beerudSMS GupShup is a text based social messaging community that allows messaging from one to many users, as well as many to many. GupShup has been compared to Twitter, and has claimed revenues of $150,000 per month. For a company like GupShup, the more successful it is in terms of messages sent – around 400-500 million SMS per month – the higher its costs. At the same time, despite a potential reach of 22 million users, SMS has its limits as a medium for branding. MediaNama spoke to Beerud Sheth, CEO of SMS GupShup, at length about carrier relationships, impact of changes in India’s short code regime, International expansion plans, Monetization, classifieds on mobile, how GupShup is different from Twitter, among other things.

What’s next for Gupshup?

Growth, lots of it. The way we see it, there are two sides to GupShup. On the consumer site, we’ve built a social messaging platform which is a user generated platform for for people to build communities and connect and share with each other. The flip side of that coin is a mobile marketing solution for advertisers to do targeted contextual advertising. this is a win-win for both. Unlike spam-like activities, it is opt-in from consumers. Advertisers can target better, and messages are likelier to be opened.

You’ve got 22 million users, but when people switch operators, you must see a drop in usage…

Yes, we do churn out numbers. If we can’t deliver to a phone, after a few repeated tries, we stop doing that. We have an interest in not sending messages to churned out numbers either.

So how many users are “Active”?

30 day active would be around half of them. Inactive would be people like if the publisher stops sending for some reason – for example an alumni group that goes quiet for a couple of months. We’ll consider them inactive, but they do become active later.

At 22 million, you’ve doubled your base in a year..

Yeah, we ended 2007 at a million users, 2008 at 15 million. This year will end at somewhere between 25-30 million. They key is that we have slowed down our growth – throttled it. Our user growth was explosive, and we had to scramble to build out a business model, that could pay for keeping the communities going. We established some messaging limits. That has slowed down the growth a little bit. We believe that as our business model picks up, we should be in a position to ramp up consumer growth rapidly.

How are users discovering groups on GupShup if they’re coming only through mobile?

Two things – one is word of mouth, which is completely offline, with friends telling friends. Then we also cross-promote through footer messaging.

How do you monitor or control what kind of content goes in the ads or messages? There’s always the risk of solicitation of sex or ID theft?

So one thing is, in a systemic way, the mobile platform is much safer, since the phone number is a unique ID that can be traced back to the sender. So GupShup verifies the phone number first and foremost. We verify the phone number, and that in itself acts a big deterrent, and takes care of extreme issues. We manage that through manual supervision.

The sense that I get is that you’re comfortable with your consumer base, and you will be focusing on driving revenues…

Yeah. It’s not like 100-0, but we’re comfortable with the size and rate of growth of the community. It’s not slow by any stretch – it could have been a lot higher. What we’ve done is, it is still growing rapidly, but slower that it was before, even as we are rapidly growing our revenue streams.

The $150,000 per month run rate mentioned earlier…was that a good month, or is that monthly?

(laughs) I wish I could announce results according to our best month as our run rate. We are on an accelerating trajectory. As a private company, I don’t want to get too precise, but suffice it to say that month on month we’re growing rapidly. It wasn’t just one good month, and there has been month on month since then. I think we grow 15-20 percent month over month. Even the percentage growth – it’s not as simple as that. We bring new revenue streams online, which can have disproportionate growth.

How was 2008-09 for you? In 2007-08, you had a turnover of Rs. 8.18 crores, expenses of 19.13 crores, and a net loss of 10.18 crores…

Those numbers are not directly relevant, because we were in transition from the earlier product to the GupShup platform. As far as the last year 2008-09 is concerned, we were scaling up GupShup, and had a lot of messaging expenses, and very little revenue. Our focus was on consumer experience and growing the community. 2009-10 is the first year where we will have revenues, and our goal is to get really close to profitability in this year.

What are your revenue streams?

The two revenue streams we have are advertising and messaging. The two are blending, and we see both as mobile marketing. Sometimes people buy advertising, and then if they want to send messages to their existing users, then its just messaging. We still add value in terms of engagement and creatives. In case of engagement marketing – there’s an opportunity to educate, inform, evaluate and give special ofers, prior to the sale. Once the sale is done, there could be additional tips being provided, in order to drive repeats, accessories and referrals. The point is to build a relationship. For example, UTI Mutual Funds has nearly 5 lakh members. Some of them may be existing customers of UTI Mutual funds or prospects who haven’t yet bought funds.

