Volker on Mobile

On 15 February, one of the most exciting showcases of mobile innovation of the year will be on display in Barcelona: the Mobile Premier Awards in Innovation. The awards are the largest start-up competition in the mobile sector and they are a unique grass-roots discovery tool: each chapter of the global community of Mobile Monday chooses one candidate. 49 candidates have been chosen (have a look further down). An international jury (I am flattered and proud to be a member) selects 20 finalists who will pitch in Barcelona at the Palau de la Musica on the afternoon of the first day of the Mobile World Congress.

It is a wonderful display of the innovation and creative power the mobile industry has to offer and I invite you to have a good look at the candidates.

If you are in Barcelona that week (and who isn’t?), you should make sure to book your ticket for the event here.

I hope to see you in Barcelona to celebrate innovation in mobile!

To stay in touch with everything around the awards, follow them on Twitter (@mobilepremier), become a fan on Facbook,

And, once your in Barcelona, you should not miss Mobile Sunday Barcelona 2010, which has fast become an unofficial kick-off event to MWC for mobile bloggers. It is on on Sunday, 14 Feb, from 7pm CET onwards.

Here’s a list of the 49 candidates (with links here):

• MobileMonday Austria – Mobilizy
• MobileMonday Barcelona – fonYou
• MobileMonday Belfast – SpeechStorm
• MobileMonday Bergen – ComCom
• MobileMonday Berlin – spendino
• MobileMonday Bogota – RedSalvavidas
• MobileMonday Brussels – Getyoo
• MobileMonday Buenos Aires – Beepoint
• MobileMonday Caracas – Consorcio Si-SMS
• MobileMonday Chennai – mobiSiteGalore
• MobileMonday Copenhagen – Cepa Mobility
• MobileMonday Dallas – Wave Integrated Marketing Solutions
• MobileMonday Dublin – Locle
• MobileMonday Dusseldorf – Yoose
• MobileMonday Edinburgh – Mobile Acuity
• MobileMonday Estonia – TaxiPal
• MobileMonday Frankfurt – match2blue
• MobileMonday Hamburg – apprupt
• MobileMonday Hungary – InfomatiX
• MobileMonday Jakarta – dotus indonesia
• MobileMonday Kuala Lumpur – CWorks Mobile
• MobileMonday Lithuania – SendFlow
• MobileMonday London – Audioboo
• MobileMonday Madrid – Tooio
• MobileMonday Malmö – Color Monkey
• MobileMonday Medellin – Wanbee
• MobileMonday Melbourne – Callernizer
• MobileMonday Mexico – Binbit
• MobileMonday Mid-Atlantic – Amphetamobile
• MobileMonday Milan – Soundtrckr
• MobileMonday Mumbai – Umundo
• MobileMonday Munich – Aloqa
• MobileMonday New Delhi – Voicetap Technologies
• MobileMonday New York – PercentMobile
• MobileMonday Oslo – Bipper Communication
• MobileMonday Paris – Presselite
• MobileMonday Rest of EMEA – Layar
• MobileMonday Rio de Janeiro – iMusica
• MobileMonday Rome – Mobnotes
• MobileMonday Sao Paulo – Atope
• MobileMonday Shanghai – mInfo
• MobileMonday Silicon Valley – CloudMade
• MobileMonday Singapore – Just Mobile
• MobileMonday Slovenia – Visionect
• MobileMonday Sofia – Bianor
• MobileMonday Stockholm – MoSync
• MobileMonday Tel Aviv – waze
• MobileMonday Toronto – Fonolo
• MobileMonday Vancouver – Sort Shots

We live in a world where sharing has become an It-word. Contribution, engagement have all fast become pinnacles of every marketing expert’s arsenal.

And now O2, not always famous for the radical and new, has taken this concept, embraced it, turbo-charged it and took it to a whole new level. Enter: giffgaff (fashionable with no upper case). giffgaff is the world’s first people-powered MVNO (or “mobile service” as it calls itself), owned by O2 but apparently independently run. Here’s how it works (or supposed to work):

The network is a good (?) old-fashioned solid one, namely from O2. But that’s where it ends. Sales, marketing, customer service, brand development and the general business decisions will apparently all be made (or at least proposed or advised on) by giffgaff’s own users. I already found an entry in its forum calling for users calling for two rotating board-seats for users (though that will probably remain to be seen). giffgaff does have a gaffer (CEO in old-fashioned corporate speak) with a back-room (management team) overseeing the whole thing (and that team, according to early commentators who have met them, seem to be for real). The service appears to run on a SIM-only model and aims for “simple” tariffs that include voice, text and data (mobile web without restrictions).

