Author: Volker Page 56 of 73

Blyk: ad-funded MVNO revisited

On 20/04/2008

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.

Carriers lose content sales to off-deck

By Volker

On 16/04/2008

I wrote about this phenomenon a short while ago here but now Business Week has some further stuff to tell us. They quote an analyst that the share of content sales via carrier decks versus so-called off-deck (or D2C providers) will drop from its current 80% to only 25% in 5 years time. And, interestingly, all of the sudden the carriers contend they had said it all along: now they claim that a single piece was not as meaningful as access. In the latter the juice is (Sprint Nextel). and now they claim that they never said that content would take over the workd (AT&T).

Do I hear bit-pipe? The article reports that revenue from wireless data, which includes mobile content and Web access, rose 53%, to $23 billion, in 2007, according to CTIA. And, yes, that’s the bit pipe. The carriers start to love it? Hooray!

With D2C giants like Jamba, Thumbplay or Zed all reporting (or being said to record) very meaningful revenue numbers (Zed reported $500m in revenues last year), and OEMs on the move into a more service-driven model (with Nokia as the spearhead; see here, here and here), the pressure onto the carriers seems to have mounted so much that they now look to what they have traditionally been doing best: provide network access and bandwidth (be it for voice or data).

Enter: flat-rate data, walled gardens are so yesterday…

Get content! 200m downloads in 2 years…

By Volker

On 07/04/2008

200m downloads? Who is doing that, you say? Who do you reckon? Zed, Jamba, Thumbplay? No, not them. Getjar, a website featuring free mobile phone downloads (and a logo that cries out for a pro) announced that it recorded 200m downloads in 2 years of operation. See? Users do download content, so where’s your problem? Well… the downloads are not paid for, you see? This makes for a somewhat warped business model…

So, whilst Getjar would certainly appear to prove that consumers are keen to download content and applications to their phones, it does not prove that they would be willing to pay for it. And with mobile advertising sluggish to make a commercially meaningful impact (at least from developers’ point of view) that is somehow not so good really… Better then the Jamba’s et al as they at least make money from it and pay their developers.

Congratulations to the good folks from Getjar anyhow. I hope at least you guys got a good numbers of clicks on your Google apps…

iTunes the largest music retailer

By Volker

On 07/04/2008

In Apple, OEM

Not really mobile but at least digital and interesting in any event: a news release has it that Apple‘s iTunes had overtaken mighty Wal-Mart as the US’ largest retailer of music. Best Buy was ranked third and Amazon.com and Target tied for the fourth spot in January and February, it is reported.

iTunes apparently sold more than 4 billion tracks since its launch in 2003. The survey counted every 12 digital downloads as one CD but excluded mobile music sales. Apple claims more than 50 million customers. This is a rather impressive development: They sold around 25m tracks in 2003, surpassed the 1bn mark only 3 years later and hit 3bn in July2007.

Twitter's pains & (chance of) gains

By Volker

On 06/04/2008

I have been dealing with Jaiku and Twitter, the micro-blogging machines, a lot recently (see here, here and here). Today though, I stumbled across an article that put a rather different twist to it, and it makes you wonder… The piece is written by a mother of 3 daughters who tries to use Twitter as a mass communication tool (broadcast SMS) only to be utterly frustrated as none of her “super-communicating” daughters takes it up – too complicated, too onerous, too cumbersome, too – as one academic has it – surveillance-style.

Now, is that so? It would counter my (borrowed) argument of the intrinsic attraction of objects to social circles around such objects. It doesn’t seem to work with daughters though… Well, I wonder: The mom, a tech-savvy NY Times journalist, tries to put Twitter to a use, namely to shorten communication with her 3 daughters (no need to having to tell each of them – separately – that she is on the way to XYZ). However, the object of interest to each of the daughters is very different to the ones of the others (cardigan, pizza, shopping, …). So, no stumbling block after all: Twitter, et al are for people who group around a common object, which must be of common interest (e.g. the status and availability of black cardigans in the NY youth scene), not around one that only seems to be common (mom). Mom only happens to be at a point of interlinking circles, different objects that all touch her; she is not – at least not in the examples elaborated upon in the article – the central object herself.

Adoption-wise, this does of course not make things easier as the Twitters of this world need to migrate user behaviour: fans of Cheshire golf clubs or the NY indie music scene, Parisian vernissage goers and Seattle jazz fans will all have had ways to communicate prior to Twitter’s entry on stage; they need to be convinced that this is a superior tool to keep the community buzzing. And because there is slightly less vanity space involved (Twitter doesn’t allow you nearly as much room to put your wares on display), the communication bit must be utterly compelling to pull people across. It is the only USP the concept has. And this explains why the take-up is not as quick as for other social media: this is the raw core of it, and the simple truth is – as we know never simple.

I am hopeful though that they’ll find a way: object-centered sociality is the way!

Paramount gets game

By Volker

On 28/03/2008

Viacom’s Paramount announced to enter the sphere of video game publishing, and they want to concentrate on “casual, hand-held and mobile” because of the lower production cost compared to “proper” consoles. The latter would, it seems, remain reserved to sister company MTV, which recently entered the space with Rock Band, a title that sold a respectable 1.8m units since November 2007.

Paramount still seems to be looking around for the right models though: Sandi Isaacs, its SVP Interactive & Mobile said that they “are entering into deals now where we will be publishing games this year. There’s going to be a slate where in some cases we’re publishing, in some cases we’re co-publishing, or in others we’re funding development and another publisher buys it. It’s important for us to have a flexible model.” She also said that the studio might use external finance to fund video game development, which would be closer to business models widely applied in the film industry but which is still relatively nascent in games (although there are a select few project finance companies out there that also take on game development).

Irrespective of the relatively cloudy nature of the announcements, it is good to see that a major studio starts putting more emphasis on gaming as a way to capitalize on their IP besides (relatively speaking) shabby guarantees and advances for licensing their rights to others. For mobile, the most exciting bit may well be a co-publishing model: Paramount does not and – at least for a while – will not have the distribution footprint of many mobile publishers, so a partnership there might be mutually fruitful for both parties. Should this become a successful example, it might well help to break open the somewhat old-school business models that sometimes tend to strangle developers and publishers in the mobile space: they are required to cough up money that they would really require to put into game development, marketing, sales and promotions rather than contributing what is a relatively tiny percentage to a movie’s overall revenue. Encouraging!

R.I.P. European i-mode: one more down

By Volker

On 26/03/2008

Following last year’s drop of i-mode by O2 UK and Telstra (see here), Germany’s third-largest carrier E-Plus is now dropping the service, too. I saw the cause last year in the ways of the data charges (through which NTT DoCoMo makes most of its money for the service) and noted that this wasn’t too compelling for users and this seems to hold true, in particular in view of the move towards flat-rate data plans introduced in recent months by a lot of carriers, which will continue in the coming months, too.

Outside Bouygues in France and, seemingly, O2 in Ireland, it never took off over here. Rotten subscriber numbers in spite of huge marketing budgets. R.I.P. Nuff’ said.