When I first met Inma Martinez at Mobile 2.0 Europe I was struck by the depth of her knowledge and the strength of her determination to speak her mind. I made the decision to work with her at some level. A few in-person meetings in London (where she is based) and many Skype chats later we are proud to take the wraps off Mobile Groove, a monthly podcast series here at MSearchGroove that will provide short, digestible and insightful commentary on what’s hot in news, investments and developments impacting the mobile space at all levels.

Mobile Groove will air on the last Friday of every month and consist of three thought-provoking segments: The Big Picture, a wrap of the month’s news and views; Street Groove, an informed discussion of the companies and technologies sure to rock the mobile space; and The Radar, a roundup of talk on the street and what is highest on investors’ radars.

OUTRAGEOUS & INSIGHTFUL

The first in the series kicks of with a look at the the rise and fall of ad-funded MVNO Blyk, the controversy surrounding voice-to-text provider Spinvox and an in-depth look at the key platform players (Apple, Google and Microsoft) – specifically the news via Taiwan handset makers that Microsoft plans to adopt a dual platform strategy to promote its Windows Mobile OS (operating system) and, thus, take aim at both Android- and iPhone-based platforms.

Inma, who stands out as an über-connected advisor to venture capital firms, also gives us the inside track a new fund by entrepreneurs for entrepreneurs that may spell relief for European startups and smart people with brilliant ideas.

We joined forces to provide industry commentary and insights on the top market news in the mobile industry. But it doesn’t mean you can’t get involved. We welcome your ideas, suggestions and elevator pitches. DM us on Twitter(@mobilegroove)or email us at mobilegroove@msearchgroove.com.

Listen to the podcast here. [22:25]

A ROUND OF THANKS

And finally, thanks (again!) to Inma, for the energy and excellent ideas. Thanks to Annette Kramer, a Stradbroke Partner and presentation coach, for her kind offer to do the intro and outro to our podcast series; and to Alfred DeRose, Brian Avery and the team of professionals at Tego Interactive, a company helping to build businesses – including mine – through converged Web and mobile solutions. The company has been instrumental in creating some new features and functionality (including a mobile site) for MSearchGroove, with more soon to come, so please check back regularly.

And a special thanks to RealWire, an MSG partner and supporter whose global news release distribution service (specializing in the online media and mobile) consistently delivers reach, audience and exceptional analytics. MSG uses RealWire for all press releases, and I recommend you do the same.

For now our podcast will be accessible via the MSearchGroove web site home page. In September Mobile Groove will also be available for download via a dedicated iTunes channel.

In brief: An analysis of what Blyk’s partnership with Vodafone Netherlands really means, an exclusive Q&A with

It’s been a bit quiet at MSG as I finalize the plans and partnerships that will transform MSG into a media company and lay the groundwork for an ambitious mobile marketing publishing project that has already earned the endorsement of several major industry organizations.  (More in a press release soon via RealWire, a global news release distribution service and MSG partner that, like the online media industry that is its focus, is always-on, always-connected and always professional, which is why I can recommend them so highly.)

But I couldn’t end the week without posting an analysis of the exciting (but not unexpected) news from Blyk, combination mobile engagement media company, mobile advertising startup and MVNO, that it had signed an deal with to roll out its branded service in partnership with Vodafone Netherlands and to share revenues with the operator.

Connect the dots, and Blyk has executed on the game-changing strategy that Antti Öhling, Blyk co-founder and CEO U.K., outlined in May in this exclusive Q&A. In it he provides solid logic for “making the switch” from MVNO (a model he called a “proof of concept”) to youth engagement media. The reasons range from scale and speed (both accelerated through partnership with operators) to the ones that matter most to advertisers: reach and engagement.

As Antti put it: “An MVNO means that you have to make up-front heavy investments. We needed to do it in the U.K. in order to get the whole machinery working. We needed to have access to all the tools that the operators have in their server rooms. Now that we understand how to use it [technology] we know how to help them. We know exactly how they can combine operator infrastructure with our ad engine and campaign management. We can make every campaign pixel perfect but what’s more important is that they [campaigns] are extremely relevant to the receiver. We saw the MVNO model as too slow for growth. If we partner with operators, we can triple or quadruple the speed, and reach the scalability that many advertisers are looking for.”

And while we’re reviewing the milestone statements from this Q&A (opinions that have new and significant meaning in view of the Vodafone Netherlands partnership), allow me to bring your attention to the one from Antti that speaks volumes (literally) about why operators would/should tie up with Blyk for a Blyk-branded service in the first place. In a word, brand.

