The recent report on trends in location-aware apps from Apple’s App Store, Google’s Android Marketplace, and Blackberry’s App World released by Skyhook Wireless, itself a provider of a patented hybrid system of location awareness, reveals a buoyant market for LBS apps. Indeed, the Apple App Store was found to have the greatest number of location-based applications, at over 2,300, and the highest percentage of paid for location apps, at over 75 percent. 67 percent of Blackberry apps are paid, and 80 percent of Android Marketplace apps are free.

Clearly, location apps are popular, as their increasing ubiquity and popularity across a variety of app stores demonstrates. But move past the hype and the excitement generated by the flurry of activity in the space, and it becomes clear that location services – by themselves – are not game-changing.

Location-aware data is not enough

Indeed, mobile location-based services and social networking companies such as Loopt, Pelago, and Sense Networks have invested a great deal to achieve their vision, which revolves around the provision of an array of consumer and community services supported by socially-tagged, location-aware data stores. The data they have is impressive and the expansion plans they pursue are ambitious. However, they also face formidable competition from Internet giants (Google, MySpace, Facebook, and Yelp) that have already aggregated their own large sets of useful social content, and are anxious to extend their reach to mobile.

Can companies compete on location data? Many players are positioning themselves to do just this. However, I submit that location services – and the structures and systems in place to deliver them – represent little more than an incremental innovation on top of the immense stockpiles of location data and content that are largely under the control of established Web companies and heavyweights. As a result, these Web giants are well-positioned to leverage location data to mobilize their offers and ultimately dominate the marketplace. There are, however, options and strategies mobile location services companies can employ to win the game – even though, as I argue in this is column, location services on their own are far from game-changing.

Admittedly, not everyone shares my view. Sam Altman, founder of Loopt, told me in a recent interview that he strongly believes in the value of innovation in location-based services and their central position in personal mobility experiences. A prime example is the company’s iPhone app. Loopt’s Mix feature enables users -without compromising their personal privacy – to connect with other users nearby. What’s more, users can find places nearby on Yelp and find what their friends on Loopt are saying about those places.

Beyond this interesting user experience, Loopt’s location-related content is thin, and therefore isn’t terribly useful – yet. However, it’s not so much the company’s progress with their service offering that interests me as much as its business priorities.

Specifically, Loopt has correctly honed in on two features/functionalities which are fundamental to all location-based services moving forward.

1. Connecting users to each other (using location in addition to other social filtering parameters).
2. Connecting users to information (using location as an additional input to search).

The intersection between location and search on a mobile is particularly promising, and has caught the attention of location services providers including Loopt, Sense Networks (CitySense), and Pelago (Where service), as well as mobile search services providers including ChaCha, a company that connects users to a human agents trained to provide answers to their SMS text search queries and, more recently, voice-activated queries.

However, these players are all pursuing business models built around a broad but rather general vision of what location-based services are – and can be.

In their view, location can be to mobile search and social networking what PageRank currently is to Internet search. Put in this perspective, location is potentially disruptive. What’s more, the companies that control the data stores (thus the capabilities to connect users to information they require, and to each other) are positioned to rock the industry.

Location information is power, both to the companies that deliver it and the consumers, who benefit from the tremendous amount of utility it provides.

Love the restaurant where you just ate? Review it, post it online, and alert everyone (or just your friends) nearby to try the place, all while you’re waiting for the check. Want to find a good barber shop in Mountain View, California? Ask a question, direct it only to users in downtown Mountain View, and be alerted when you receive an answer from someone there. The immediacy, intimacy, relevance, and quality of such services make them very exciting for consumers.

And let’s not forget the potential for the delivery of more relevant, location-aware mobile advertising, which is the main attraction for local stores, clubs, restaurants, businesses, and organizations hoping to attract consumers to their premises.

The location tools and technologies used here to record what we do and where we are (all the while paying careful attention to personal privacy concerns) as part of our day-to-day routine provide advertisers, agencies, and mobile operators a potentially much deeper understanding of consumer habits, insights that can greatly increase the value of mobile advertising linked to location-based services. Mobile contextual advertising is already de rigueur, but location has the potential to make mobile advertising more relevant, more personalized, and thus much more effective.

