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Part 2: SMS GupShup CEO Beerud Sheth On Twitter, Carriers, Interconnect, Short Codes, API, Classifieds, M-Payments

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. In Part 1 of this two part interview series, Beerud Sheth, CEO of SMS GupShup told MediaNama about the companys revenue streams, their user base and the do not call registry, and more. In Part 2, Sheth talks about carrier relationships, impact of changes in India’s short code norms, API, International expansion plans, whether GupShup would even consider powering Twitter in India, and more:

(In case of content based communities) What about the conflict of interest with carriers paid (subscription) services? MyToday has had problems with that…

Clearly, carriers have paid for spectrum, and are offering some services. I don’t think our intention is to duplicate or replicate what carriers are doing. I think MyToday has more syndicated content than ours, which is long tail user generated content on the free communities. Even on the paid side, if someone wants to launch very quickly or has a small user base, it may be uneconomical for them to launch. Ours is an easier, simpler platform, and is much more long tail content.

But as an aggregate, the number of communities related to, say, stock quotes and IPL match scores would eat into carrier subscription revenue…

Not quite. Carriers offer Cricket scores, but on our communities, you would have discussions, as opposed to actual scores. Providing live scores takes effort, and has to be automated, bought, while if you want to discuss it, it’s not systematic. Even though you see occasional scores, a bulk of it is casual blogging, and conversational, as opposed to professional content.

Are you working with carriers? Is there a revenue share arrangement with them?

We work on building relationships with carriers. We buy network capacity from them. In addition, we would like to get or share user profiles to drive better targeting, without violating any user privacy issues. This will be good for them and us, for making advertising more effective. On the VAS side, whenever we’ve built Cricket communities (for example for Rajasthan Royals and Delhi Daredevils), we’ve taken them to carriers, saying – ‘can we provide some of this content through your deck or SMS promotions?’. We have applications, and would love to offer them to carriers. When we run a short code, it does benefit the carrier.

Are you on-deck with any carrier?
We’re on deck with Idea Cellular.

Is there a risk that telecom operators could increase rates for you through interconnect charges, because costs would be a significant concern?

We keep talking to operators, and clearly, cost of messages is a variable that we have to deal with in our business. That cost also relates to revenues for us, at least on the messaging side. It has dual impact – in some cases it increases revenues, in some cases, expenses. Ultimately, it is in the carrier and our interest to have a reasonable rate regime that reflects the underlying cost of the carrier, and is yet stable and predictable so that you dont have uncertainty and disruptions. At some level, the prices are at some equillibruim. They will get defined, but I dont think it will radically alter.

But even if it increased by a paise or two, it will affect your cost significantly….

I think what Gupshup was a year ago versus what Gupshup is today are two different things. A year ago we were in a phase where we had messaging expenses, and no revenues. Today it is a different company where we have revenues, and the revenues are related to the users and messages we sent. If the messaging cost goes up, and if we’re delivering value to advertisers and enterprises, they will pay us more for it too. You can’t just look at one side of the equation.

How did the change in the short code regime impact you, with the change to alphanumeric codes?

You know, that was a well intentioned directive with unintended negative consequences. With numeric short codes, people could reply to those short codes and interact with the application. With TRAI introducing the alphanumeric prefix to identify the source of the message, the way it was implemented, disabled the users abiltiy to reply. This disabled a whole class of rich interactive applications that took advantage of the reply capability. We had some reply based applications on the short code, which cant work on that. We’ve either switched to the long code, where we dont get revenues, or not running them. It could have been implemented in a way that you don’t throw out the baby with the bathwater – maybe use a numeric prefix.

What trends have you seen post opening up of the API?

We have about a dozen to two dozen third party applications, and a similar number created by us to seed the market. I wish there are more entrepreneurs and developers who want to create apps. This is an opportunity to launch a VAS company in a day…you can almost call it Mass VAS. Anybody can build a VAS application with a few hours of programming. Some of the third party apps are Movie and University alerts. We’ve built apps around quizzes and polling. The analogy is that an open platform like the iPhone – once its easy to launch an app, many people can do it, and monetize it since it runs on the short code. We share revenue – 50 percent – back with the publisher.

Do you have International plans? Do SMS costs allow you to build a scaled business like this in any other market?

