| Strategic Play. Flytxt: Sticking to its guns |
| Wednesday, 26 February 2003 | |
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New Media Age- 27th February 2003 - Mobile marketing agency Flytxt prides itself on
offering a full service, and has survived where other more specialist
firms have gone by the wayside. But can it compete against major
agency's own mobile arms? The company developed SMS gateway technology, built relationships with the networks and put together a marketing team. As predicted, SMS proved more successful than WAP and Flytxt can now claim it's well-placed to break even this year, three years after securing €2m (£1.35m) in venture capital. CEO Lars Becker is keen to point out, though, that unlike many competitors, Flytxt isn't in a rush to show a profit. It's more interested in spending the rewards for being an early mover in a ballooning sector by growing beyond the UK and Germany. "Our strategy has always been quite conservative," he explains. "We've always been very frugal and we'd rather grow than take profits out of the company. As we reach break-even, our ambition will be to open up in the US, and add a third base to headquarters in London and our small offices in Frankfurt." Flytxt's main growth has come from working with media and entertainment companies because, according to Becker, they're the early adopters of this new marketing route and their requirements are suited to the type of work his company aims to find a niche in. "We don't want to use mobiles for push marketing and neither do media companies," he says. "They're one of the first sectors to realise that mobile marketing is all about building a relationship with consumers. It's like with our work with five (formerly Channel 5). We give viewers competitions and free games and ring tones and in return Five has a direct relationship with them, to tell them, for instance when a big new series is starting. "It's been largely the same with Emap. It was very quick to realise the potential of mobiles, particularly through Smash Hits, for example lets people who've entered a competition for a particular star know when that singer's next song is out." Other large media companies that have signed up with Flytxt include Chrysalis Radio, Kiss FM and Miss World. Now the company is hoping the media companies with which it has established its reputation will soon be joined by banks, utilities and retailers. In particular banks and utilities, the company's thinking goes, have useful information to send to consumers via mobile phones, and thus have the basis of building mobile marketing relationships. "We already work with Deutsche Bank in Germany to send people texts when money comes in or out of their account," says Becker. "This is where we really see a lot of growth coming. These big companies are a little conservative, so have been watching development, but we certainly think they'll be coming on board soon." His hopes are partially backed up by the latest figures from Forrester that predict a third of European companies already use SMS marketing and a further third will in the near future. However, the research warns that most of the companies considering mobile marketing favourably won't enter the market in earnest for another year. This doesn't necessarily send shivers down the spines of company heads, claims Michael Birkel, CEO of Flytxt rival 12Snap. He reveals that significant growth is coming from companies already involved in mobile marketing. "A couple of years ago we were doing deals for £10,000-£20,000," he reflects. "Now we're seeing some going for 10 or 20 times that, so there are plenty of opportunities coming from existing players increasing their spend." Even so, the Forrester figures predict mobile marketing over the next couple of years will rarely managed to get above 3%-4% of the average client's marketing budget." Flytxt's approach is to remain conservative and, rather than reinventing itself (as some rivals have been forced to do), it's happy to wait for its vision of the future to pan out. Within five years, predicts corporate development director Pamir Gelenbe, convergence will mean Flytxt will be delivering all manner of marketing messages that, because they all go to the phone, will be indistinguishable to clients and consumers. "Within five years we won't be talking about text, voice, email and instant messaging as different media," he predicts. "They'll all be seen as the same thing that reaches a person via their mobile phone. That's what makes being in this marketplace so interesting. We think technology won't radically change the sector, because the principles of texting will remain the same, It's just you'll be able to do a lot more on, say a 3G phone than you can today. We're making sure that we can work with every medium, such as instant messaging and email, so we're not just relying on text." For now, while Flytxt's hopes for convergence wait to materialise, the company claims it can distinguish itself from rivals by its reporting software. "We can tell a client who received messages and who responded at what times," claims Gelenbe. "It's really useful for, say, a chocolate bar