But it doesn’t stop there. Adding location on top of traditional information sources we know from the Internet provides online companies with further opportunity to personalize content for their users on the move. Location can also boost the quality and value of online recommendations (where the system delivers suggestions based on an implicit understanding of user content preferences and requirements) and search (where an explicit query triggers the delivery of additional related results).

Why location-based services are an incremental innovation

Clearly, location services which connect users to each other, or information, or both have the best chances for success. However, there are several major obstacles that make this a difficult space for companies – particularly startups – to gain traction.

1. Users can resist change: Connecting users to each other and introducing them to new social networking communities could be tough, particularly if they are loyal to the communities where they are already members. The social networking space is already nearing saturation point, at least in the U.S. and the U.K.
2. User-generated content matters: Without a large data store of geotagged content, there is little value to a location-based service. Yelp and CitySearch, companies that have large data stores of reviews, listings, phone numbers, and shop information indexed by location, have the advantage here.
3. Search needs location: Developing effective mobile search will likely require heavy-duty algorithms and design (that factor location and context into the equation), and a large infrastructure to deliver.
4. Google is on an expansion course: Companies – particularly startups – face strong competition from Google. Latitude, a service that allows users to share their location with their friends on GTalk, can be read as Google’s bid for market supremacy. Is Google over-reaching? Not if we consider the company’s ability, through Latitude, to leverage legions of clusters for search to deliver more relevant information culled from a wider data set than any startup could ever stockpile. Furthermore, Google’s dominance in contextual advertising, which it is trying to extend to the mobile space, allows it to reach out to a wide network of advertisers and businesses eager to attract traffic to their sites and tap in to the potentially lucrative Long Tail of search queries. While even Google will have difficulties as it sharpens its focus on selling paid search advertising to the hyperlocal market, its brand recognition and reach may allow it to make considerable inroads and thus pose a significant threat to a broad mix of location services providers and mobile ad networks.
5. Brands need trust: Users are generally not accustomed to sharing their location data with brands and merchants. To convince consumers they trust brands with their personal information, all communications (particularly brand messages delivered via mobile marketing campaigns) will need to be permission-based and comply with the Global Code of Conduct, guidelines introduced by the Mobile Marketing Association (MMA), a global non-profit trade organization established to lead the growth of mobile marketing and its associated technologies. Put another way, brands best positioned to achieve their business objectives, and reach mainstream users instead of just early adopters, are ones that respect our privacy and have our respect. That narrows the candidates down to established big-name brands, companies that we know and trust.
6. Content without consent is spam: The avalanche of new content linked to contextual data (what we do and where) opens the door wide open to the delivery of spam and the spread of fraud. All companies have to do their utmost to attack this problem at the root. However, many startups will likely find they lack the infrastructure to keep this issue in check.

Put another way, making a mark in the location services space requires more than the ability to pick up on a user’s location. Location services require the professional and reliable interplay of systems and services enabling search, content delivery and discovery, social networking and communication, and mobile marketing and advertising. What’s more, players in this space must connect and collaborate with a complex value chain that includes advertisers, enablers, operators, consumers, and companies we have yet to identify.

Given these factors, the players that emerge dominant in this market are likely to be the names we know from the Internet: Facebook, MySpace, Google, and Yelp. Why? Because, as I have pointed out: It’s not about location; it’s about the data and the networks that power location services. Internet giants have experience, communities, content, and search. Location is just another ingredient they can add to their already successful recipe for success. Put simply, location serves as an additional input, paving the way for these companies to provide interesting new applications – applications that fundamentally leverage the assets already out there on the Web.

Smart strategies for clever newcomers

It may be a bleak picture that I paint for mobile location companies and startups; I would like to point out that I am a believer in the vision behind location based services. However, given my experience and common sense, I cannot ignore the barriers that prevent newcomers from changing the game.

