European Ad-Sponsored Mobile Phone Service Is Taking Off

Posted by: Jennifer L. Schenker on June 26, 2008

Industry observers have been questioning how fast mobile advertising will take off. Blyk, which offers free mobile phone calls and text messages for 16-to-24-year-olds who agree to accept advertising delivered onto their handsets, is providing a pretty good indicator, at least when it comes to the European market. The company, which was launched less than a year ago, reached its target of 100,000 users in Britain six months ahead of schedule and is now expanding into the Netherlands, Belgium, Germany and Spain.

Though it is early days the introduction of advertising onto mobile phones could greatly disrupt the current business models of mobile operators, which are built on charging for airtime, text messages and other services. If enough mobile phone users opt instead for free, ad-supported service, billions in revenues could shift from traditional subscriptions to mobile advertising. The market for such ads could generate as much as $19 billion within the next five years.

Some U.S. carriers have been slow to embrace ads because they are afraid customers will be driven away, leading some observers to warn that market growth estimates are too optimistic. But mobile ads don’t have to be a turn-off, says Blyk co-founder Pekka Ala-Pietila, a former Nokia president. He credits his company’s encouraging results to the fact that it has shied away from pop-ups or search ads and instead concentrated on messaging, the most popular form of mobile communication for 16-to-24-year-olds.

Blyk’s ads are sent via sms or mms or a combination of mms with texting. The idea is to get users to engage in a dialogue with advertisers. Hair product company Brylcream, for example, recently sent a select group of British young men a text message on a Friday night, at a time in the evening when they would be preparing to go out. The message was “tell us how you like your hair to get a fuss-free styling tip.” There were three possible responses: “Kind of smart”, “Sort of messy” or “Somewhere in between.” Brylcreem sent an image of the appropriate hair gel based on individualized responses. The campaign got a response rate of 49%, which is considering phenomenally high for the ad industry.

Another secret to the company’s success is Blyk’s users must register for the service and fill out a profile so ads are targeted to stated interests and thus are seen as being less intrusive, says Ala-Pietila. It takes market research and smart targeting, but “you can make mobile advertising work,” he says.

After running over 900 mobile ad campaigns in the U.K., Blyk is now ready to move into other markets, launching in the Netherlands by year’s end and the other three countries in 2009. Ala-Pietila says he figures he can apply about 80% of what the company has done in other countries but will adapt to local market communication patterns. So, while in Britain, members get 43 minutes per month of free mobile voice service and 217 free text messages, the formula will be different in the other countries, depending on whether people like to talk or text more. It will be interesting to see if youth in the rest of Europe will be as enthusiastic about mobile ads as the British.