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.
Tag: ad-funded
We will all remember that ad-supported content was the flavour of the month a short while ago. There were successful trials and a lot of hype all around, hell, there are even MVNO based on this model. Now, however, there is a survey that suggests that people will pay to avoid ads (if you are a true believer, look at the end of this post though…). Who’s right then?
Now, what then? Free content? And who is paying us poor sods who produce it? Hmm. Now, it gets even more confusing: according to the study, in particular the younger demographic shuns ads. 35% of the 16-24 year-olds would rather pay than get ads vs. only 17% of the (presumably battle-hardened and more cynical) 35-44 year-olds; one would have thought so that the elders with their higher spending power were more likely to pay… Hmm, hmm.While the vast majority (56%) believes that content downloads to mobile phones should be free of charge, there is a growing number of consumers that are so averse to advertising that they are now willing to pay a premium in order to avoid it, signifying a shift in how operators need to be tailoring their offering. A substantial 25% of respondents said that they would rather pay for a download if it guarantees them immunity from advertising.
One symptom of this trend is the increased resistance to targeted advertising on mobile phones. Whilst 47% of people feel that adverts tailored to their individual tastes and interests are a good idea overall, half of those who were willing to receive targeted ads on the internet were not happy to receive them on their mobiles.
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.