Ad-driven MVNO concept ailing in Europe but set to succeed in India?

In March, I chewed over the question of whether India or one or more markets in Africa would be the most likely setting for genuinely successful MVNOs to gain traction. I came down on the side of India, notwithstanding the fact that earlier the same month I had commented briefly on regulatory wrangles which looked set to frustrate certain business models for prospective MVNOs in the country.

One possible new entrant in India, according to a Cellular News story today, could be Blyk. For anyone not familiar with this company, Blyk, positioned by its developers as a "totally new proposition", has been making headlines (in Europe at least) and, as I have observed, stimulating debate at telecoms industry conferences since its inception in 2007.

The Blyk business model has been built on a belief that young people (the offering has been targeted exclusively at 16-24 year olds) love to communicate, would like to do so without eating into their disposable income and can thus be persuaded to accept a certain amount of advertising being sent to their mobile devices in exchange for a free service.

The Finnish founders of Blyk, Pekka Ala-Pietilä and Antti Öhrling, contend that their offering to advertisers is also very compelling: "Blyk allows advertisers to reach young people using the only channel that they carry with them everywhere," says the blurb on Blyk's corporate website. Advertisers, runs the blurb, "can engage them in a dialogue, one that they are uniquely ready for, because they’ve opted in." The ad-driven MVNO says its advertising products are "based on the most dominant pattern of mobile behaviour among young consumers: getting a message and responding to it" so that "its offerings create awareness, build relationships and drive sales.

Will this resonate in India? Possibly, but there might be a number of questions asked. The Cellular News story quotes Sanjay Behl, head of branding and marketing operations at cellco Reliance Communications, who has expressed concerns about whether consumers would find the adverts too intrusive, while declining to confirm or deny if the company is in talks with the MVNO.

This kind of response is not new for Blyk. When the UK press covered the launch of the new service back in 2007, the main talking point seemed to be to what degree consumers might find mobile advertising irritating. The Guardian newspaper, for example, warned that advertisers would "have to be careful not to annoy their new users with the mobile equivalent of spam email."

Pekka Ala-Pietilä, once President of Nokia, responded to this challenge in the same article: "We will collect the profiles of the young consumers, or members as we call them, who use the service to find out their areas of interest," he said, adding that "by understanding the preferences of our customers, advertisers will be able to create very relevant campaigns."

It now seems that this model is indeed set to be brought to the Indian market. According to a recent MocoNews article, senior level recruitment is already underway and Blyk spokesperson Ann Sarimo has confirmed that the MVNO does indeed plan on doing business in the country.

How successful, then, has Blyk been in Europe? Well, while the company can claim to have had some impact in the UK markets, recent reports have focused on a scaling down of its ambitions to offer similar services on the same basis elsewhere.

Caroline Gabriel, for example, writing for Rethink Wireless, suggests that the Blyk variation on more standard MVNO business models "is now showing signs of strain", with the company "reported to be scaling back its efforts."

Gabriel talks in terms of Blyk's UK operation "only" having acquired about 200,000 subscribers, which, in her view, "suggests the model may be proving too limited to support Blyk's ambitions and those of its backers, especially at a time of advertising downturn." In Gabriel's article, Pekka Ala-Pietilä is said to have admitted that the economic crisis has forced the company to cut costs and streamline its operation, despite having raised an additional USD 51 million to support a planned expansion into the European mainland. Gabriel reports that even when these funds were raised, Blyk was indicating that it favoured a switch away from running full-blown MVNOs of its own, in favour of a new marketing strategy based on partnering with major MNOs and media companies. Gabriel suggests that the most likely route forward now is for Blyk to work with larger cellcos, perhaps to run an ad-supported strand of their business under the MNOs' brands rather than Blyk's own.

Around the same time, Mobile Today echoed Caroline Gabriel's thoughts, contending that Blyk "has declared it will freeze its expansion plans into Europe." This article, too, insists that "modest consumer take-up" and "investor reluctance" are the factors which have "grounded" the project. Blyk co-founder Antti Öhrling, now the CEO of the UK operation, is quoted as saying that the UK would be used as a 'proof of concept', i.e. a case study for selling the mobile advertising concept to other markets.

I had to smile when this article brought up comments made by John Strand of Strand Consult. Strand admits in his own bio that "being honest - and giving his honest opinion on current issues in the mobile industry has become [his] trademark - even when it means being controversial or treading on some toes." I have seen this at first hand at one or two conferences and remember sharing a joke with a colleague who is still in the telecoms conference production business, as I was for a good few years. We agreed that nothing was surer to rattle an august line-up of big name speakers from major telecoms businesses than a few particularly piercing questions from Mr. Strand. We couldn't decide if this was a good or bad thing for a conference organiser - good in terms of livening things up a bit, or bad in terms of scaring top-name speakers away from future iterations of an event.

The Mobile Today article reminded me of the comments Strand made when Blyk was first launched. Adopting his trademark style, Strand remarked then that he "would rather put his money on a lottery ticket." Last month, commenting on the reported scaling back of Blyk's ambitions, he said "it is a difficult proposition because you need a hell of a lot of advertising revenue to mae it work." Tell it like it is, John.

In the context of what can hardly be construed as good news about Blyk in its native Europe, it will be interesting to see how the mooted move into India plays out. Perhaps the sheer scale of the market there will enable the business model to prevail more successfully. That said, I have noted here before that while India's low overall mobile penetration and vast population appear to offer rich opportunities, the market is already so competitive that players such as BSNL and Bharti Airtel are increasingly looking to foreign adventures for further growth prospects, the latter having gained much recent coverage concerning a hoped-for link up with giant pan-African cellco MTN. So let's see if this competitive market does indeed offer a decent opportunity for Blyk and for any other innovative MVNO propositions.

Ad-driven MVNO concept ailing in Europe but set to succeed in India?