But there are actions startups can take to ensure they nonetheless secure a central spot in the merging location services value chain. It may require a rethink, but the potential rewards make it well worth the effort.

I would therefore suggest startups refocus their strategy to bring more value to users, boost their competitiveness in the process. I would advise executing one of the following options:

1. Mashup: tackle the “cold start” problem and build up your data store (and follow the lead of services such as Loopt and Where) by providing content from larger Web services such as Yelp, Evite, Eventbrite, and CitySearch. It’s a great way to connect your users to valuable information immediately. What’s more, there’s an opportunity for one or two location-based “data aggregators” – companies that use information from other services and present it via a unified interface on the mobile device. (However, there is only room for a few companies in this space since the barriers to entry are low and little prevents Internet giants from entering the mobile space (on their own) themselves. Yelp and Google lead the group of Internet companies staking out their mobile territory by releasing location-aware apps for the iPhone and Android devices. A successful play in this niche would therefore require companies to outmaneuver both the mashups offered by other competitors aiming to be data aggregators and the individual siloed applications offered by the Internet companies that have the data and determination to play in mobile.
2. Killer search: It may seem unlikely, but search can be decisive and disruptive, particularly as the integration of location information will likely cause a seismic shift in how users interact with the results they receive on their mobile phone. Keep in mind that, when Google began promoting their brand of search engine, observers joked that the race had already been run and won by the likes of Lycos, HotBot, Yahoo, and AltaVista. My message: If a company makes a fundamental improvement in search by using location data, it would represent a sea-change in contextual search and shift the balance of power away from the current market leaders.
3. Big money: Location can enhance the value and effectiveness of advertising and marketing, adding a new dimension to how companies communicate their brand message to consumers. It may even be possible to use location information to provide better advertising that will appeal to users. As this recent post on MSearchGroove points out: Advertising is indeed content. Location can enable the delivery of truly compelling content. At the other end of the spectrum, we might ask ourselves if it is not possible that location could even pave the way for a whole new paradigm around the effective monetization of content and services that does not involve ad-funding. The value of receiving the right information at the right time and in the right context may be so valuable that people will pay for it.

In conclusion, a bright future awaits location services startups that think outside the box. Granted, it’s a tough market with ever tougher competition, but a strategy built on one (or all) of the options I present will help startups stand up to the Internet giants. I strongly believe location and location-based services are the future. I enjoy hearing about scrappy, ambitious startups, and their success should encourage all companies in this space to execute on the strategies I have outlined. The strategies may vary but the pay-off is clear: Companies that position themselves now to leverage the power of location will lead the way in delivering contextual relevance across mobile search, mobile advertising, and a potentially lucrative range of mobile services we cannot even imagine.

About the author:

Web: http://www.linkedin.com/in/njanewit
Nate Janewit is a search and mobile technologist and a Silicon Valley resident. His career thus far has spanned Microsoft, Google, Kosmix, Efficient Frontier, and research in Japan and at Stanford. He is an analyst of emerging technology and media and actively contributes to developments in the search and search advertising space.

The bottom line: As illustrated numerous times within this section, the data dominance and superior browsing experience allowed by smartphones is undeniable.  Making mobile Web user experience smooth, easy, and compelling – as these handsets often do – is shown to consistently drive mobile data traffic.  That many consumers probably can’t tell and don’t care about the difference between mobile websites and HTML sites is also testament to technical developments.

***

GARTNER SAYS THE NUMBER OF MOBILE PAYMENT users will increase by 70 percent this year.  Its report claims that 73.4 million users of mpayment in 2009 would represent a leap of 70.4 percent from 2008.  By 2012, it says mobile payment will reach more than 190 million, more than 3 percent of total mobile users worldwide, attaining a level at which it will be considered “mainstream.”

