Your Take - On The Cost Issues Of Push SMS Services In India

We’ve received some great responses on this post on the burn rate of Push SMS services, both on MediaNama as well as via SMS and email (which are off-the-record by default). Do note that the Webaroo funding has NOT been confirmed to MediaNama and we’ve merely published an estimation of their burn rate. There’s great value in your comments (do keep them coming), and here are some of the issues that you have mentioned -

Inter-operator charges: Sony Joy says that the burn rate will increase, and problems will be compounded further if telecom operators introduce inter-operator MT charges, like 10/15 paise.

Sustainability; GPRS vs SMS: Pratham believes that at a cost of 1.5$ per 1K SMS, they would need a 1.5$ and above CPM to survive on advertising, which he thinks is unlikely. K believes that the SMS distribution model will have issues sustaining beyond the next 24 months - users are likely to move to GPRS/EDGE, and once 3G becomes a reality. He feels that SMS is cumbersome and expensive compared to GPRS. Sanjay Vijaykumar rightly points out that we have not included the 12.36% service tax in our estimation, which would our estimation of costs for these Push SMS services, adding that GupShup has released a mobile version of the site at m.smsgupshup.com, and has an internal ad engine in the works. Some have also said that $10 million is not likely wont last for more than a year.

On VCs Backing This Model
Yogi mentions that the VCs are betting on big reputations (Rajesh Jain and Rakesh Mathur) and the hype of mobile advertising. The space is hot, and the jury is still out on whether this will work or not. Prashant Singh believes it will - he compares the SMS space to the TV channel space - TV channels will bleed a few crores per month, and with segmentation in that space, the target group for each channel is limited. Compared to that, the target group for Push SMS services is smaller - like a generic TV channel, with a diverse community mix. Sudhir Syal says that VC’s don’t fund companies so that they can help them achieve their cash burn rate plans.

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