The prices for the service should be significantly lower because there are no armies of marketers, sales professionals, account managers, customer service representatives, customer service managers, etc, etc – or at least much less of them. At the same time, the “sharing is caring” credo has shown its power and quality in many ways on the web so far (and with giffgaff people will apparently earn rebates if they contribute). And in particular on customer service it should be easy to beat virtually any carrier hands down, shouldn’t it?

So will it work? I think it would be wonderful if it would. I am not sure though if this experiment will be a massive success (maybe a small success is good enough anyway). And the reason for this is power law distribution: only very, very few people contribute significantly (Clay Shirky gives a wealth of examples) and most people contribute hardly anything (the question would then be if the rebates are enough to break that mould). Whilst this works well with something like Wikipedia, I am not sure if a user of giffgaff would be all too happy to wait however long it takes for a member of the community to answer his/her particular query, at least not if it concerns some core functionality. Such a user would arguably be disappointed and thus relatively quickly discouraged. Which would be the end of him/her as a user of the service. Which would be not so good.

I would be more than thrilled if they would pull it off. And I will clap and shout for them. It would really be a whole new level of sharing. Go on, guys!!!

MVNOs seem to be seeking the shelter of big incumbents. Or is it the other way around? Incumbents buying the brands built by MVNOs and internalizing cost along the way? I suspect it is the latter but the economics would work either way…

Anyway, along these lines, Bell Mobility, the Canadian incumbent carrier, announced today that it has acquired Virgin Mobile Canada (or rather the half it did not own already) for Can$ 142m. This follows the acquisitions of Virgin Mobile UK by NTL and Virgin Mobile Australia by Optus. And, continuing the above theme, Bell also announced that Virgin will continue to operate under its own “unique wireless brand with special appeal to young Canadians”. There you have it.

Blyk, the ad-funded MVNO for 16-24 year-olds has been in the news lately a lot. The trigger was a piece by NMA according to which Blyk had announced it would scrap its consumer offering and concentrate on selling its technology/concept/both to other operators. This was quickly refuted by Blyk. The “final” position appears to being a little unclear.

I post on Blyk, and the next day its CEO rushes to give an interview… Was he upset about what he read and unleashed a PR storm to rescue his company to fight sentiment of the blogosphere? Perhaps, perhaps not. Well, maybe not. On the merits, there is nothing dramatically new but it is worth mentioning, I guess, nonetheless. Judge by yourself.

I know I have been depriving you lately (the day-job demanding more of my nightly attention than I would like) but this is remarkable: Blyk, the ad-funded MVNO, which I have covered previously (here and here), raised – financial crisis or not – a rather substantial amount from its existing investors, namely €40m (which apparently translates into $50.4m). Now, do they not read my blog? Or do I not get it (as Blyk’s UK MD would probably suggest).

Now, I will not claim that they ramped up their efforts as a result of my comments a few days ago, but Blyk announced today that they breezed past the 100,000 subscriber mark. So, well done them!

It does not however alleviate my concerns about the general business model, I have to say. They are not revealing ARPU or anything like that. The overall constraints of the ad-funded approach do, I think, remain. I stand to be corrected but would need to see a more robust business parameters to be convinced…

PS: Thanks to BitRabbit for the heads-up!

Ad-funded MVNO Blyk’s business is something I had long wanted to comment upon but, alas, never got around to. But as it was now reported that they increased their advertiser base from 44 to 117, now here we go…

Blyk is an ad-funded MVNO stricly for the 16-24 year-olds. It launched in September 2007 in the UK (running via the Orange network) and, on its website, promises to roll out to go “pan-European” this year.

Does it catch on? Blyk recently reported that they reached 30,000 subscribers in the UK and would ad 3,000 per week. However, they had also said they’d hit 50,000 by March and I have yet to hear of that milestone; even a Google search doesn’t reveal any progress report beyond the 30,000…

There has been some talk about issues in signing up to the full service but that may well be from rumour-land, so let’s ignore it here.

As a Blyk subscriber, you get 43 minutes of voice and 217 texts a month for free as long as you opt in to receive up to six ads to your phone a day. After that, Blyk subscribers, all of whom are pre-paid users, pay 10p (US$0.20) per text and voice calls are charged at 15p (US$0.30) per minute. Applying these rates to the free voice and texts, you get services worth GBP 28.15 (c. US$ 56.30) per month for free. This is therefore the amount they need to make back from advertisers (who include Sony Ericsson, Coca Cola, SonyBMG, I-play, Ford, Adidas and Mastercard) in order to break even (let’s assume the operating costs are absorbed in the margin on actual cost per voice minute and SMS, which should be somewhere around 40%). On 6 messages per day, this equals 15.6p (c. US$ 0.31) required ad revenue per message in order to make good for that (operating costs aside), the equivalent of a CPM of a hefty US$ 310 (compared to a market average of US$ 25-40). With the chronically cash-deprived user base that they are targeting, one can probably well assume that most users will in fact use their allowance in full.

