Blyk Preps Summer Launch

Blyk , the ad-funded mobile service provider fronted by a former president of Nokia Corp. (NYSE: NOK), is set to launch in the U.K. this summer and later expand into other European markets. (See Blyk Plans UK Launch.)

Blyk will target young people aged 16 to 24 with free calls and texts in exchange for receiving advertisements, which will be delivered based on user preferences and behavioral patterns. The aim is to make the ads seem like useful and relevant information to the customer, rather than intrusive hard-sell messages. The advertisers, meanwhile, get to plan targeted campaigns with measurable results.

And with a mobile virtual network operator (MVNO) agreement with Orange UK and a network outsourcing contract with Nokia Networks already in place, the Blyk team can focus completely on the business development and services side of the company and leave the technology issues to others.

"We eat, work, and sleep this particular business model," says Pekka Ala-Pietilä, Blyk's cofounder and CEO, and a former big cheese at Nokia. "Speed and customer understanding are extremely important." (See Blyk Outsources to NSN.)

For skeptics who think a free ad-funded mobile service is an unsustainable business model, there's a twist -- Blyk isn't totally free.

"Not everything will be free... There will be a limit," says Ala-Pietilä, who was Nokia's president from 1999 to 2005 and head of the vendor's mobile phones business from 1992 to 1998. "If it was completely unlimited, then the amount of ads would be too big, too intrusive." (See Nokia Changes Management.)

But Ala-Pietilä wouldn't unveil details of the service offering -– for example, which services will be priced, and where the line between free and paid-for calls will be drawn.

Blyk chose the U.K. for the launch, rather than its home country Finland, because it is the third largest advertising market after the United States and China, explains Ala-Pietilä.

And the 16-to-24 demographic is the prime target market for the service because this age group is highly price sensitive. According to Blyk's consumer research, 64 percent of people in this age group say they change mobile service providers to get a lower price. Also, they appear to be more tolerant of advertising because they've been used to it on the Internet "ever since they were literate," says Ala-Pietilä.

"[For this age group,] ads are good... not something to be tolerated," he says. "And there can be personalized ads that become information that adds value to your life."

But will the ads -- initially targeted text (SMS) messages delivered by First Hop Ltd. 's mobile advertising platform -- be tolerated on a mobile phone? (See First Hop Pushes Ads.)

According to the startup, early indications from various trials and market research show that 16-to-24-year-olds are open to the idea of getting free calls for ads, and can even get personally attached to the service. One response from a trial participant was: "At the end, I'm going to miss my little friend Blyk that's always texting me."

"Mobile advertising is about building relationships, not audiences," says Ala-Pietilä.

He doesn't rule out older demographics for this service, such as 25 to 35 year olds, but he says they would be a more "difficult" group to attract.

Blyk will have a couple of sources of information for analyzing and presenting data to advertisers: the user profiles new customers fill out when they sign up, and usage patterns -- such as when calls are made. That information will be used to segment the customer base.

Of course, privacy issues will always loom large for a service such as Blyk that aims to exploit customer data and behavioral patterns, and the service will test the limits of data protection laws in Europe. But as long as customers "opt-in" and know how their information will be used, much of the legal minefield can be avoided.

And there are some strict limitations that will restrict how deep Blyk can mine its user database. For example, Blyk won't be allowed to single out and expose an individual customer's usage behavior -- the data has to be aggregated to be lawfully used.

Ala-Pietilä says the segmented user data is very attractive to advertisers who find 16 to 24 year olds especially difficult to reach and influence. And with text-based campaigns, advertisers can know who has responded to the ads.

"The fact that you can not only segment the audience, but then also get the campaign's results... that's an important extension of the knowledge" for advertisers, says Ala-Pietilä.

Blyk already has some big brands on board for the service launch, including Buena Vista, Coca-Cola, I-play Mobile Gaming, L'Oreal Paris, StepStone, and Yell.com.

Yell.com says this summer's launch is a pilot for mobile advertising. "[Blyk] is part of the experimentation for us," says Carey Bunks, senior VP of business development at the British online business directory. "Nobody knows what's going to happen with mobile advertising."

— Michelle Donegan, European Editor, Unstrung

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