Sunday, November 12, 2006

Blyk is it killer service?

Blyk is Pan -European free mobile operator .yes you have read it right they are planning to offer mobile service free of cost based on advertisement model. You have heard a lot about free WLAN access but free regular mobile service which most of you would be paying nearly minimum of 30- 50 Euros per month is going to be offered free is hard to believe but if all goes well according to this company they will be launching this service in UK in mid of 2007 and soon expanding to rest of Europe.

Lets start analyzing this company and its model from checking who are its founders .It is started by none other then former Nokia president Pekka Ala-Pietilä ,which is one of the main reasons which makes me feel that this is serious company and not a dot com kind of company trying to ride the advertisement based success of Google. The company as not disclosed many details except that its services are free and revenue model is based on advertisement so it leaves people like me to speculate on what kind of model and services it can be. To begin with my primary assumption is that this doable the reasons for this are

  • Due to convergence and emergence of VOIP technology the cost of per minute voice has come down considerably making it this kind of free service possible .For example skype founder recently said cost of voip call is so negligible that when delivered in volumes it is almost free which made them to provide skype PC to PC calls free.Ofcourse VOIP PC to PC is different from mobile calls but there are indications that cost of mobile calls are heading in same direction which is making some operators in UK to bundle unlimited UK to UK mobile calls as part of decent monthly subscription plans. So if Blyk comes up with smart way of delivering most of calls on voip making cost per minute almost negligible they have big piece of puzzle solved.
  • Blyk is MVNO meaning that they don’t have to build capital intensive network and bid of scare and costly spectrum they lease network from exiting operators at whole sale price .so which means they don’t have much of fixed cost and can easily expand as customer base grows .Of course European regulations regarding MVNO also help them
  • Most important thing is if advertisements are delivered in a non intrusive way this medium (i.e. mobile advertisement) has potential to be most important and effective medium for advertisers even better then internet PPC (pay per Click model) .Because this not only delivers all goodies of internet based advertisement but has potential to take it better level in terms of targeted and timely advertisement using both mobility and location metrics and tools .So in short it has potential that advertisers may shell out more money then in pure internet model. This means that theoretically Blyk potential revenue opportunity is enormous.

So after going through things in favour of Blyk let’s see some potential huge problems

  • Most importantly these kinds of free services have been tried out unsuccessfully in 1998-99 in South Korea .Recently Xero an new American MVNO with 300 million $ funding plans to start partial advertisement based services where consumers by seeing or listening to advertisement can accumulate free voice minutes. This service seems not to have picked up so in past none of these kind of services have picked up. So based on history Blyk chances look bleak but again it might be Blyk chance to create history.
  • Another big hurdle is typically for this kind of service to work there needs to be decent number of customers ideally in millions and definitely not in thousands because as discussed earlier more the customers lesser would be cost per minute and also most importantly from revenue generation side advertisers are not attracted by small numbers as their cost of producing mobile specific advertisement content may not work out .So in short from both cost of operation and revenue generation side it is absolutely must that this kind service gather quickly good number of customers to keep it rolling .which is typically very hard thing to do .But again you may never know the real power of free service .

So in all I would say this company is certainly a company to watch in 2007 .It has great potential to disrupt entire mobile operators space and become next Google or at the same time high chance of failure and become yet another failed company .But I hope it succeeds.

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