Gartner defines a mobile payment as paying for a product or service using mobile technology such as a short message service (SMS), Wireless Application Protocol (WAP), Unstructured Supplementary Service Data (USSD), and Near Field Communication (NFC). It includes transactions that use cash, bank accounts or debit and credit cards, as well as non-carrier stored value accounts, such as travel cards, gift cards or PayPal. It does not include transactions that use mobile operators’ billing systems, such as purchase of mobile content or telebanking by mobile to the service center via an interactive voice response (IVR) system. Source

The bottom line: Although the definition of mobile payment is ambiguous here, these figures demonstrate that the mass market is slowly growing confident in using their mobile to pay for and transfer money.  Much effort has been made to foster consumer confidence in the micropayment mobile payment space, and the adoption of mobile banking technologies still varies drastically from region to region.  There are regulatory and security challenges to overcome, particularly with the emergence of NFC technologies, but these figures give strong reason for hope.

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SPEECH APPLICATIONS ARE TO TRIPLE by 2014 according to a new Datamonitor report. The report claims that as we get used to using mobile computing devices in ‘hands-busy’, ‘eyes-busy’ environments, speech recognition technologies are expected to gain considerable traction. The global market for advanced speech recognition (ASR) in mobile handsets will increase from $32.7 million in 2009 to $99.6 million in 2014. Meanwhile ASR in-vehicle telematics is expected to grow from $64.3 million in 2009 to 208.2 million by 2014. Source

The bottom line: An exciting array of new voice applications has been promised for some time now, without seeming to gain mass market adoption.  This Datamonitor report suggests the market is still full of potential, and with technologies emerging to intuitively allow users to control device functionality with their voice, these projections may herald the beginning of significant penetration.

Peggy adds: A space to watch is voice-activated mobile search, where “Just say what you want,” the guiding principle of voice search to avoid complex and confusing navigation, and to provide a shortcut to information (in the network) and services (on the mobile device) the user wants, is particularly compelling.

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OPERA’S MINI BROWSER RECORDED MORE THAN 23.4 million users worldwide in April, a jump of 140 percent from the same period one year ago. Page views in America grew 129 percent over the last year; unique users grew 11.8 percent; and there was an average of 198 page views per user in April. U.S. carrier subscribers are said to be viewing more data-intensive pages than those in any other country. Opera said the average page viewed is about 32KB compressed (almost 320KB uncompressed).

Top 10 sites accessed via Opera Mini in the U.S., by number of unique users:

1. Google.com
2. Facebook.com
3. MySpace.com
4. Wikipedia.org
5. YouTube.com (up from 7)
6. Yahoo.com
7. NYTimes.com (down from 5)
8. AccuWeather.com
9. My.Opera.com
10. ESPN.com

Source

The bottom line: The mobile Internet is continuing to see heavy usage and mass adoption, although we should remember these figures are largely coming from BlackBerry handsets operating Opera. The handsets do have massive appeal, as clearly does mobile Internet content.  However, we might also remember that, as a corporate device of choice, their users may not always be paying the bills

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AN AENEAS STRATEGY STUDY OF U.K. ATTITUDE TOWARDS mobile advertising found that 64 percent of consumers would grant permission to receive mobile advertising if they were incentivized.  The majority of the 1,002 consumers surveyed had a more negative initial attitude, but this changed if advertising was made relevant (65 percent positive), permission was asked (67 percent positive), or if the consumer was in control (69 percent positive). It placed mobile amongst the most popular traditional media (print, outdoor, and television) and above the Internet and radio. 

The research also revealed that 52 percent claim engagement with the brands they love is important, five advertisements per day is most accepted by consumers, 52 percent of consumers doesn’t mind listening to a brand message while waiting for someone to pick up the phone, and 54 percent would send an interesting offer they have received to  friends and family

Tarik Fawzi, of Aeneas Strategy Consulting and Management, commented: ”The consumer research shows some unexpected results regarding consumer attitude towards mobile advertising. Also mobile is compared with other media. This shows consumers know what they want and are open towards mobile advertising, if it is offered on their terms.” Source

The bottom line: This study shows once again that relevancy and control of mobile advertising are critical to its consumer acceptance and success.  The challenge mobile advertising faces is in making campaigns relevant, and offering control, but still maintaining a strong enough number of eyeballs to keep brands spending.

