Perfect storm: Kids, phones, ads, free

Heidi Dawley

Media Life

June 30, 2008

The idea of offering free phone service in return for putting up with ads has been around years. Marketers tried it but no one could figure out how to make it work.

What was missing, it turns out, was kids. Lots of kids.

A British company, Blyk, has come up with a formula that seems to work. It is now expanding into Europe, and something like it will likely be seen in the U.S., and soon.

Here's the deal: The target users, 16- to 24-year-olds, get 43 minutes of free phone calls and 217 free text messages a month for agreeing to view about six ads on their phones each day.

Ads are even targeted, based on the 60 to 100 data points users provide in a questionnaire when they sign up.

Blyk began offering its service in the UK just nine months ago, and it says it's well ahead of where it expected to be, with 155,000 customers, passing its goal of 100,000 signups six months early. It has run more than 900 campaigns already for advertisers who include Coca-Cola, Buena Vista, L’Oreal and Penguin, the book publisher. It claims a response rate to ads of 29 percent.

“They seem to be very successful in that regard,” says Jessica Ekholm, principal analyst at Gartner, the technology research group, in Britain.

It’s a case of offering the right consumer the right product at the right price—free.

“People were a bit surprised by Blyk’s success, but it fits the criteria for that niche group of subscribers. They don’t have a lot of money, but they do have time. And brands want to get their message to them,” says Tole Hart, research director for Gartner in New York.

Blyk will launch in the Netherlands later this year, and next year it plans to expand into Germany, Spain and Belgium. It has an eye on Asia and the U.S.

There are a few other companies out there offering customers free top-ups on their paid plans in return for viewing ads, such as Virgin Mobile’s Sugar Mama’s plan, but Blyk’s model is based on a totally free service.

Analysts on both sides of the Atlantic are not aware of any other offerings on the same scale as Blyk in their respective countries.

“They are pioneers,” says Robert Thurner, commercial director of Incentivated, an independent full-service mobile marketing and advertising company in London.

Yet there are still some questions over the business model’s long-term viability. For one thing, the company has yet to reveal anything about its finances or when it will achieve profitability.

But the bigger issue is whether consumers will be turned off by the ads over time. It is still too early to assess the churn rate, but that will be important to factor in when assessing the number of users later this year.

“If someone hasn’t used their SIM card in six months are they really still a member? Not really,” says Steven Hartley, senior analyst at Ovum, a telecoms research consultancy.