But a company can still do that without paying you for it. Anyone can set up a community…

The difference between the paid service and the free service is that they both operate on a messaging pipe which is a scarce resource. We buy fixed capacity from the carrier, and that allows us to send a certain number of charges. Clearly we end up having to prioritize paid messages over free messages. The paid messages go instantly, while free might be delayed. Jokes, Shayari, Spiritual Content, which is not time-critical, that is over free, while content that is time-critical, is opted in as a paid service. Ultimately, there’s a cost for the pipe.

Is that how Facebook is being monetized on Gupshup?

No. Facebook is a straightforward messaging deal. They’re just using our infrastructure. We have nothing to do with the content, it’s from Facebook to its users.

Have you considered self-serve advertising, with community owners promoting themselves?

Yeah, if you look at ads.smsgupshup.com, it is a self service ad server like Google AdWords, where anybody can log in, define targeting parameters, creatives, schedule the ads and pay for it online. You can also check analytics as the campaigns are running. We absolutely believe in giving tools to advertisers in a self service platform.

Is Response a key revenue stream for you, wherein you restrict the number of messages a user gets, and has to respond with a premium SMS for more?

We have a mechanism called Get. A user can SMS ‘Get’ to a short code, for receiving more messages, and for the speed/limit increases to the user. It serves two purposes – one is to reduce traffic, and the other is to generate revenue. It’s not a significant revenue portion to be meaningful. It’s more of a throttle. We do this because of network capacity and there are subscribers who sign up for multiple groups. Many users end up with more messages that they bargained for, so once you get 10 messages per day, if you want more, you can request more. Else, they get queued up.

What’s your take on Google SMS? They’re also providing content and communities…

That’s validation. If Google enters a space, then it must be a really big space, right? No, I think spaces like ours are driven by referral and viral growth. The growth and the user base depends on the number of users you have, and the growth of the referrals. We have both larger size and growth. There is room for many playes. There’s a lot more to be figured out here. The social messaging is one part, figuring out how to make marketing work is a different thing too. You have to capture user profiles, develop and infer rich user profiles and tie it to advertiser objectives. With 400 million subscribers, it’s a big market. And it’s not just 400 million in India, but with 4-5 billion handsets worldwide, it’s a big opportunity internationally.

How many clients do you have for SMS advertising? Does it work for anything beyond lead generation?

We have a couple of hundred large brands. UTI, ICICI Lombard, BigFlix, Fastrack, Delhi Daredevils, Deccan Chargers. On the messaging side, India Today, HP, NDTV Imagine, and a few others.

In case of some of the paid communities, like Reliance Money, do you keep a revenue share?

Yes, sometimes, some brands have premium content. That’s offered on a subscription basis, and we would share revenue with them. It hasn’t been a big portion of what we did. We have the platform and the infrastructure. Publishers want to use the paid service, and we’d be happy to do that. That’s still in early stages.

How big is your sales team in India, for bringing advertisers on board?

We have 4-5 people between Mumbai and Delhi, but growing quickly as well.

Have you had any issues with DNC filings? How do you deal with a situation where a subscriber files a DNC filing?

Even the most well intentioned company that wants to ensure full compliance has the hardest time practically ensuring compliance. There are limits to how many numbers you can check on a given day, and therefore there are limits to how many numbers you can check against the database, especially for companies like ours that operate on such large scale, where you have tens of millions of numbers to verify. And you have to keep verifying them periodically, because any user could have signed up for DNC at any point in time, so you have to keep cycling through the database. There are just practical and technical challenges for ensuring compliance.

How do you deal with a existing subscriber opting in for the DNC? Is he still opted in, or is he opting out?

Different users have different perspectives on that. If they’re signed up, and the number is shown as on DNC, we ask them to opt-in to Gupshup again. It’s not an idiological stance that one thing supercedes the other. My contention is that give users some control, because they may want to opt out of everything, or selectively choose services. We have the ability to both join and leave a group, and we notify users about these through footer messaging. We try to minimise the problem. We have no desire to send messages to people who don’t want to receive them.

Tomorrow: Opening up the GupShup API, Carrier Relationships, Twitter, Mobile Classifieds and Payments and more.

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— Google Gets Into The Push SMS Business In India, Takes On MyToday, SMS Gupshup