Peggy adds: This consumer research will also be discussed during Mobile Advertising U.K. (June 15 in London), when MSG, which was commissioned to research and write the report in collaboration with Aeneas, will present key findings from interviews with 15+ industry executives and influencers.

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41 PERCENT OF U.S. CONSUMERS ARE LIKELY TO PURCHASE a multimedia handset with a data plan as their next phone, says a new study by the Yankee Group. BlackBerry and Apple are the top two brands, considered by 44 percent and 30 percent of prospective buyers, respectively.

Meanwhile, in enterprise, the same analyst claims that 75 percent of small to medium businesses anticipate some reduction in their business technology investments due to the economy. End-user software and hardware are the two areas that will experience the biggest budget cuts. Source

The bottom line: These two nuggets from Yankee illustrate the ongoing consumer affair with smartphones, and the rich data consumption experience they allow, in the face of predictable technology cutbacks which the environment has imposed on smaller businesses. It’s tough out there, but consumers remain enthused about compelling mobile data experiences, if the data plan is right.

The recent arrival on Twitter of Jonathan Ross and Jeremy Clarkson (BBC TV presenters for those who don’t know) has led some hardened Twitterholics to suggest that it may be time to “jump ship”. OK, so Clarkson wasn’t the real deal (or a ‘fakelebrity’ as the Guardian – a U.K. news site – put it), but Jonathan Ross’ primetime return to BBC screens will include an interview with the UK’s leading Twitterer, Stephen Fry, bringing the geek-laden micro-blogging service very much into the mainstream

This poses a serious question for any 2.0 companies out there: Why are we as humans so hell-bent on being part of something new and innovative (praising and marketing it to peers as the Next Big Thing), only to turn off the moment it tips towards the mainstream?

Is there a point when a social network becomes too big? Sure looks like there is – and we may have reached it.

In January of last year both Facebook and MySpace lost 5 percent of their subscribers, suggesting that the number of users had reached a plateau.

And business network LinkedIn may also be too much of a good thing. Leading mobile marketer, Helen Keegan of Beep Marketing and Technokitten fame (soon to appear as a columnist on MSG), was quoted recently in a Guardian article – exposure that resulted in Helen receiving a link request on LinkedIn from a person in a totally unrelated industry. OK – so this may not exactly be a bad thing, but it is a sign that the core value of LinkedIn may be diluting.

Fortunately for those of us waiting for a sudden deluge of Twactivity (Twitter activity), The The Telegraph (in particular Bryony Gordon) implies that middle England is not ready to take up micro-blogging – check out her article “Twittering is for twits with nothing better to do”.

But there is a point in there somewhere, and Ewan McLeod (from our partners at Mobile Industry Review) alludes to it. “Twittering is 99 percent ego and 1 percent useful”. It’s just a case of ensuring that you can see that 1 percent useful. And Doc Searls, one of the leading thinkers in this space, agrees, citing a “Noise/Signal ratio of 600-to-1″ in a recent article for Linux Journal

For me though, the biggest challenge facing social networks in the coming year is monetising the audience. The delivery of advertising to users must be both contextual and relevant, or it just ends up as a fail. And banner advertising is also off the mark in my book (as an example, Facebook clearly still has a long way to go). Conversation and engagement are the buzz words for brands, and the Holy Grail for social networks seeking to deliver significant monetisation.

Peggy adds: Twitter can surely get more mileage out of search. I’m told by Vince Staybl, Gofresh CEO, that search is a main attraction in mobile social networks such as itsmy.com (which belongs to Gofresh). Read between the lines and it is a business model that could pay dividends for all networks moving forward. But the model may be more about convenience than CPMs or CTRs.

How viable is mobile advertising in an economic slowdown? How will the current economy impact businesses that derive revenues from mobile advertising? Can mobile advertising count on VC funding?

