Another MVNO Takes Aim At The Free-Cell-Service-With-Ads Model

from the this-post-brought-to-you-by-Yugo dept

A mobile virtual network operator (MVNO) called Xero Mobile is better known for its connections to the notorious Gizmondo gaming device, but its business plan is equally sketchy. It says that it will offer free phones and service to users, in exchange for sending them ads. The concept is questionable -- while ad-supported mobile content is a decent idea, it's hard to imagine Xero generating enough revenue per user to make the venture profitable -- as is Xero's supposed implementation of it. However, the idea's attracted the interest of some other people, who want to move forward with a similar idea in Europe, with an MVNO called Blyk. The founders come from a little more credible stock than Xero's: one is the former president of Nokia, the other the chairman of a Scandinavian advertising agency. Still, that does little to answer the general skepticism about this business model. The people behind Blyk say they'll send targeted ads to users, and they'll be ads that offer value, rather than ones that are simply tolerated as a non-financial cost of service. They say they're doing a lot of work to make them a natural part of the user experience and unintrusive, so ads in ringtones probably aren't on the table. But the overall question remains: will they be able to generate enough revenue per user to cover the costs of providing free service, let alone to profit? Furthermore, will they be able to offer a service that's worth using, even if it is free? If the service comes with plenty of strings attached, like unreasonable limits on free calls or messages, it won't fly. And there's something of a chicken-and-egg problem: they need to get a large enough base of users to have an inventory that's attractive to advertisers, but they can't attract users without the free service, which requires paying the costs of airtime from suppliers. Blyk's attracted 30 million euros in VC, but looking at the way companies like Mobile ESPN, Amp'd and Helio have burned through their cash -- and not attracted huge numbers of users -- it's hard to imagine that will be enough.