maker running a competition, to know when its product is being bought, and if people are entering more than one competition, which other snacks they're buying. So we pride ourselves on being able to give clients a lot of feedback as well as building a relationship with their customers for them." To the outside observer, Flytxt arguably stands out from the crowd by being able to offer clients a service from start to finish - from marketing consultancy to application development and delivery "We're split down the middle into marketing and technology," says Becker. "It means companies can chose to use our marketing team to come up with a campaign, or they can have their own team an come to us to build and deliver it. We offer consultancy because we don't want to be seen as just an infrastructure company people can go to send out texts; there's much more to us than that." In an industry that's largely built on partner relationships, this all-inclusive approach stands out. Certainly rival SMS marketer Mobileway thinks it's a mistake to try to carry out every task. Executive VP Bob Pike argues that by trying to spread its expertise to cover all bases, a company runs the risk of missing its main opportunities. "We don't concentrate on marketing because we've decided the core of our business is through advertising and marketing agencies bringing household names to us." he says. "No-one can do everything well, so you're better off with concentrating on working with the agencies that the big names - like Sony and Fox, which we do a lot of work for, are always going to use." Pike claims that building up a large marketing team would have diverted Mobileway from the main growth area in the sector. "You have to be global because that's what the big companies want," he says. "So we've concentrated on building relationships around the world. You're far more likely to be taken seriously by the big players if you're not just operating out of one or two countries." It's a view echoed by Craig Barrack, country manager at Netsize. The company stands out as having one of the largest sets of agreements with operators around the world (including more than 50 European Networks), leading many of its potential rivals to piggyback on its list of contacts to deliver pan-European or global campaigns. "You can't be a jack of all trades," warns Barrack. "That's why we've concentrated on building global agreements which we can handle for clients. We're more about contacts, infrastructure and billing than actually marketing, which is a good thing because telcos have a shocking record when they try to do marketing. Just look at Genie and Vizzavi." He also believes that companies like Flytxt - which, although working on behalf of businesses, largely sends messages to consumers - need to really get moving into the B2B field, allowing companies to speak to one another and their employees. "We get something like 30% of our income from B2B, through employee messaging deals and services like the FedEx parcel alert system we run," says Barrack. "You can't rely solely on B2C, which a lot have been trying to do." Certainly this message has struck home with Nightfly, the mobile marketing spin-off from global drinks giant Diageo. It has very publicly renounced its former B2C stance, remodelling itself as a B2B mobile marketer and forgetting about the old days of relying solely on signing up trendy youngsters as hip bars to receive text alerts for drinks and club promotions. "We recognised that the B2C route wasn't the way to go forward," admits Nick Wiggin, head of planning at Nightfly. "We're now looking at opportunities provided through innovations like voucher redemption and location services for business, particularly around business-to-employee services." Fortunately for Flytxt, it never went down the route adopted by Nightfly and 12Snap, of trying to sell mobile services under its own brand. Several companies have switched away from the approach and chosen to offer a mobile marketing gateway that only puts client's names at the head of the messages. 12Snap's Birkel can testify that building up a mobile brand can be very expensive. "You can't take on the operators the likes of Club Nokia'" he admits. "It can cost anything from £1 to £5 to acquire every customer, because of the huge marketing and advertising spend. So it was clear to us we were better managing other people's lists than trying to go to consumers direct with our own brand." Interestingly, this led 12Snap into an area in which Flytxt isn't active: managing third parties opt-in lists. In a move that's clearly alien to Flytxt's attempts no to be seen as being involved in push marketing, 12Snap currently sells space on its client's opt-in lists, which reach a total of 19m Europeans. Becker takes on board the argument that mobile marketers need to be more focused on B2B services, naming an "interesting" campaign in Germany in which the agro-chemicals giant Bayer, through Flytxt, alerts farmers to weather and germ conditions with advice on apt products, such as which spray to use for an outbreak of crop diseases in their area. Looking at how its rivals have had to reposition, however, it's