These were just a few of the key questions that thought leaders, startups, investors, mobile carriers, device manufacturers, and mobile application developers debated during Mobile 2.0 in San Francisco.

The mobile conference – organized by the Mobile 2.0 Organizing Committee ( Daniel Appelquist, Senior Technology Strategist at Vodafone Group; Gregory Gorman, Principal at Tertius Advisory Services; Mike Rowehl, Scalability Architect at Skyfire; Peter Vesterbacka, Founder Some Bazaar and Mobile Monday and Rudy De Waele, Co-founder dotopen / mTrends) in partnership with AMF Ventures – brought together a stellar line-up of professionals and practitioners in a frank (translated: no-hype) one-day discussion of the topics and trends that matter.

The most dominant theme: The economy. Or more specifically: How companies can survive in the global downturn that is already impacting businesses at every level.

Overall, attendees were upbeat about the outlook for mobile advertising. But this was more than a hunch.

New numbers from mobile social networking company Limbo and GfK Technology, a market research firm, underlined the increasing importance (and reach) of mobile advertising in the U.S. market. A recent study from these firms found that 40 percent of mobile phone users in the U.S., about 100 million people, recalled seeing an advertisement on their phone during 3Q08 (about two-thirds of the ads were text messages; the other one-third were display ads). It was the first time mobile advertising awareness in the U.S. reached such a level during a single quarter, and it represents a sure sign that mobile advertising is getting the attention of brands/advertisers despite the economic downturn.

More evidence that advertising is indeed delivering positive results came from Brian Cowley, president and CEO of AdInfuse; Jason Spero, vice president of marketing at AdMob; and Ragnar Kruse, CEO and founder of Smaato.

Each reported that they are seeing continued and strong interest in mobile advertising, and each backed this up with some interesting observations. Jason, for example, told us that AdMob has not seen a drop in mobile advertising budgets among its partners. To the contrary, companies are asking for more ad placement and increasing their budget with AdMob. This view was echoed by Brian at AdInfuse, who said his company has never seen more interest in advertising by top brands than it is seeing today.

A driver is the consumer expectation that content must be and will remain free of charge – subsidized by advertising. Granted, there are many examples of companies making money on content and apps – such as Apple, which has built a lucrative business by selling applications via its App Store, and Google, which follows the same blueprint with its new Android Market. However, executives from GetJar and MySpace asserted at the conference that in most contexts, the most scalable and sustainable business model is just giving away mobile apps for free.

Don’t count on distribution via carrier decks,  because it is hard to get in the door with operators and it does not guarantee a worthwhile income. This was the view of Ilja Laurs, the founder of GetJar. His company, widely considered to be the world’s largest mobile applications portal, has harnessed mobile advertising to fund the successful distribution of free apps on behalf of its developer partners.

Consumers are also not willing to pay to join or interact in mobile social networks. Brandon Lucas, senior director of mobile business development at MySpace, pointed out that consumers’ unwillingness to pay a monthly fee for mobile MySpace services has pushed his company to phase out its premium-based mobile services. The focus is now on moving to a pure ad-funded model.

For many mobile companies, mobile advertising works. But will it pay? This was the question that made for a lively discussion during the VC panel. Their view: Companies that are not dominant in their sectors may find it hard to succeed with an advertising model, and those that are trying to get off the ground with this approach are likely to face an uphill battle.

Tim Chang, a partner at Norwest Venture Partners; Peter Barry, head of venture capital and startups for Vodafone Group; and Rick Segal, a partner at JLA Ventures and Blackberry Partners Fund, agreed that VC firms are not dazzled by mobile app and services startups that depend on ads for revenue. The reason: A startup has to reach a lot of eyeballs, and the market is chock-full of companies that have bet their bottom lines on this approach.

In a nutshell, only a few of these mobile newcomers can hope to survive – and that isn’t a risk many VCs are willing to take.

What excites VCs? Companies that provide the infrastructure and middleware to deliver mobile advertising or reduce the costs associated with it are hot properties now. AdMob, which recently pulled in $15.7 million in its third round of funding, was cited as an example of a desirable mobile advertising investment.

