These days, €40m ($51m) is a big funding round for any company whose revenues are based entirely on advertising. Blyk provides free mobile calls to 200,000 British 16- to 24-year-olds in exchange for them receiving advertising messages, a membership it reached much faster than expected. Its response rates of 25 per cent have attracted 180 advertisers – but is even that enough to maintain revenues, with advertisers pulling budgets from even the most tried and tested of media?
Blyk’s fundraising – its third, coming from existing investors, who include Goldman Sachs and Sofinnova Partners – was accompanied by a “new media partnership strategy”. Blyk currently operates using a mobile virtual network, airtime bought wholesale from Orange in the UK and Vodafone in the Netherlands. But for further international expansion, Blyk’s co-founder and chief executive (and a former Nokia president), Pekka Ala-Pietila, says: “We don’t need to work purely on our own.”
A strategy of partnering more closely with operators or local media companies was prompted by interest in Europe and Asia “at such a level it has given us a lot of food for thought, to consider how we can be fast in expanding in new countries and also more flexible in pursuing different kinds of opportunities”, he says. “Where there is high demand then it makes sense to move and ride with the wave when the time is right.”
In constrained times, anything that cuts phone bills is likely to be popular, but Mr Ala-Pietila is thin on specifics of how such partnerships will work. Alexandra Rehak, mobile media analyst at Analysys Mason, a research group, expects Blyk to offer consulting services to operators impressed by those response rates and its mobile advertising technology.
Blyk also says it is pruning back from its estimated 60 people, among other undisclosed “streamlining” efforts. But in spite of the change in business model, cost cutting and a statement that Blyk is “feeling the impact of the world’s financial situation”, Mr Ala-Pietila insists that advertising on Blyk remains robust.
But Ms Rehak finds that hard to believe. “Obviously the advertising market in general is taking a huge hit and that is going to carry over into mobile even more than advertising at large, because it is new and untested,” she says. “Blyk’s whole business model is based only on advertising… they really have nothing to fall back on.”
Maybe, as Mr Ala-Pietila says, the advertising environment is not hurting Blyk in the UK yet. Mobile is an unproven medium, but demands only a small fraction of marketing budgets.
Reaching 100,000 subscribers – the point at which it says advertisers started to take it seriously as a “youth media” – by itself in a new country would be a much tougher proposition. In the meantime, the extra funds will help service the network costs of those 200,000 subscribers if advertisers do start to pull out.