clear that Flytxt deserves credit for never confusing its role with an expensive push to build awareness of its own name among consumers. While this had given its rivals an expensive opportunity to re-evaluate their strategies. Becker is adamant that he will hang onto Flytxt's key differentiator: the marketing consultancy arm that some rivals suggest places the company in competition with the very agencies that could bring it new clients. "Anyone can send text messages, it's not rocket science," he argues. "We don't want to be just an SMS gateway; that's only part of our business. It's running the whole process for clients that makes up the advanced service we can differentiate ourselves with. By looking after the whole process we can tailor campaigns to what a client wants and then provide very useful data mining so they can monitor how the campaign is going. "If a client wants to use their own marketing agency, that's fine. We don't force people to use that part of the service, but it's there if they need it," Becker explains. So, unlike its rivals, a major revamp of strategy isn't on the books, because opinion at the company holds that it's about to break even through its original business model and it's well-placed to succeed in a growing market that will see new clients entering the field as well new routes to mobiles opening up as convergence progresses. "We're confident that we're in good shape to grow through new companies looking at the success of mobile marketing," says Gelenbe. "You only have to look at the economics. It takes 60p-70p to send out a piece of direct mail, compared to something like 10p for a text message. Yet an SMS can get response rate three or four times higher ." Certainly the large advertising and marketing agencies are publicly eyeing the sector to see if they should launch or acquire their own divisions. Ogilvy, which represents the likes of Ford, BT and IBM, has been first out of the blocks, announcing in January the launch of a mobile marketing arm which it had been testing at the end of 2002. According to Victoria Moffatt, its head of strategy, the market is going to be "big and exciting", but only when MMS phones start to shift in great numbers, offering something more compelling than just text. Until then, the agency is offering its mobile option to clients as a "test, learn and evolve" process that will mean they have experience of the medium once MMS is big enough to take seriously. Moffatt confirms the agency is in discussions with BT to launch its first public texting campaign. Two further clients which helped test the system at the end of last year aren't willing to be named. Flytxt claims not to be overly worried by big agencies becoming involved in the sector, because it believes it's still a place where small specialists, rather than agency giants, are best placed to keep up with technology and spot new opportunities. It's a belief echoed by 12Snap's Birkel. "Traditionally the big ad agencies think that anything that isn't TV is a bit peripheral for them, so I don't think anyone's unduly worried," he says. "Most people believe they're going to be spending this year figuring out how to deal with the downturn, and then the year after they'll want to move into mobile marketing, so will either build their own systems or buy companies. I don't think anyone in the sector isn't expecting consolidation from next year. " Hitting back, Moffatt claims that mobile marketers don't offer anything out of the ordinary and can be competed against with out the need for large purchased. "We decided to build-in house because, with all respect to someone like Flytxt, we found that we could build a system by just getting someone in for three weeks," she says. "We respect SMS marketing companies, but we don't thing they're doing anything that we can't do ourselves. After all, we already have lots of marketing and creative talent working on campaigns every day." Whether this approach will be followed by other advertising and marketing giants remains to be seen, although given Ogilvy's experience it seems unlikely that Flytxt's full-service model will be appealing to a global giant that will probably feel it has all the consultancy talent it needs already. Despite the looming threat of global giants adding mobile marketing to their list of channels, Flytxt is set to continue on its steady course, which isn't going to set the proverbial world on fire but could well end up serving as a model the big names chose to emulate when they enter the market an usher in an era of full-service consolidation. Flyxt, claims it's not worried about the tide of competition coming its way, but one thing for sure: competition is the keyword. With its current make-up, Flytxt is less likely than some of its rivals to offer its founders the exit route of being bought out by an advertising giant. So its strong confidence in its strategy is set to be tested to the extreme as it goes to head with the likes of Ogilvy over the next couple of years. © Copyright Flytxt Ltd 2006. Unauthorized use of any content constitutes a material breach. |
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