Ad funded MVNO Blyk set to make cutbacks

Ad funded virtual mobile network Blyk is feeling the heat from the global economic downturn, after announcing plans to cut costs on Tuesday.

The news came just as the MVNO, which recently celebrated its first birthday, announced an additional Eur40m investment to support its ongoing operations and international expansion.

“The advertising industry and operators have expressed a strong interest in bringing Blyk into new countries and Eur40m in additional funding demonstrates the commitment by investors to the Blyk media model,” said Pekka Ala-Pietila, Blyk’s CEO and co-founder. “However, we like everyone else are feeling the impact of the world’s financial situation. As a result, in parallel to securing the new investment, we’ve taken decisive steps to cut costs and streamline our organization,” he said.

Despite initial scepticism, Blyk has made waves in the industry, announcing in September the doubling of its member base in the UK to 200,000 since autumn 2007.

The company runs an advertising funded mobile service aimed at 16-24 year olds, providing free text messages and calls to subscribers who receive advertisements on their phones.

The company has also raised eyebrows over its claimed average advertising response rates of 29 per cent. Compared to other forms of mass market advertising this figure is phenomenal, stacked against a 0.5 per cent response rate for online advertising and 4.5 per cent from unprofiled SMS.

Blyk piggybacks on Orange’s network in the UK, and in January revealed Vodafone as its Dutch partner. In Belgium, the company will team up with Mobistar, and recently confirmed plans to move into Spain and Germany.