Sceptics of the advertising-based model dismissed Blyk’s modest target of 100,000 customers within one year of launch as unlikely. But they were proved wrong, as the company announced last week, just ahead of its first birthday, that it had doubled that figure.
Blyk CEO Pekka Ala-Pietilä is the first to admit that its 200,000 subscribers is not a massive number in the mobile world, but the MVNO should not be judged by the same yardstick as Tesco Mobile, Lebara or Virgin’s customer numbers. Blyk is as much – if not more – a media business as it is a telecoms business, and advertisers are more interested in who the audience is rather than how many of them there are.
Blyk’s model is based on customers receiving 217 free texts and 43 free minutes every month in exchange for accepting up to six advertising messages per day. ‘Blyk is attractive because we have advertising funding and we can build our offer on top of that,’ Ala-Pietilä says.
All Blyk’s revenue comes from advertisers rather than subscribers, so the company’s priority is to ensure it has a user base that advertisers will pay a premium to reach.
Getting the information
Blyk’s selling point is having the information that advertisers need to ensure the right people get their message and which advertisers are willing to pay more. To ensure its customer base is appealing to advertisers, customers registering with Blyk have to answer a long list of questions about themselves.
Ben Wood, analyst at CCS Insight, says: ‘If you go on [Blyk’s] website and go through the registration process to become a member, you’ll see why they have only 200,000 members. They ask for things like your passport number and they check your details against the electoral roll. These are real subscribers. If you compare this with the largely anonymous prepay market in the UK, this is very different.
‘They could go to universities to give out free Sim cards and have a million subscribers if they wanted to. But that’s not their business. The day they compromise on this, will be when the business model begins to fail.’
Also, the 16-24 year-old market segment that Blyk has decided to target is one advertisers are finding increasingly difficult to reach through traditional mediums. Ala-Pietilä says: ‘The youth is a special segment; their behaviour is different. It’s difficult to reach them and influence them, but they have a lot of money to spend.’
So far advertisers have been keen to promote their brands on the service, with names such as L’Oreal, WKD, STA Travel and Heat using the media. Blyk has run over 1,000 ad campaigns for more than 100 brands during the first year since launch. And three out of every five of these brands have come back for more.
The reason companies are interested in Blyk is that it gets a much higher response rate to advertising than any other media. The MVNO reports that 25% of ads get a response from its customer base. This is much higher than other media - online advertising gets less than 1% and direct mail less than 2%.
The company’s promise isn’t just the click-through rates, it also claims that the cost of a click through is significantly lower on Blyk than on print, TV, the web or any other media, because the ads are so well targeted and wastage is minimal.
As a case study, Blyk shows energy drink Lucozade, which launched a campaign offering vouchers for a free drink. Although only 1% of the company’s media spend was with Blyk, 35% of the vouchers were redeemed by the MVNO’s users.
Blyk’s next target is to double the number of advertisers from 100 to 200 by the end of the year, reveals UK MD Shaun Gregory.
Building the brand
Blyk is not spending any money on advertising itself. The company gathered its user base by first sending out ‘street teams’ to demonstrate the services to 16 to 24 year-olds in major cities across the nation. ‘That’s how we got the initial few sales and then the viral phase kicked in, with programs like “member get member”. And now we are at the truly viral stage, we have become a community. We have no current plans to advertise, as word of mouth is strong enough,’ Gregory says.
The company has managed to get the word out. Blyk’s head of strategy and business development, Timo Ahopelto, says: ‘Our brand awareness is at 20% without having spent a single pound on advertising. For someone like L’Oreal launching a new hair product that would be very low, but they would have spent £5m advertising it.
‘Also, one third of people know there is a free operator. The concept is bigger than the company.’
Paving the way
For two years, analysts have predicted mobile advertising to become a billion-pound industry, but no-one has yet shown the formula of how to make money from it.
Wood says: ‘Operators under pressure from regulation and with downward pressure on prices, are looking to advertising as a new source of revenue. Blyk is definitely the most focused company in mobile advertising. They are the case study for other companies that want to be successful in mobile ads.’
Nokia has also been active in mobile advertising on a more global scale, but its model relies on a more traditional way of selling advertising space. The manufacturer’s handsets in markets where they don’t carry an operator logo come preloaded with Nokia’s homepage and the company already has 120 million users accessing its mobile portal. Others such as Yahoo! and Google have been active in mobile advertising, but the market hasn’t yet seen a consistent and optimal way of advertising on mobile.
3 and Orange were offering advertising-funded, free videos to their subscribers. Although the offer was successful in that 3 reported one million of its four million subscribers were downloading the videos, the company delivering the advertising, Rhythm New Media, had to pull out of the UK last month, with speculations about lack of advertiser interest.
Of all the mobile advertising experiments, it seems that Blyk may have found a formula that works.
The power behind Blyk
The fact that Blyk has shown all the signs of success isn’t surprising, considering CEO and co-founder Pekka Ala-Pietilä served as the president of Nokia for 15 years. As for Blyk’s other co-founder, Antti Öhrling, his background is in branded goods, retail and wholesale, publishing, film and advertising.
Wood says: ‘There aren’t many people that have a little black address book like Pekka [Ala-Pietilä]. He has influential contacts, that shouldn’t be discounted.’
However, mobile industry knowledge is not enough. Blyk has drawn talent from across the telecoms and media worlds. Shaun Gregory comes from the advertising background that launched youth-oriented brands, such as Kiss and Kerrang in the UK.
‘It’s an excellent team with many competencies. We had to gather telco, operator, media, advertising, internet knowledge and then know how to scale it all,’ says Ala-Pietilä.