Mobile advertising experts at the event also expressed strong interest in companies that collect and wield customer data (all the better if they do it in new and innovative ways). This new focus makes business sense if we consider the underlying logic: The more data an application can generate about users, the more advertising it will attract and, ultimately, funding. It’s a virtuous cycle. Likewise, companies that can develop infrastructure and techniques that will bring in more metadata and metrics via mobile applications are also high on the radar.

Why the focus on Blyk? For one, it’s a perfect fit with my passion to analyze all things mobile at the intersection of content and context. Blyk has honed its customer profiling to send its users (between the ages of 16 and 24 – the toughest demographic there is) only those advertising messages that they (the users) deem relevant and valuable. Blyk understands the requirement to conduct its business at these crossroads (where content and context meet) and that is rare. It merits a closer look, and I recently attended an analyst roundtable hosted by Blyk executives to find out more.

Listen to the podcast here.

Before I list some of the podcast highlights, allow me to focus on one presentation slide that stood out during the roundtable – one I believe speaks volumes about the brand power Blyk has built over just one year. (No wonder esteemed colleagues such as Emeka Obiodu at Ovum speculate on whether a mobile operator might not just buy up Blyk to pull ahead in mobile advertising.)

At first glance, the slide documents that Blyk has the highest “net advocacy score” among mobile networks. (Translated: 40 percent of those polled would recommend Blyk.) In my view, the real story is the company Blyk now keeps. It trails the likes of YouTube and Facebook – and has pulled ahead of MSN, MySpace and Bebo.

My take: It may not have been Blyk’s strategy to be in the same league as social networks and Internet giants – but Blyk has made the grade.

And that without spending “a single pound on marketing.” Leif tells me Blyk has become a word-of-mouth brand with strong appeal among members of a choice demographic of trendsetters, early-adopters and lead users he calls “The Recommenders.” True to the name, these young people try new things and pass them around to their friends. (Little wonder why friend-tells-a-friend referrals are how 6 out of 10 Blyk users learned about the offer and joined up.)

Can Blyk cash in on this phenomenon to enhance its appeal to brands as a provider of mobile advertising (more correctly mobile social advertising) content to youth?

I put the question to Leif during the podcast. Blyk isn’t pursuing a wider strategy around providing content and enabling mobile social networking – but it could. For now, however, research and focus groups confirm his views that users can and will get content and services from other sources and other kinds of channels. “The evolution of mobile advertising will not go to [in the direction of] more content. It’s about dialogue …it’s not about [adopting] online business models or anything like that.”

During the roundtable, I learned that some companies have approached Blyk – a numbers-run company that takes customer analytics seriously – with a strong interest in purchasing a white-label solution that would get them up to speed and pave the way for them to engage users, collect and collate data, and so effectively advertise to empowered consumers. Will Blyk do it? There are discussions but the company will stick to its knitting – at least for now.

Other podcast highlights:

ADVERTISING & ENGAGEMENT: Combining the two is a core value at Blyk and a key competitive advantage that has allowed Blyk to chalk up some impressive stats, including a 25 percent response rate among Blyk users to mobile advertising campaigns. In fact, the campaign by Penguin to introduce the book Slam by author Nick Hornby resulted in a 67 percent response rate. Over half (51 percent) of users downloaded an audio clip (a preview of the opening chapters) to their mobile phone. Mobile advertising is in need of a re-think (as Jonathan MacDonald is quite quick to point out). Leif agrees and sees some encouraging progress in this direction. “The industry is starting to realize that mobile advertising equates to engaging young people. It’s a communication tool.”

MESSAGING & MESSAGES: Blyk messaging traffic is fairly evenly split between SMS and MMS. Interactive campaigns generally consist of 2 SMS text messages and one MMS. The first text message asks the user if they want to know about a specific brand or offer; the second continues the conversation; and the MMS comes as a follow-up. It’s more natural for someone in the 16-24 year-old demographic to receive and respond to an SMS as opposed to clicking through to a WAP link. (I learned during the roundtable that even if the user says “no” to the first SMS, indicating they are not interested, they will get a message back acknowledging that choice and asking them if they would be interested in something else. This advertising is a conversation.)

