Blyk's Ad-Funded Service Hits UK

Blyk launched its advertising-funded mobile service for young people in the U.K. today, with plans to launch in other European markets next year. (See Blyk Plans UK Launch, Blyk Preps Summer Launch, and Blyk Stalls UK Launch.)

Blyk, which is an invitation-only MVNO service, is seeking to create a kind of mobile social network. Subscribers, which Blyk calls "members," have to be invited either by Blyk directly or by other members. And membership is strictly limited to young people aged between 16 and 24, which Blyk says is a target market of 14 million people in the U.K. So, if you're 25, or 45, you can forget about joining Blyk.

In exchange for receiving six MMS advertisement messages per day, Blyk members get 217 free texts and 43 free voice minutes per month, excluding international calls. When the free monthly allowance for texts and voice minutes runs out, members can top-up their Blyk accounts and will be charged 10 pence ($0.20) per text message and 15 pence ($0.30) per minute for calls to any fixed or mobile network in the U.K.

Blyk will also charge members 99 pence ($2.00) per Mbyte for mobile data use. But Jonathan Macdonald, Blyk's U.K. advertising sales director, explains that "a vast amount" of members' data usage will be free because there is no data charge when users click through to a Website from an ad.

According to M:Metrics Inc. , text-based advertising is nearly ubiquitous in Europe, with three out of four mobile subscribers receiving ads via SMS in the month of July 2007. Blyk says it chose message-based advertising because messaging is the No. 1 feature that 16-to-24 year olds use on their phones.

Blyk's founder and CEO Pekka Ala-Pietilä, also a former president of Nokia Corp. (NYSE: NOK), reckons that six ads per day is just the right number to make the advertising-based model work for this age group.

"Over that number is too much, and under that is too little to create an experience [for the user]," says Ala-Pietilä.

Blyk has 45 advertising partners, including brands like Coke, L'Oreal, McDonalds, MasterCard, British Sky Broadcasting Group plc , Sony Ericsson Mobile Communications , and Microsoft Corp. (Nasdaq: MSFT)'s Xbox.

Before new members can receive their SIM cards from Blyk, they have to fill out personal profiles with basic demographic information and areas of interest. This profile information is important for advertisers to send relevant messages to the right people.

Blyk charges advertisers 20 pence ($0.40) to send an MMS to a member, 5 pence ($0.10) to send a text message, 2 pence ($0.04) for a text tag (where ads are inserted into text messages from other people), and 5 pence ($0.10) for the reply from members.

"This is absolutely the channel [advertisers] have been wishing for and missing," says Ala-Pietilä. "No other medium can combine these things: knowledge, interaction, and feedback."

According to Ala-Pietilä, Blyk has three revenue streams: the charges to advertisers, the members' top-up fees, and the termination fees other operators pay them to interconnect.

"We need good growth on the advertiser side and on membership," he says.

Apparently, getting ads via MMS six times a day is not annoying to this age group. One Blyk trial user -- Cleo, 21 – said, "It's like they know you personally and are giving you really good stuff?" (See Text Sells?)

Blyk outsourced network management to Nokia Siemens Networks , and its U.K. MVNO partner is Orange UK . First Hop Ltd. provides the messaging software in Blyk's advertising platform. TietoEnator Corp. provides the customer relationship management (CRM) system and business support system (BSS). (See Blyk Outsources to NSN.)

And Blyk wants to repeat this model across Europe next year. The service provider is in negotiations with 12 operators in Europe, which doesn't mean it will launch or have MVNO partners in 12 different countries. The service provider is talking to multiple operators in each market. Timo Ahopelto, Blyk's strategy and business development director, says that the key European markets Blyk is looking at are France, Germany, Spain, Italy, Belgium, and the Netherlands.

— Michelle Donegan, European Editor, Unstrung