News broke Tuesday of changes at the top for European mobile advertising company Blyk, with co-founder Pekka Ala-Pietilä out as CEO — to be replaced by his colleague Eric Kip.
The five-year-old startup, which essentially serves ads through personalized text conversations, announced the shift this morning, though it’s not clear what brought the move about. It could be a graduation of sorts, since Ala-Pietilä — a former high-ranking Nokia executive — will continue as chairman to oversee Kip, a former marketing executive with brands like Coca-Cola, Danone and Sara Lee.
Whatever the reason, it certainly marks a significant shift for the business, which is headquartered in Helsinki and London, as it continues its search for profit.
And the pressure is on: since starting in 2006, Blyk has raised €87 million ($125 million USD) from investors, but has had a tough time trying to turn that into a major business.
Back in 2007, Blyk 1.0 started out with an idea that seemed novel enough to make a difference: build a mobile network that offered users services for free in exchange for being able to advertise direct to them on their phone. The model took the way the mobile market worked — which already offers vast amounts of subsidy, yet suffers from terrible acquisition costs and high churn rates — and switched it up.
We were a little skeptical at the time — suggesting that trying to support phone use with ad money was “telcos getting Google envy” — and, it turns out, the plan didn’t work.
The precise reasons why things didn’t pan out are fuzzy: a combination of too few users, not enough exposure and a collapse in the advertising market alongside the financial crisis all hurt. But probably the most painful development was the sudden appearance of the iPhone and the host of derivatives that hit the market soon afterwards. Subsidizing a low-cost handset through ads is one thing, but the company’s target market — young, trendy urbanites — suddenly decided that they needed to have phones that cost hundreds of dollars each. Ads aren’t necessarily a huge money spinner, and if costs are high, then those numbers are much, much harder to get right.
Second time around
So, the company switched tracks in 2009 to become a pure mobile advertising firm that partners with operators rather than trying to be an operator itself — it’s a wholesaler of advertising, rather than a retailer. Now it works with Vodafone, Orange, T-Mobile and Aircel across Britain, the Netherlands and India rather than competing against them.
And according to Reuters, things aren’t going too badly, with more than a million users in both the U.K. and India. It might not be enough yet to justify the investment, but it’s looking better than it did a couple of years ago.
But are today’s changes a signal that the company is getting ready for another shift?
That seems possible but unlikely: Kip is not exactly a new broom, but a Blyk insider who has been heading up commercial deals at the company for a couple of years. Perhaps what it does indicate is that the company feels a change of tempo is required.