As he put it: “Blyk is a simple end-to-end proposition that covers everything from ad platform, campaign management, user experience and audience management to technology.  Sometimes when I discuss this with operators, I say, ‘Think of Blyk as a Coke.’ as this example makes our role easier to understand. We have the recipe and we have the brand. People understand Blyk; young people understand what it means when we come to a country.  The recipe is how you make it work.  The operators have the factories for making all the refreshments they need, and they have their existing distribution channels. Basically, they have the works. But if they bring Coke in there, they can get so much more volume and so much more value. It’s a lot more interesting – and lucrative – to have Blyk as part of the operator offer. In other words, they can expand their reach to offering another well-known product.”

EXPERIENCE EXPERTS

Jonathan MacDonald – friend, esteemed colleague and, importantly, an architect of Blyk strategy – highlights another ace that plays in Blyk’s favor as it enters into this and other partnerships with mobile operators: breadth of offer.

Based on a background briefing with Antti Öhling, Blyk co-founder and CEO U.K., Jonathan pieces together what he calls the “Blyk partnership Blueprint” (which he shares in this post).

The model:

1)    Position yourself as an MVNO (as Blyk did) to perfect the process of linking brands with people. As Jonathan, an eyewitness to this stage of the company build-out observes: “Over time there was constant improvement of processes and tools which all connected to creating a true experience for Blyk members and creating the world’s first network as a media.”

2)    Productize this offer. Create a comprehensive capabilities mix whose components (in the case of Blyk) include: “Blyk brand, Blyk user experience, Blyk approach, Blyk audience management and of course, Blyk advertising sales.”)

3)    Partner with mobile operators. Use the existing infrastructure and capabilities of the mobile operator, experts at customer acquisition, billing and delivering great service.

Intrigued by this model, I caught up with Pekka Ala-Pietilä, Blyk co-founder and CEO, earlier this morning to deep-dive into Blyk’s real business objectives and the real value of brand in the scheme of mobile advertising. (My personal thanks to Irene Nyberg, Blyk Head of Analyst Relations and International Press, for arranging this briefing on short notice.)

AN EXCERPT OF THE Q&A WITH PEKKA ALA-PIETILÄ

Q: What have you achieved in the U.K. and how will you bring this to bear in your partnership with Vodafone Netherlands and others in the pipeline?

A: There are three elements. We have developed the capability to make ads relevant, that has allowed us to create an opt-in audience that want to receive this advertising. Beyond this, we have changed the whole context of advertising. Advertising ceases to exist because it is perceived as content. And that is one of the great aspirations of advertisers: to get to a level of relevance where what they send is perceived as valuable information, valuable content and important social currency. The fact that the audience responds positively to this response is reflected in the third element of this: our net advocacy scores. [By way of background, Net Advocacy is a measure of the volume of positive and negative word-of-mouth.] With over 40 percent, we’re at the same level as YouTube and Facebook. That is important for advertisers. Net advocacy is high and so are response rates. They have stayed at 25 percent for over 20 months now. [NOTE: Some 200 advertisers, including major brands such as Coca-Cola, L'Oreal and Sky, have run some 2,500 campaigns to date, reporting an average response rate of 25 percent.]

Q: You have achieved brand awareness without yourself spending on advertising and promotion. It worked in the U.K., but what will be the strategy for other countries? And how do you quantify your brand strength?

A: We believe the Blyk brand has several facets. The consumer-facing brand has the capability to spill over. Consumers are connected and can find out about our brand on the Internet or from other sources, so we believe that is how awareness will continue to grow. Our brand also has a great crossover effect when it comes to advertisers. We work with all six major advertising agencies and a large number of international and global brands. Finally, our brand is known to mobile operators who know what we achieved in the U.K. and what we plan to do in The Netherlands. Many forget that we have successfully recruited youth, the most difficult audience segment to reach because you have to get to them through the clutter of other media. We did this because youth is an extremely important segment for advertisers.

Q: The news is the partnership. But why not just go it alone?

A: Mobile advertising is not a technology game. Technologies can be bought. Of course, you need to have a good technology, and we have it. But it comes to the ability to deliver a seamless end-to-end media experience, which is why we are a media company. Operators are telecom companies and all the corporate DNA and KPIs [key performance indicators] are telco-driven. In the model [Vodafone Netherlands partnership] the operator brings the telco capability, the infrastructure, the billing and the ability to acquire customers and on a mass scale and feed that into an opt-in database that you need to make advertising work. We bring the audience management – the member experience – and we manage it for them. We bring the processes, how the media works between the members and the advertisers; and we bring the technology and the ad sales force. All this means we can get off to a flying start, and that’s a great benefit for operators.

