Chris Pulicicchio from Splendid Communications got in touch with me today regarding some exciting news about a new mobile network which is being launched late this year.

Dubbed as the first ‘people-powered’ mobile network, ‘giffgaff’ claims to have redefined a new mobile network business model by tapping into existing online behaviour where people get involved by creating content, suggesting new ideas or product innovation and supporting each other with queries on forums or blogs, on behalf of the brands they use.

Before you all roll your eyes and shout “gimmick” – giffgaff seems to have tapped into something genuinely quite innovative here. The main take out from the press release is that the more that members get involved the greater the reward they receive.

Members (read customers) will be able to get up to 100% of top-ups back depending on varying degrees of participation. giffgaff members have a choice of what to do with their rebate:

· they can use it for mobile calls and texts

· take the cash

· or donate it to their preferred charity or fundraising group

It is the latter point which could earn giffgaff some interesting community-based customers (e.g. members of a local church who could collectively raise money for facilities, or a community sports group looking to fundraise some cash for new equipment).

giffgaff, which apparently means ‘to give and receive’, will operate with a low cost base, without the overheads of high street stores, handset subsidies and running large call centres. It offers a simple SIM only tariff and a range of online tools to allow members to self-serve and suggest answers to each other’s questions in online user groups.  As well as that, members will be rewarded for things like referring giffgaff to a friend or relative, creating user-generated marketing, or voting on business decisions.

I really like this idea of building a truly mobile customer-centric rewards model. Many networks have tried but none have succeeded, because up until now none have put their money where their customers’ mouths are. The participatory rewards model is something which needs to be built-in at the heart of a brand in order for it to succeed.

Operating as an independent company, virtual network operator giffgaff will deliver its service using the network of parent company O2 which is worth noting – particularly as it suggests a potentially disruptive revenue model to shake up the UK’s mobile sector.

The giffgaff people-powered business model could only ever succeed within the context of the social web. Statistics from Forrester’s 2009 European Benchmark Survey show that 40% of 16-34 year olds comment on blogs at least monthly, 28% contribute to forums and 64% of active internet users have created and managed a social network profile. If the new model relies on a user-generated brand model whereby traditional advertising is replaced by social network ‘noise’ emanating from the users, who knows where this could lead other brands or services…

Personal recommendation is the key to a brand’s success, which s what giffgaff presumably wants to tap into. However, recommendation is different from brand exposure and providing giffgaff recognises this, we could see an interesting ‘You-Vertising’ model emerging. Where the line could get messy is where members simply ‘wear’ the brand within their social networks in order to receive free voice minutes – without actually buying into the brand itself.

Giffgaff’s CEO Mike Fairman understands that the new mobile company’s business model plays to a proven consumer passion:

“We know that people-powered projects like Wikipedia can often out-do the efforts of established businesses and that people trust personal recommendation much more than traditional advertising – so it seemed like a good idea to encourage that behaviour in our members and reward the effort with a rebate.

“The people-powered model will be at the heart of our business and we believe it will help us build better long term relationships with our members – for instance – who needs market research when you have an active community talking to each other and sending you suggestions?”

What is clear is that building a people-powered network should mean that giffgaff can avoid traditional costs in many areas of their business, so in theory they can pass on those savings to all of their members in the form of lower prices – with the most active contributors getting a higher rebate.

giffgaff is a hybrid pre and post-pay offer with the flexibility and control of pre-pay, and the ease of post pay with ‘auto-top-up’ online. With pre-pay users forecasted to be 42 million in 2010, and with six million SIM only contract users reported in Q1 2009?, the marketing opportunity is approximately 48 million people.

Pricing will be announced at launch, but giffgaff promises that it will be simple and transparent with low fixed rates for all UK calls and texts to UK mobiles and landlines.

giffgaff goes live later this year with a people-powered marketing challenge which will  hopefully inspire people to get creative and spread the word about giffgaff.

There is an official blog already up on the website which you can check out here.