
Ad-funded, youth-targeted European mobile virtual network operator Blyk announced yesterday that it had secured a massive $50 million (40 million euros) in funding from its existing backers, which include Goldman Sachs, IFIC and Sofinnova Partners, no mean feat for a company whose business model relies almost entirely on advertising at a time when the downturn is clearly hurting ad revenues. But Blyk CEO Pekka Ala-Pietilä, and ex-president of Nokia, says that the company, which now has 200,000 users in its targeted age group of 16-24 who have agreed to view ads in return for free airtime, is not only poised to "weather the storm," it may well have edge during the recession.
Blyk has "taken measures to streamline and cut costs"--what does this mean exactly? "It means first of all that we are experiencing tougher times and unpredictable times ahead of us, and we like everyone else are feeling the impact, so we have to be well prepared and to do things differently internally. We are working more smartly, and we have to cut the number of people. But I can't disclose that number."
More on advertising, funding and other topics after the jump
Growing the subscriber base: "This hasn't been a challenge. Now more than ever people want free things."
The downturn is obviously having an impact on advertising, what does this mean for Blyk, given that your model is so reliant on it? "In Blyk's case there are interesting things that will help us weather the storm. If you can send relevant messages, you cut down on waste. Our form of advertising is extremely measurable, and during times when people are very careful when planning how best to spend their money, we see this even giving us an edge. (Blyk claims an average response rate of 25 percent for the 2000+ campaigns it has run in the UK.) Also, the mobile advertising industry is still small and we believe it will be less impacted because of its relatively smaller size."
But despite the cuts, international expansion is going ahead...: "Yes, it's going ahead. In the last few months, we've had increasing interest in Blyk's media model. It was at such a level that we needed to go back and rethink what does this mean as an opportunity for us. We are embarking on a path for partnering with operators, with media, and with ad agencies. To deliver the Blyk media experience, from end to end, from operator to consumer, the whole ecosystem, or constellation, is very muti-faceted, very complex. By partnering, we speed up our footprint, by using competencies from each of the partners."
Aside from Europe and Asia, what plans are there for the US, where the Blyk model might be more of a challenge to implement as mobile users pay to receive SMS? "Again, with this partnership approach, I can envisage a partnership model in which we work together with key players in the US. This is part of our motivation?if we have the flexibility in our model, we don't need to be fixed too tightly [to our existing business model] and can expand in markets and countries where [industry practices] are different."
Despite the sizable funding you've been able to bring in, and as you say the very measurable results you can show, there still seems to be lingering skepticism over the Blyk model. Why do you think is? Where is it coming from?: "Mobile advertising as a market is still nascent. The different facets of mobile advertising have not been discussed that deeply, the awareness is not deep. Mobile advertising is still used as an umbrella term to mean one monolithic market. That doesn't do us justice; it's not the right way to assess things."
"Mobile advertising is at least four things--content, messaging, search and display. It's not fair to take a stand on all in one go. On the content and messaging side, which form Blyk's main model, what is already emerging is the recognition that messaging works well with consumers because messaging is already part of their everyday behavior. It fits naturally within the mobile experience. Complemented with targeting, which makes messaging relevant, its the holy grail. Relevant messaging is not seen as an ad, but content. We know that young people want content from the areas of their interest, which is why we have got the high response rates. When people look at our model, to say mobile advertising is too constraining, too limited. It doesn't take into account the different [strands] within it: we can do above the line, below the line, direct sales, and also market research."
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