Q: You have a kind of turnkey solution here; one that you say gets you off to a “flying start” when you move into a new country. What countries are on the roadmap?

A: We have a model that doesn’t only allow us to grow fast in a country. We can roll it out in number of countries in parallel.

Q: Such as?

A: We are moving in Europe and Asia. One of the guidelines we follow is the interest shown by advertisers, the markets they think are important. Asia is where broadband has not and never will take off to the same level that it has in Europe. There mobile will be THE digital media. There is no other digital advertising channel available.

Q: We hear that a lot – but why is advertising the major revenue source for every mass media except mobile? And where are the mobile operators? My own mobile advertising research (Mobile Advertising Research U.K.) revealed value chain confusion is to blame, along with a lack of awareness and education. What’s your take?

A: For one, the industry has tried to take the online experience – such as search and banner – and apply it to mobile. We have not yet come up with an adaptation that is right for the mobile context. It’s the same as in the 1990s, when we learned that you cannot force mobile on the Internet and saw that WAP didn’t work.

Second, operators have taken a purely technology approach. They have brought in multiple platforms, in some cases two, three, even four technology platforms, and none is generating revenues. So they have gone for piecemeal and not complete solutions and it’s only a recent revelation [among operators] that this isn’t going to work.

But awareness is changing and that will sharpen the focus on mobile advertising. Another development that has raised the stakes is the intention of the Internet companies – Google, Apple, Microsoft, Nokia and others – to make money and a business out of mobile advertising. So, there will be an interesting increase of efforts and tensions, and this will create an increased sense of urgency on the part of the operators to put more effort into mobile advertising. There will be a battle between players to decide who will be first to create the foundation and grow to become the game-changer in mobile advertising.

Q: My own research also revealed a growing concern that the number of mouths to feed in the value chain exceeds the revenues to share. How many mouths are in your value chain?

A: We have only three mouths to be fed: agencies, operator and us. So, there is more than enough to be shared and go around. If the value chain is a puzzle then, you are right, there are too many players that need to be taken care of, and you have more companies than revenues to go around. On the topic of costs, we can partner in way that the incremental cost for an operator to actually build this capability from the technical side is low. The production cost and what’s need to achieve economies of scale for producing [advertising] messages is also low. On top of that the incremental cost for us to connect [our media offering] with different operators is again low. So, when you look at the cost competitiveness of different alternative value chains or solutions – the one we have built is almost unbeatable. There are revenues to share and the partners involved [Blyk and the operator] already have an optimized cost structure.

Q: Lastly, a look back to your off-portal play. You have a partnership with Velti and a sharp focus on content portals and providers. What does this tell us about Blyk objectives? Some could argue this conflicts or that you could be spreading yourself too thin…

A: This is not a zero-sum game. That model only applies when the market is stagnant – but on the mobile side – content and consumption the market is on a growth curve. What happens off-portal – and promoting it – is a way of helping acquaint people with mobile and encouraging them to use services and content, and that is a benefit for everyone. A parallel is i-mode. There are open and closed spaces – and helping both to grow is a win-win for everyone.

Q: It’s about content and services. But what about apps? Companies tell me they are excited about apps and getting in now with advertising schemes and strategies. Is Blyk going to jump aboard the app bandwagon?

A: We will have an aspect in our business which will definitely, and in due course, be aligned with the elements you mentioned. Having said that, we don’t see the need to rush to the app stores – especially when our core business has so much potential. We have more then enough work and opportunities just focusing on what we do.

WHAT DOES THIS ALL MEAN?

My take: Connect the dots, and Blyk has its eye on the prize: developing the capabilities – in partnership with mobile operators – to be a game-changing engagement media in reach and response.

It’s also about leveling the playing field and helping mobile operators understand the terrible truth: mobile operators are no longer in the access business and focusing on growing subscriber numbers obliges them to overlook the very opportunities (such as mobile advertising) and value creation opportunities that Internet brands are rushing to embrace.

Indeed, let’s not forget how bullish Google CEO Eric Schmidt is on mobile advertising. In August 2008 during a guest spot on CNBC’s “Mad Money with Jim Cramer” he stated: “Over time, we will make more money from mobile advertising. The reason is because the mobile computer is more targeted. Think about it–you carry your phone everywhere; it knows all about you.”

But it’s more than a play to make sure the Internet – where network operators (who owned the networks) and media companies (that owned the content) lost out to Internet giants such as Google – doesn’t repeat itself.

