How to make money by giving away cellular service

celebrating their 200,000th subscriber. It took them just a year to reach this number, which is quite impressive to say the least. One might be wondering, though, how exactly they turn a profit if they’re not charging for basic services. They can’t be totally ad supported, can they? The short answer is no. The long answer is explained by Telco 2.0. After the jump we’ll go over the highlights, but if you’re really interested in this business model I’d suggest reading the whole thing.

As you can see, Blyk loses money on outbound calls and texts, but picks up revenue across all other areas. In fact, their loss on outbound calls is more than made up for with their advertising SMS, and is just 59 cents off their mark for advertising MMS. So yes, it appears that advertising is their main source of income, though as you can see they keep themselves afloat with many other income streams. Much of Blyks’ income comes from termination charges, by which we do not mean early termination fees. I’ll let Telco 2.0 explain:

his is effectively shown in the lower diagram of the chart above where we show operators as both receivers of money from end users (when originating the call) and receivers of money from other operators (when terminating the call). So every time a Blyk user receives a call or text from an off-net customer the originating operator pays Blyk for termination. In turn, Blyk obviously pays some of this termination charge out to its network supplier (Orange) but we guesstimate that the company still makes some margin on this.

They also make money off of customer overages, which is probably significant, since they only give away a limited number of minutes and texts per month. All of this leads to Blyk having a rather high ARPU for a prepaid carrier, especially considering their base service is free. That could come down a bit: Blyk is experiencing a 29 percent response rate, which is far, far above the industry norm. If that comes down, advertisers might not pay as much, thereby decreasing Blyk’s revenue. Once again, it’s a rather interesting read if you have a half hour or so to kill.]]>