mobile network, by purchasing the service on a wholesale basis from Mobile Operators and reselling the service to end users on a retail basis. Both regular and virtual mobile operators around the world are in the process of carefully examining business models that allow them to open a new revenue stream from advertisers to compensate what appears to be a slowdown in the growth of revenues coming from consumer services.

In most Western countries, the penetration of mobile services has reached saturation and the two main mobile services – voice and SMS have exhausted their growth potential. The penetration of mobile data services (browsing, search, content, music, TV…) is relatively low and the rate of revenue growth from these services is slow.

Blyk is an anomaly among MVNOs in that it defines and builds its business model primarily on revenues derived from advertisements, in addition to standard revenues coming from consumer services. Living by this concept of mobile advertising as its main revenue source makes Blyk a pioneer in this sphere of conservative players of mobile operators who remain cautious in opening their network to advertisements.

Blyk was co-founded by CEO Pekka Ala-Pietilä, former president of Nokia Corporation, and Antti Öhrling, Chairman and CEO of Contra Group. Its development began in 2006, and included extensive user group studies and live user trials of more than 3,000 people in the UK, combined with the industry knowledge of Blyk executives.
Blyk is now live in the UK. It will go pan-European during 2008 with the potential to reach over 40 million young consumers. Major brands (over 40 brands according to the Blyk CEO), including Buena Vista, Coca-Cola, I-play Mobile Gaming, L'Oreal Paris, StepStone and Yell.com mobile have confirmed, before the service launch, that they will be among the first advertisers to use the Blyk network.
Blyk gives consumers 217 text messages and 43 voice minutes free every month, and in this way ‘splitting its revenue' from advertisements with its consumers. On the other side, consumers have accepted to receive up to six commercial messages per day. The commercials arrive in the format of SMS or MMS.
The process of registration to Blyk is as follows:
- You receive an invitation from Blyk in one of Blyk's recruitment events, either through a friend or by sending an SMS.
- Enter personal details through Blyk web site (age, gender, city and more) as well as lifestyle information ("I like travel…") which is later used as valuable profiling for advertisers.
- Receive a SIM card in the mail which activates the user.
- Blyk offers a "pay as you go" program only. Service tariffs (topped up to the free voice and SMS) are published on Blyk's Web site.
Targeted for the Real Young at Heart (and Body)
Blyk positions itself as a brand for youth. It has been investing heavily in well planned and media heavy launch events. As part of the launch program, Blyk has been putting extensive efforts in recruiting users in a marketing campaign at colleges and universities (over 30 based on Blyk) through Freshers' Fayres events. It has also teamed up with Vice Magazine to run a free live music tour called Unitaur and works with various music artists such as Lethal Bizzle and Electrons, as well as with animators who created image clips for Blyk and published them using viral video distribution channels.
Blyk is nurturing the relationships between music artists and consumers (Blyk Music) under the assumption (probably to some extent the reality) that young consumers seek a closer relationship with their favorite music artists, and to that end, they are also willing to receive related information on their mobile phone.

Relevancy is a slogan that you will often hear from Blyk's executives in their interviews on the Internet. Blyk is very strict in respect to their targeted recruitment of their consumers – if you are 25, you can't join since you are no longer part of Blyk's focused group of 16-24s. Blyk offers its customers (the advertisers) a focused and well-segmented consumer database of subscribers who are willing to receive advertisements to their mobile phones. Blyk also proposes a method for better focusing on the relevant consumer segment in the following way and based on the following assumptions:
- Send SMS to all consumers with content that encourages users to reply for free (call for action).
- The ones that reply are interested and can be regarded as club members.
- Send a more appealing and expensive advertisement only to those who replied.
So where are the problems and will Blyk be able to translate its vision to practice?
- Blyk's target market is defined by age but is also limited by technology constraints:
o Blyk signed an MVNO agreement with Orange UK and limits newcomers to join only if they own a phone from Orange UK, or a SIM free phone from other operators. If you are an O2 user and you own a SIM locked phone, you can not join Blyk unless you buy a new phone (which you can order on Blyk's site).
o Your phone must support MMS.
- Blyk mode of operation is cash consuming to large extent and Blyk's capability to move to profitability is not a given. Blyk is in a very competitive race of subscriber recruitment to reach a critical mass of consumers that will interest advertisers over the course of time.
- Blyk is committed to provide free service (Voice and SMS) to consumers even if it does not manage to sell 100% of its mobile advertisement space in parallel. It is burning its money as you read this article…
- Using SMS and MMS as a method to deliver advertisements is, on one hand familiar to consumers, but on the other hand, could be irritating at a rate of 6 messages per ever day!
- Blyk's tariffs are expensive. If you speak with Blyk's representatives, you will learn that a single SMS costs 5 pence and a single MMS costs 20 pence. What Blyk does not explicitly reveal is that the prices under the standard advertisement terminology – CPM or Cost per mille is the price for a thousand impressions. In Blyk's case, the CPM is 50 pound for SMS and 200 pound for MMS!!! In other words, in comparison with alternative channels, advertising with Blyk is a very expensive proposition.
- Blyk is a media agency in the form of a mobile operator and is trying to be more of the first than the later. It has outsourced most of its mobile activities and focuses on its media operation and consumer recruitment. Still, the support of a growing number of users over time, especially when expanding the operation to more than a single country, becomes more consuming and expensive.
- The value that Blyk presents to consumers is clear and appealing, but on the same time relates only to a single service. Blyk is not ready to present its consumers with services beyond the free service that it delivers every month. Blyk competitors have an arsenal of weapons that they can use if they feel jeopardized in any way.
Will Blyk make it? I assume that a lot of people who are interested in this subject are looking for signs of success or failure, such as the users' take-up rate, which Blyk does not reveal. The main problem of Blyk is its high pace of cash burning and a tough path before it becomes profitable. 2008 will probably be the test year for Blyk and its model.