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A Radical Change Of Course Kicks Off New Growth Strategy For Blyk
Need for growth drives closure of MVNO in favor of a partnership model

blyk_orange_275.jpgToday Blyk and Orange UK announced a partnership that marks the end of Blyk’s initial operations as an MVNO, but perhaps is the beginning of a more scalable, sustainable, long-term strategy.

At the end of August, Blyk will be closing down its MVNO operations in the UK, and focusing instead on a partnership with Orange. We had a chance to speak with Pekka Ala-Pietilä, CEO and co-founder of Blyk, and Marc Overton, VP of Wholesale, Business Development & Partnerships at Orange about the details and the strategy behind this major announcement.

Blyk is the ad-funded, youth-focused MVNO that launched almost two years ago in the UK, with subsequent launches in other European countries. The service provided subscribers with a certain number of voice minutes and text messages per month free in return for receiving advertising.
(see MobiAD articles: Designing Blyk – The First Ad-Funded Mobile Operator, and Blyk, The Ad-Funded Mobile Network – One Year Later: Still Learning, Still Innovating)

The basic Blyk proposition was built around a number of key principles:

1. A focus on youth market. Youth are hard to reach with traditional media, yet they all use mobile all the time.

2.Using text message conversations as a model for advertising. This is a communication mode everyone already feels comfortable with. All the Blyk ads were in the form of sms or mms messages that encouraged the subscriber to reply, and therefore have a conversation with the brand.

3. Developing a very good profile on each subscriber – through an introductory questionnaire and through gathering subsequent information – in order to insure that the ad messages were relevant to that subscriber.

Following these principles, Blyk UK grew to almost 200,000 subscribers their first year, double their publicly stated target of 100,000 subscribers. And the advertising seemed to work, with response rates reportedly staying at a very high 25% over the course of the 2,600 campaigns that Blyk ran since their launch.

Plus, the subscribers actually liked the ads and found them useful, with many subscribers calling Blyk’s customer support line to ask how they could receive more advertising messages each day.

New Strategy

But now Blyk is radically changing course, and will be closing down its MVNO activities and focusing in the UK market on a partnership approach with Orange in order to grow more rapidly. The main points of the partnership are quite clear.

  • As of the end of August, the Blyk MVNO will no longer operate. Blyk subscribers will need to find a new mobile operator for service. And Blyk will cease to be a consumer brand in the UK.
  • Blyk will work with Orange to offer similar advertising opportunities to brands and media houses. The Orange sales team will sell the ad inventory, and Blyk will be responsible for actual implementation, including working with the brand and agency to develop the ad, serving the ads, optimizing content for various handsets, analyzing and optimizing a campaign based on reported results.

What is not yet clear is what sort of consumer propositions Orange will make to their various customer segments. Comments from Orange indicate that the first new offers will appear within the next couple of weeks, and will be applicable to all segments, not just the youth segment group that Blyk targeted.

The Orange view

Orange has been providing MVNO services to Blyk for 2 years, and their objective is to bring the Blyk benefits to their customer base of over 16 million subscribers. Mark Overton commented, “We view this as an enhancement to our core business, not a replacement. ”

From Orange’s perspective, there are several major reasons why this partnership makes sense. First, Orange subscribers will receive the kind of offers that caused Blyk subscribers to view the ads more as content rather than advertising. For media houses, they would like to have campaigns with the very high response rates that have been seen on Blyk. And finally, for Orange, it allows them a level of conversation with their customers they have not had before.

It will be interesting to see if in fact these high response rates and customer enthusiasm can maintained as Orange begins to implement Blyk-type advertising. A couple of points make this an open question:

• As the campaigns expand beyond the youth demographic, the targeted subscribers are probably less adept with texting and mobile in general. (This may not be too big an issue in the UK, but may be a concern in other countries.)

• Blyk obtained quite detailed profiles on all their subscribers. Insuring the relevancy of the ads was undoubtably a big factor in the high response rates and overall customer satisfaction. While Orange does have some information about their subscribers, they will not have this level of profiling to work with.

Lessons learned

MobiAd asked Pekka what were the main lessons Blyk had learned after being live in the UK for almost 2 years. He replied that the main thing is that their basic assumptions have been verified: messaging is a great model for mobile advertising; relevant messages leads to high response and customer advocacy scores; and interest by advertisers is very high, both for brand-building above the line campaigns as well as for direct marketing purposes.

Given that the basic assumptions have proved sound, the company’s main challenge now is a need to scale quickly. And this push for growth is driving major changes in their corporate strategy.

As Pekka explained, for Blyk scale has two dimensions:

First, there is the overall need to expand into additional countries. The MVNO approach was proving too slow and resource intensive, hence the decision to partner with existing mobile operators in each market.

Second, within each country, there is a need to quickly reach a certain critical size in order to be a viable media channel. “We need to become a mass media and a must media in each market. To be a must media, you need to reach 8% to 10% of the market, and we can do that much faster working with an existing mobile operator,” Pekka continued.

As Blyk pursues this new strategy, we’re likely to see a continuing series of new announcements; just a few days ago Blyk announced a partnership with Vodafone for the Netherlands market, where Blyk will exist as a customer-facing brand.

Since its conception, Blyk has been an interesting experiment in the viability of ad-funded service. While the initial approach was clearly successful, it depended on tightly controlling all parts of the advertising process. As Blyk begins to rely more on partners, and in some markets forgoes the opportunity to build an independent brand, that level of success may drop.

But perhaps more interesting will be to see how Orange is able to adapt Blyk’s mobile advertising approach to the opportunities and constraints of a major mobile operator.

Many in the mobile industry have remarked that much of today’s mobile advertising is simply a copy of successful internet advertising strategies. If Blyk’s style of message-based conversational advertising can be successfully brought to an operator with the customer reach of Orange, perhaps this will become the first truly mobile centric ad format.

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