So how do the economics work? And do they work at all? According to fellow blogger Jan-Michael Hess from Mobiliser.org the reason Blyk claims to justify this very high CPM is there apparently very high click-through rate (CTR) of 29% on average (anywhere between X and 43%). But can this be sustained? One cannot force users to click through. If each user gets 180 messages per month, how likely are they to act on an average of 2 per day? Not very, I’d say… This means that they are more likely to having to come down on their CPM. And this is where the fact that they apparently managed to nearly triple their advertiser-base is interesting: did they do so on their original CPM? Or did they have to drop it? Alas, the report doesn’t reveal this crucial bit of information…

CPM is key to Blyk’s business model and I would consider it highly unlikely that it will be able to command such a premium to the market, also as 30,000 users aren’t the world. Youth may be the killer target market that can create or make or kill new brands and it is therefore very interesting to advertisers. But, as has been pointed out, this particular target market is also fickle: free offers are loved but connection via community and brand means that users want to get in touch any way possible. More often that not mobile youth have several mobile prepaid cards all with special offers and bundled rates. They are tech-savvy and will often know where and how to get the free or cheap voice calls they need when they need them (to which I, the father of a near-13-year-old boy, can already testify).

My preliminary verdict is therefore: not very likely to succeed.

In Earthlink’s earnings call, they unearthed some usage numbers for US MVNO Helio, the joint venture between Earthlink and South Korea’s SK Telecom. And, despite the fact that Helio still seems to burn through cash rather quickly, these numbers do not look too bad:

- Helio’s ARPU was more than $85 a month compared to an industry average of under $50.
- Its users average more than 550 text messages a month, and instant message penetration is 3x the industry average.
- A whopping 95% of Helio customers access the web through their mobile devices (industry average: c. 13%.
- In December, Helio’s users uploaded photos from their devices to the web at a rate 5x of the industry average.

But then came the bad bit: Helio finished the quarter with just over 180,000 subs, which is a 28% growth rate over the prior quarter, but its revenues of $56 million may be an increase of 147% over the prior year but only 8% over the prior quarter. That means their top-line growth was not matched by their bottom-line one, quite to the contrary. The available news do not shed light onto why that is so but it is concerning as it means that they do either not have their costs under control (expending more per added user than per previously existing one) or they have a serious CPA problem: if the margin per incremental user gets slimmer, they may have to spend more to recruit them. Not healthy…

Because Earthlink has pulled out of additional funding requirements for Helio, the burden rests on SKT’s shoulders. For how much longer is anyone’s guess although, to be fair, SKT has shown a pretty healthy amount of patience in this.

Here’s something nice: after I mused extensively about the sense and nonsense of MVNO models. I have long been preaching that the true reason (other than price) why people might move would be driven by affinity marketing, namely the strong affiliation to a brand, a cause, an organization conveying something in people’s lifestyle that they wish to publicly own up to. So what is one of the strongest affinities people have? Their partner? No, 50% of marriages end in divorce. Their car? No, it breaks down after a while. Their phone? No, they change it every 12-18 months. Their club? YES! Or have you ever heard of a Boston Celtics fan who converted to the Knicks, a 49ers man crossing over to the Raiders? You will not because they do not exist.

Enter the good folks of Portuguese carrier TMN and FC Porto, one of the country’s major football (my American friends, read: soccer) clubs. Rather than fussing about sourcing handsets, staffing customer service and equipping shops in AAA locations, they focus on the real thing, namely the brand. The brief PR release outlines the service roughly: “The Dragao Mobile service offers calls to all networks at EUR 0.16 per minute and SMS at EUR 0.08 each, as well as personalised services for club members and fans. The club’s name will be shown on the handset display, and users will benefit from exclusive content. Customers will also get 5 percent of the value of each top-up returned to their bank account for use on FC Porto products and services. The package includes a EUR 10 card and a Motorola W218 mobile phone for EUR 59.90.”

There you have it. This is as it should be, in a previous post I called this “soft customization”: they utilise and activate the brand values by personalizing the handset and giving users some goodies connected to the brand. For the remainder, existing channels, networks, shops, handsets are being used, making the whole thing a whole lot cheaper. For a network operator, this makes sense as it reduces churn (listen & repeat: “no one ever changes the allegiance to their club!”), i.e. fans will be significantly more likely to stay with a network if it is the one where they have the chance to show their allegiance.

I sincerely hope that this will be successful. I would otherwise have to bury my conviction that affinity marketing is one of the instruments of choice in this industry, and that would be a real shame!