Will other forms of advertising, such as display and search advertising, be the “next big thing” in mobile advertising? Not if it’s a conversation. “People don’t want to be advertised to. They want an experience,” as Leif put it. “I think if I take the research …there was a lot of discussion about what would be the driving pattern in mobile advertising. With the [advent of] display advertising, it will be search advertising. [However,] the latest trend reports I have seen … talk about the lion’s share of all investments already now [and] moving forward is based on message advertising. This is for the simple reason that it’s the most common [communication] pattern and the way people use their phones.”

NO-BRAINER CAMPAIGNS: During the roundtable, Blyk asked the big question: Why has mobile advertising not been happening, and why is it happening now with Blyk? Clearly, the emphasis on engagement is part of the answer. But Blyk also has ambitious plans underway to make mobile advertising campaigns (planning, execution and measurement) a no-brainer for brands. Leif couldn’t disclose details, but it’s clear Blyk want to make this dead simple. A welcome change from the bureaucracy brands typically face when they put in a call to a mobile operator.

(Indeed, many advertisers with significant budgets have told me they threw in the towel after making dozens of calls around mobile operators and their ad partners. Even Shaun Gregory, Blyk Managing Director, UK, revealed his own experiment -posing as a brand with a GBP25,000 mobile advertising budget – ended up with him talking to “no less than 27 touch points” at which point he gave up.)

As Leif put it: “We have been working with a lot of big media agencies, and we have developed booking and planning tools that they can use. We also have a couple of frame agreements now in place with the biggest media companies in the U.K.”

CUSTOMER DATA & MORE: These are Blyk’s crown jewels. Users freely share their preferences (filling out customer profiles to qualify for the service in the first place) and freely share their opinions with Blyk on what they think is hot – and not. Case in point is this user response to the question: Are you proud to be British? ^Y/N

“Being British is about drivin’ in a german car 2 an Irish pub 4 a Belgian beer, then on way 2 ya home, grabbin’ an Indian curry or a Turkish kebab, 2 sit on a Swedish sofa and watch USA shows on a Japanese TV. And most of all being suspicious of anything Foreign. Oh and.. Only in Britain .. Can u get a pizza 2 ya home faster than ambulance. Only in Britain do banks leave both doors open and chain pens 2 the counter. Also Supermarkets make sick people walk to the back of the shop 4 prescriptions whilst healthy people get their fags at front of shop. We might be british but by hell we’re funny!”

Read between the lines and it’s clear that Blyk is doing more than delivering mobile advertising and recording the response. It has become a brand users trust with their ideas, feelings and personal opinions. As Leif pointed out: “People are opting in [and] we have a lot of insight into [youth] trends.” This unique position – between the brands and the consumers – is money in the bank, so no wonder Blyk is “accelerating” the development of this “inside piece” of the mobile advertising equation. Knowing why users think a campaign is off the mark is as important as understanding why it is a success. “There are many brands that – before they run a campaign – want to test the waters and know ‘do I have the right value proposition, do I have the right messages.’ It can even be that advertisers want to know what TV shows young people are watching.”

My take: Companies will no doubt try to copy the Blyk model (in fact, MSG has reported on a similar ad-funded scheme here). But it’ll take more than free services to convince consumers to offer frequent and honest feedback to ad campaigns.

Remember Blyk isn’t only delivering mobile advertising. The combination of analytics systems and solutions (supplied by Xtract, a pioneer in social advertising intelligence whose claim to fame is its ability to tap into social interactions, behavior data and other dataflow to create dynamic real-time customer profiles) and Blyk’s own conviction that advertising is and must remain a two-way conversation position at the center of the exchange and allow it to keep its finger on the pulse of users long after the campaign is over. And that’s a powerful place to be.

More in Part 2 of this podcast series – so check back!