Mobile has to be different, which is why the partners (Blyk and Vodafone Netherlands) have also agreed to maintain the Blyk brand to their mutual benefit. (Makes sense… Why start with a new brand when Blyk already has a high net advocacy rate and high profile with agencies and advertisers?) Against this backdrop, a Blyk brand in the arsenal is a great way to jumpstart a youth-focused mobile offer wrapped in a proven media model brands and agencies understand. Now it’s up to the partners to turn it on and turn up the volume (literally) to build the opt-in database of members that will attract the brands.

But does it have to stop with a youth brand? I doubt it. A look under the hood a the breadth of the Blyk offer tells us this is a turnkey solution that clever operators could brand and turn on for other customer segments that advertisers want to reach (other age groups or illusive prosumers, for example).

And why not?

After all, the solution is the same (Blyk built it); the value chain is manageable (always and only three mouths to feed); and a raft of recent research reports tell us people everywhere respond positively to mobile advertising that is relevant to their interests and respectful of their right to co-create their advertising experiences. (Or at least they have to have that option. No doubt the 90/10 rule that holds for the Internet – that 90 percent are lurkers and 10 percent are contributors who get involved – goes for the mobile Web, but it’s best to ask permission all the same, and it’s a great way to gather the demographic data that so far only the social networks can.)

And if this sounds far-fetched then consider a surprise finding that emerged from the interviews that fed into Mobile Advertising Research U.K.: a growth opportunity lies in building the capabilities mix to improve audience segmentation and deliver demographics brands and agencies know from other media.

From the report: “However, this opportunity also represents one of the greatest challenges to mobile operators. While they wield powerful data about their customers, many operators have not yet structured their organizations to deliver this in a form that brands and agencies appreciate. As one executive at an application provider put it: ‘Operators must be able to segment the audience into media segments that make sense. Till now they haven’t done a good job at that.’”

Maybe the Blyk Blueprint shows the way…

***

RELATED READING

·       Blyk: Inventory Doesn’t Make Mobile Operators Media Companies; Why Mobile Advertising Must Be Relevant

·       Ad-funded MVNO Blyk: Alive & Kicking – AND Coming Exclusively To MSG

·       Mobile Advertising Success: Orchestrate Don’t Dominate

·       PODCAST: Blyk COO Leif Fågelstedt On Stats, Response & Competitive Landscape; Mobile; Does Blyk Break The Mould?

·       Podcast: Blyk COO Leif Fågelstedt On Mobile Advertising,

Why did I include a section on Blyk in my white paper?

Because the company has had phenomenal success with SMS/MMS campaigns, reporting an average 25 percent response rate to campaigns that harness the messaging technology to enable a conversation with users. No doubt this success is linked to Blyk’s bleeding-edge approach to mobile advertising (no spam – no way) and customer profiling (drilling down to deliver the right ad to the right person). However, in my white paper I also argue Blyk stands as an example of what a well-executed mobile advertising campaign can achieve – and one that mobile advertising newbies should note.

The bottom line: Strategy matters. If we accept advertising is content, then it’s clear advertisers/publishers can get a long way if they use existing technologies (SMS/MMS) and focus energy on crafting creative (and engaging) messages. As my dearest and most disruptive colleague Jonathan MacDonald points out: Advertising is in need of a re-think. It’s not about selling hard; it’s about listening harder to what consumers want. Jonathan (ex-Blyk) has obviously left his mark because Blyk excels in delivering advertising as content in a two-way conversation with customers. (For more background on Blyk, please check out this earlier analysis on MSG.)

Against this backdrop, it’s excellent timing to continue with part two of the audio interview marking Blyk’s first anniversary, which I conducted during a recent analyst briefing with Leif Fågelstedt, Blyk COO.

A message that comes through loud and clear: Blyk is not about warm-and-fuzzy business models. It is a serious and successful company that systematically collects and wields analytics (customer data and feedback) to drive high performance. Mobile advertising is just one area where Blyk’s approach pays off. In fact, Leif and I mused that the real money may be in Blyk’s ability to reality-check brands’ preconceived notions about what youth thinks, likes/dislikes, and will likely recommend to their friends.

Listen to the podcast here.

Before I deep dive into Leif’s views and my take, allow me to direct your attention to a recent research note from my esteemed colleague, Marek Pawlowski. (His thought-provoking analysis of mobile usability and user experience issues sets the bar, and his events attract some of the brightest minds in the business.)

We attended the same briefing, and have come to some similar conclusions. While I hint in my earlier post that Blyk should be considered as something other than an MVNO, Marek goes straight to the heart of the matter. He asks: Is it still appropriate to call Blyk an MVNO when the company’s real focus is on being a leading youth media?

