Blyk repositions as managed service provider

Ad-funded MVNO Blyk announced Monday that it is to wind down its virtual network operation in the UK and reposition itself as a provider of managed services.

It has signed an exclusive deal with Orange in the UK, the carrier that has hosted its MVNO. The announcement came hard on the heels of Blyk’s partnership deal with Vodafone in the Netherlands.

Blyk’s original model relied on revenues from advertising customers being used to subsidise voice and text usage for 16 – 24 year-old end users (or ‘members’ as Blyk prefers to describe them). But, although initial uptake was quicker than the firm had forecast, the service was not a commercial success.

Blyk will cease its MVNO operation at the close of August with some 200,000 end users.

While the firm’s advertising response rates have remained high, at 25 per cent, it lacks the kind of reach that advertisers are used to buying through more established media. And the volume of free usage made available to end users through advertising subsidies was simply insufficient. Earlier this year the firm scrapped its bundle of 217 texts and 43 minutes to a simple £15 credit.

But while the firm has conceded that the MVNO model has not borne fruit, and has adjusted its strategy accordingly, it believes that launching its own operation was a necessary evolutionary stage. The company’s founder, Pekka Ala-Pietilä said that the MVNO model simply didn’t allow the concept to scale

“One of the important conclusions for us is that if we want to seize the opportunity, which seems to be now opening up in a very rapid manner in different markets, we need to have the capability to speed up the rollout,” Ala-Pietilä told telecoms.com. “The MVNO model was resource intensive and time-consuming, because we needed to build up parallel telecoms infrastructure. If you’re partnering  you don’t need to do that. You can go very fast and you can create a mass media. But I don’t believe we could do that if we hadn’t managed to perfect the media model and gain the experience on the advertising side, the technical side or the consumer side by doing everything from the ground up ourselves,” he said.

Ala-Pietilä said he did not believe that Blyk’s experience of operation proved that the concept of subsidising service with advertising was unworkable. Orange, however, will not be making that the centre of the offering it will be launching on the back of this new partnership. Nor will the carrier be focussing exclusively on the youth segment.

“This is the start of a better relationship with our customers,” said Mark Overton, VP of strategy and business performance at Orange UK. “Operators today don’t have much of a relationship with their customers beyond the bill. But this push advertising, and timely, targeted messaging will enable us to give our customers a unique offering.” Overton also cited a strategic initiative the carrier is inking with Barclays Bank and said that a combination of mobile commerce, mobile advertising and location awareness made for a powerful brew. He said the firm will be making a major announcement within the next week.

Blyk’s role as managed service provider will likely require less employees, although Ala-Pietilä said the firm has yet to decide on any rationalisation in the UK, promising announcement in “due course”.

While Orange will continue to run its own sales force, Blyk will be involved in designing campaigns, ensuring content runs correctly on the full range of Orange handsets and interfacing with advertisers and agencies. Overton stressed the process and expertise elements of the offering over the technical.

Neither company would reveal the specified length of the exclusivity deal that gives Orange alone access to the new Blyk offering.