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! 
So ESPN Mobile is being reborn, this time as EPSN MVP and exclusive to Verizon V-Cast. To remind you: ESPN Mobile 1.0 was an MVNO that was mothballed 9 months after launch with an undisclosed but presumably low number of subscribers. The new ESPN Mobile is an application available on a couple of Motorola and LG phones (including all the very fashionable ones) and is apparently a pimped up version of the original application that had come pre-installed on the former MVNO’s phones. Apparently BREW and some more dev makes it faster and sexier than the original Java app did.
The new MVP application is available for free to VZW’s high-end data subscribers, which are those who subscribe to the V-Cast service and buy its $15-monthly VPak subscription.
Learnings anyone?
Now, this should be welcome news to the mobile content folks: more than $30 ARPU on data consumption vs the industry average $6.74 (which is what IDC reported), and more than half of that are from content (more than double the industry average).
These are the figures MVNO Amp’d has released. Some juicy mobile content stuff in there:
- 5% of original content sees 30% of all downloads.
- The niche lives: ultimate fighting and super-cross see a lot of traction.
- Amp’d subscribers download more full music tracks than ringtones (which nicely confirms my explanation of that trend set out a few days ago here).
Congrats!