While you’re making up your mind, some key figures tell us Blyk has long achieved this status. Some 100 brands have run some 1,000 campaigns on Blyk, reporting an average response rate of 25 percent. The response rate to some campaigns is much higher.

Seeing is believing (and also understanding why the campaigns struck such a chord with youth), so I asked Blyk to create a space where you can check them out for yourself. My personal thanks to Dan French and his colleagues who made this great graphic and the revolving carousel of mobile advertising case studies. Enjoy!

KEY STATS: ARPU isn’t relevant to Blyk and neither is CPM. The performance measurement that matters is Cost Per Response (CPR), which Leif says is “around 50p [pence] for Blyk. If you compare that with other media channels which our advertisers are looking at…[our] Cost Per Response is industry-leading.” Leif notes that other advertising channels cost much more if you want the same impact. The range is GBP1.50 (a figure he mentions in the podcast) to GBP2.20 (a figure Blyk presented during the analyst briefing). The point is: Blyk measures engagement (response), which is what counts on a personal device like mobile.

ADVERTSING MIX: Blyk sells each advertising SMS for GBP0.07 and each MMS for GBP0.22. “So the cost is 7 [pence] to send out the SMS and then 7 [pence] for every individual that is replying to your message.” The power of that two-way conversation is what allows Blyk to measure performance in CPR rather than CPM, a term “irrelevant to what Blyk is practicing.” Blyk assumed the lion’s share of pitches would be push-campaigns, but that has changed. “Probably 95 percent of everything we are doing right now is a combination of SMS and MMS, and [that] it can be linked to different websites….There are a lot of advertisers that have spent a lot of money creating their web portals and everything for mobile, and they want to drive traffic there.”

ROADMAP: Blyk is purposely targeting the countries where brands already spend the most to get their message across: Germany, Spain, Belgium, and The Netherlands. But prepare for some surprises from Blyk. “The first aim is to become the biggest youth media in Europe, and that is what we have communicated and that’s [what] we deliver. We are also looking to other kinds of opportunities outside Europe as well, but that’s not something I can reveal today.”

FREE SELLS: Blyk is ad-funded (hence, free to users). But it’s not an easy act to follow. Rivals would have to make significant investments in analytics tools and target the right growth markets. “We have invested a lot of money in profiling, ad engines, [as well as ways] to do booking and planning [of ads], and so on.” Leif also reports Blyk has “more partners than competitors right now in the marketplace.”

***

Shortly after this interview, Andrew Grill, MSG friend and frequent contributor, posted on a new ad-funded model called Tomato Plus from Croatian mobile operator Vip, a me-too Blyk model he strongly suggests we monitor moving forward. (You can check out the full post at London Calling here.)

By way of background, the brains behind this ad-funded model is global mobile advertising company Out There Media. The company has launched Mobucks, which it describes as a cross operator, cross advertiser marketplace, matching demand and supply for advertising over mobile phones. Mobucks effectively enables the creation of ad-funded tariffs for MNOs and MVNOs.

From the press release: “This mobile advertising marketplace enables consumers to sign-up, share their data, and receive targeted mobile SMS and MMS campaigns – which is exchanged for free airtime.” Out There Media reports response rates of “up to 75 percent.” Matthias Grundböeck, Vip Residential Marketing Director, is upbeat about his decision to launch an ad-funded sub-brand. “Mobucks AdFund by Out There Media gives us the opportunity to offer genuinely interesting, relevant and useful information to our customer base,” he said in a press statement.

I sent an email to Out There Media requesting a more in-depth briefing to answer key questions: What are the nuts and bolts of Mobucks and who is involved to date? How is customer data collected and what visibility does it provide into user preferences? How many ads, in what form (SMS/MMS) and from which brands? And the list goes on.

In the meantime, you may want to check out this related discussion at MobHappy.

My take: Blyk is a tough act to follow because it understands the business and the pivotal importance of customer analytics. Does the advance of similar models represent competition? Not in the markets that top the Blyk agenda. There, Blyk can protect its turf. However, the advance of ad-funded models such as Tomato Plus sends a clear message to mobile operators that they must choose their course.

To borrow from my esteemed colleague Chetan Sharma and his must-read mobile advertising book, Mobile Advertising: Supercharge Your Brand in the Exploding Wireless Market: Mobile operators must decide soon whether they wish to be access companies (pipes) or audience companies (media companies). If the goal is the latter, then they would do well to borrow a page from Blyk (and others) and focus on enabling an engaging advertising conversation with consumers (thereby gaining users’ trust and access to some key customer data) before other companies (search companies, social networks, media brands etc…) beat them to it.