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October 27, 2008
Children Of The Revolution
Ad funded MVNO Blyk celebrated its first birthday in late September. There was no shortage of sceptics when the firm launched and plenty of onlookers are still reserving judgement. But 12 months in, the people at Blyk are claiming success.
At launch, Blyk’s uptake objectives were modest by cellular market standards, with the firm looking to attract 100,000 Britons from its 16 – 24 year-old ‘youth’ target demographic in the first year of operation. In fact, the firm hit 200,000 just before its first anniversary. Expectation management is an old trick and 200,000 users is still less than three per cent penetration in the UK, home to 7.26 million 16 – 24 year-olds.
But Blyk’s management argues that the MVNO ought not to be judged against fellow providers of cellular service. Rather, said COO Leif Fagelstedt at an analyst meeting last month, it should be judged against other media, citing ‘lad’s mags’ such as FHM as an example. “For a youth media, 200,000 is a good number,” he said. “We are not a telco first, our aim is to make sure that we’re a channel for the advertisers.”
Blyk has executed more than 1,000 advertising and marketing campaigns on behalf of corporate clients since it launched and CEO Pekka Ala-Pietila reported response rates of 25 per cent. This is high; the nearest competing medium by Blyk’s estimation was un-profiled mobile advertising, with between three and six per cent. Traditional media, radio for example, offers a response rate of 0.01 per cent, said Ala-Pietila.
He also claimed that, for sales-based campaigns, Blyk was enabling advertising clients to generate a return of £10 for every £1 invested. Cost per response sits at £0.50 on Blyk (£2.20 for un-profiled mobile advertising, £12.5 for a direct mail campaign) and repeat business from advertisers is running at 60 per cent.
By contrast, the firm’s own marketing costs are minimal. Six out of ten of Blyk’s ‘members’ (the firm does not refer to end users as ‘customers’ or ‘subscribers’) have joined on recommendation from a friend. The MVNO’s churn rate is not something its management are prepared to divulge, with Ala-Pietila saying only that it is comparable to that experienced by other cellular carriers. The firm’s research suggests that a reasonable number of its members have adopted Blyk as a secondary account, though.
Customer care costs are equally low, said Timo Ahopelto, head of strategy and business development at Blyk. In 2008, 98 per cent of customer care events in 2008 have been self care contacts, he said. The firm’s members have established forums allowing for the sharing of experiences that enable the overwhelming majority of customer care queries to be processed without Blyk’s intervention, he said.
The firm’s management made some bold statements, claiming to have proven the success of mobile advertising as a service and business where others have failed. The key, they said, was establishing a good match between advertisers and their target markets. Relevance is high, they said, and the willingness of the end user base to act on recommendation can work as well for advertisers as it does for Blyk itself.
But the firm’s corporate customers are not using Blyk solely as a means to stimulate sales, or increase brand or product awareness. Ahopelto reported that campaigns run so far have generated a surprisingly high level of qualitative responses; with recipients offering information of a depth beyond that for which they were asked. So advertisers are often using the service to identify trends, likes and dislikes among the youth demographic.
Anecdotal evidence from such activities might make uncomfortable reading for other players in the mobile advertising sector. Blyk claims that its members are largely uninterested in ‘mobile content’ and portals designed to collate such content and store it in one place. They are more inclined, said Leif Fagelstedt, to search out their own content. Furthermore, there is little evidence that location-based advertising is desirable to the youth demographic, according to Timo Ahopelto, which has been a focus of both the LBS and mobile advertising sectors for some years.
Perhaps unsurprisingly, the thrust of Blyk’s message seemed to be that, in order to make a success of mobile advertising, firms need to have a dedicated service. That Blyk sees itself as a media channel and not a carrier is key to its operation. The firm’s UK CEO, Shaun Gregory, related an account of his attempt to spend a fictitious £25,000 advertising budget with one of the leading UK operators. He had 27 separate touch points with the carrier before he was connected to the person responsible for dealing with his enquiry. He was then given the names of two agencies for help with the creative work and told to call back when he had the campaign planned.
Even allowing for possible narrative embellishments, this story highlights a trend in the industry that is gaining momentum. Specialist players are often better positioned to attack specialist markets; the growth in ethnic or migrant MVNOs are another example. It is this that makes an acquisition of Blyk by a large carrier group reasonably likely; something that none of the management ruled out. Orange is the UK host for Blyk and probably has better visibility of its performance than its competitors.
It is probable that any prospective buyers will be waiting to see how the firm fares as it embarks on its international expansion plans. Last week, Blyk announced plans to expand into Belgium, tapping Nokia Siemens Networks to host its core network.
The Finnish headquartered company has chosen Nokia Siemens Networks to host its core network as it expands into the Netherlands and Belgium. Under two turnkey service deals, NSN will provide the infrastructure, prepaid charging and messaging systems, software and operations to Blyk as a fully managed, hosted service to Belgium and the Netherlands.
Blyk piggybacks on Orange’s network in the UK, and in January revealed Vodafone as its Dutch partner. In Belgium, the company will team up with Mobistar, and recently confirmed plans to move into Spain and Germany.
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