Blyk changes tack, drops UK MVNO, will court other operators

So farewell Blyk, a company that thought we all wanted to watch adverts on our phones instead of paying for calls. It plans to change its business model, which means becoming a value added service for Orange in the UK and Vodafone in the Netherlands.

Blyk was founded in Finland in 2006 by an ex-Nokia executive and has been in the UK since mid-2007 targeting the 16- to 24-year-old market, with most of its advertisers offering key youth products, such as music. By September 2008 Blyk had reached 200,000 members. However back in February this year it STILL had 200,000 subscribers, so it had stood still for at least six months and told everyone that things had to change.

Company executives had been telling anyone that asked, that it was “looking for a new business model,” which meant that the core concept just wasn’t attractive enough for the mass market. It will now close its direct-to-consumer business on 31 August.

So far Blyk claims to have run over 500 advertising campaigns, with an average response rate of 29%. That figure is way above the average for any kind of mobile advertising, around 6%, which is itself higher than almost any other kind of media. But 200,000 customers is just not enough, not when you have all the costs of running a separate network within a network, which is what a virtual mobile network is. It will now pass as many of these customers over to Orange (who provided the cellular minutes for its MVNO). Blyk will now try to get operators to run a section of their customer base along the Blyk lines, swapping the first £15 a month of minutes and texts, for accepting advertising. Any revenues it makes it will share with operators.

Orange and Blyk have yet to state their position to customers and this is expected in the next few days, but the news was broken by New Media Age and the Financial Times. Orange is said to want to offer something like Blyk’s ad swap terms but has not reached the final contract terms yet. The new deal with Vodafone in the Netherlands will definitely take this deal on board with Vodafone providing all the mobile infrastructure, and Blyk providing ad serving and ad sales on a Vodafone branded deal.

Blyk raised £40 million last year to push its new model, so it has plenty of money, and has just reached an impasse in terms of acquiring new customers. It is hoped that Orange in the UK and Vodafone in the Netherlands will bring their marketing weight behind the idea and make it take off.

Some operators have already copied Blyk and provide discounts for viewing adverts on their phones, such as E-Plus in Germany, and Virgin Mobile in the US, so Blyk will now have to look to use its expertise to enable similar deals.