10/10/2007 11:59:00 AM
Chasing the youth market
There has been a lot of noise recently about the youth segment – specifically 16 to 24 year-olds – and how this has become the new sector to chase. But is this just hot air? In the US, for example, Disney Mobile – an MVNO targeting young people – has decided to shut up shop. This closure has raised questions over the viability of new entrants in the UK such as ExtremeMob and Blyk – both of which are aiming to attack the youth market. The general consensus, however, is that comparing US-based MVNOs with British ones is like comparing chalk and cheese.
Disney Mobile was just one MVNO offered by the giant entertainment group. Disney Mobile's USP was providing a brace of handsets which enabled parents to locate their children via GPS. It wasn't offering mobile phones with Mickey Mouse ears. Before Disney Mobile's demise, the group had already shut Mobile ESPN, which instead of targeting children/parents was an MVNO aimed at American sports fans. Helio, another youth-orientated US MVNO, using Sprint's network like Virgin Mobile USA, is currently reported to be struggling financially, while Amp'd Mobile, which targeted 18 to 35 year-olds, shut down at the end of July.
Against this uninspiring background, Blyk has picked the UK to launch its first network, attracting a great deal of media attention. Blyk, of course, not only has a radical model for funding calls through sponsored adverts, but boasts an extremely precise demographic target audience, namely 16 to 24 year-olds. On top of this, Blyk will be authenticating its subscriber base carefully, which it calls 'members', to ensure that imposters are not admitted. Trying to blag your way into Blyk by sending the word 'Fresh' to 82595 (8BLYK) simply doesn't work. You merely receive a message saying that invites aren't being sent out quite yet.
Meanwhile, waiting in the wings to launch against Blyk is ExtremeMob, which will be aimed at those under 24. Al Gosling, head of the Extreme Group, says: 'ExtremeMob will be a unique, youth-focused mobile offering. We totally understand the importance and potential of mobile to the youth market. The youth audience already embraces mobiles and advances in technology; they “get it”, so why treat them like they don't?' ExtremeMob has partnered with Vodafone to bring its service to market, while Blyk is taking advantage of Orange's radio network.
The two operator partners don't appear overly stressed at the potential loss of subscribers to youth-orientated services. Keith Greenfield, director of wholesale at Orange UK, says: 'Our network is one of our greatest assets and by securing deals like this [with Blyk], we are using its potential to the full. Working with innovative new companies like Blyk offers incremental financial rewards for the business, which in turn will allow us to compete more ferociously in the UK market.' Similarly at Vodafone UK, COO Nick Read declares: 'Extreme is an attractive partner for Vodafone. It has a unique combination of brand, content and its own distribution channel, that are all complementary to Vodafone. We have been approached by several parties for an MVNO deal and Extreme is the only one that convinced us it has a genuinely different proposition that will add value to the mobile market.'
Mobile asked Jon Fisher, UK marketing director at Blyk, what part, if any, the traditional independent distribution sector might play in building youth-orientated networks like Blyk. 'Because we authenticate our members, Blyk operates an online direct channel only. Our aim is to provide a personalised service. We couldn't do that if we went through distribution,' he responds. On the other hand, Fisher reveals that Blyk would welcome any move that helps it acquire 'members', such as selling Sim-free handsets to potential subscribers. 'All items in our own store are unlocked,' Fisher points out.
That said, the company hasn't got a 'Blyk ready' approvals programme for handsets in place because it is still early days, Fisher adds. Asked what attitude Orange is taking to unlocking its phones for use on the Blyk network and whether it is giving Blyk any extra help in this department, Fisher refuses to comment.
'Another reason why Blyk doesn't suit standard distribution is that it's hard to convey exactly what the “Blyk experience” is like,' Fisher continues. 'We find that the best people to explain what Blyk offers are those who are already on the network.' The downside of heavily authenticating potential subscribers and making the network 'by invitation only' is that it will take time to build up numbers. Fisher accepts this: 'We've got to ensure that we provide [members] with everything we say they'll have. Which is why it's something of a staggered rollout as we speak.'
There are plenty in the industry who can't see what all the fuss is about over a supposedly newly discovered 'youth market'. 'The youth market isn't uncharted territory,' a spokesperson for 3 UK says. '3's deals, content and mobile broadband offers push all the right buttons for young mobile users. With our market-leading value, free internet calling on Skype and the UK's leading mobile music service, 3 already has the most to offer the youth segment.'
There is a general consensus that parallels shouldn't be drawn between what's currently happening in the US and the situation in the UK. 'The US is very different from Europe where the MVNO proposition is proven and well established,' argues Paulo Pescatore, research manager with analyst firm IDC. 'With the likes of Disney, it was more of a question of companies thinking they could jump on the mobile bandwagon and start an MVNO without any thought of the value proposition.'
Pescatore believes that as soon as one major brand, such as Disney, made the move, the rest all thought they could do it too. Indeed, even Sprint Nextel noticed that too many companies wanted to start MVNOs over its network. Along with the leading MVNO practitioner, Virgin Mobile, plus ESPN, Disney Mobile and Helio, Sprint was finding that things were getting a little crowded. 'Sprint Nextel turns down a lot of companies who want to use [our] networks,' Sprint's Len Lauer revealed back in April 2006.
'One of the problems with MVNOs in the States is that they're prepay based,' Pescatore suggests. Prepaid doesn't enjoy the same success Stateside as it does in Europe. 'The only real success with prepaid has been Virgin Mobile and they've had the advantage of being first to market.' He argues that it's actually very difficult to get young people to churn to another operator. 'In that sector, if they don't “dig” what you have to offer and already possess a mobile phone, then there's no real incentive to move to a different mobile provider.'
Parents or children?
Another industry observer who didn't wish to be named, was more forthright about the demise of Disney Mobile. He tells Mobile: 'I think the Disney offering was a stupid idea in the first place. If you looked at the business proposition Disney put together, you'd have thought it must have been authored by Dumbo.' The Disney Mobile network launched with just two handsets and appealed to parents rather than marketing directly to children.
Nonetheless, both Blyk and ExtremeMob seem confident of success. According to Blyk's Jon Fisher: 'If you asked me if I believe there is a gap in the market for a network aimed at 16 to 24 year-olds in the UK, then I'd have to answer, “Absolutely!” That said, it's going to be a competitive market, which is why we must give [the consumer] more than just the standard offering. We've got to provide something extra. We see ourselves as being the only ones able to offer that to the youth market for the foreseeable future. It's not just about fancy new devices.'