Our current focus is India – we’re building a model and want to become profitable in India first. Over the next few months, as we move towards profitability, we will start looking at international markets as well. When you look at new markets, the two main variables are the messaging cost and the ad rates. Quite simply, if the advertising potential is greater than the messaging cost potential over time – maybe within a year of launch – then it may be a good investment to make. We haven’t identified the countries yet, but are clearly looking at countries where dynamics are similar to India. That’s true of a lot of emerging markets.

Would you be looking to raise more funds?

It depends. At one level, we could get to profitability with the resources that we have. On the other, if we find some strategic investors that want to invest in many more places, and accelerate growth, we’d be open to it.

What did you use your last round of funding for?

Between fixed and variable expenses – fixed is mainly people and overheads, and variable being messaging.

Have you considered greater integration with media platforms on TV?

We’d love to do that, and we are in conversations with different media companies. We don’t have anything to announce at the moment. We have a lot of celebrities using the platform – Sanjana is a Tollywood actress, and has a community of 10-15000 fans on Gupshup. We’ve barely scratched the surface of what is possible with SMS – it’s not just a one to one platform. We can do one to many, many to many, play single and multiplayer games.

What about Real Time updates? Discovery of people and content has been integral to the growth of Twitter. Are you looking at enabling real time updates?

If you’re using these products on the web, the best tool for consuming on the web is through search. Twitter is consumed mostly on the web. Gupshup is launching a realtime search capability 2-3 weeks. But we also have to solve the discovery problem on SMS. Search hasn’t worked on SMS – even Google search on SMS has not taken off. I don’t think many people use it. But, there are other ways to discover – if people have subscribed to one group, then we also cross-promote through footer messages. We help people discover other groups through the mechanism that we have, and search makes sense on the Web, and referrals make sense on SMS. We won’t do realtime search on SMS. Realtime search capability will be for our web users. For our SMS users, we already have a referral based discovery model.

How is the WAP usage on GupShup? Is this an initiative for driving WAP and Web usage for SMSGupShup?

Both Web and WAP tends to be used by publishers to send messages. I think we have half a million unique visitors on the web, and maybe half or 2/3rd of that on WAP. We would certainly like to grow Web and WAP usage. I don’t think it’s either or – SMS is the mass medium, and is critical to what we do. The Big B has a blog, and has tens of thousands of visitors, while he has crores of fans. The reason they cant reach him is because it’s on the wrong medium. If it was done on SMS, he could reach people where they are.

We want to expand the capability and richness to web and WAP users. We’re streamlining the Web registrations, and will enable comments through comments, or even Web Only comments. There’s going to be a big release over the next few weeks, which will make Web and WAP properties a lot more usable and user friendly, while remaining consistent with SMS usage. We internally code-name our releases by movie stars, and this is the “Deepika” release.

Would you enable Twitter on Mobile in India if you had the option? They would be competition for you…

I think the way the two media are consumed are very different. On the web, I have a much higher tweet-frequency, and hyperlink to content on the web. Also, the way, I consume it, it’s a stream that I can filter, sort and search, so I don’t mind it. But when you get to SMS, I would not tolerate 50 messages a day. I would not be happy with hyperlinks that I can’t click on. I can’t filter, search and discover on SMS. I think it’s not about Twitter versus GupShup. The SMS inbox is a personal space where you have a certain expectation of frequency and clickability of messages, versus the web where you can search and discover. You don’t mind it. Imagine if you were receiving every tweet in your inbox. Twitter is meant to be consumed in a snacky kind of way. They can also enable email, but I don’t think any user would use it for the same reason, because it’s not suited for the inbox. While GupShup is a social messaging tool. There’s a very different nettiquette.

Have you considered enabling a classifieds system for users for their city, since you would have city based targeting for messages, particularly for using remnant inventory?

Yes. We see GupShup as a platform, and we can launch a variety of services that can be seeded by cross-promoting. Some of the things we have done are activities around commerce – auctions, deals and offers, classifieds. We’ve also done some e-governance utilities for users to submit questions and comments to their local government – a group called Mumbaikar. A child labor case was reported through that group. We’ve done matrimonials and jobs – not like the way it works on the web, but like newspaper classifieds. We’ve launched collaborative tools like the dream date with Sanjana, and are experimenting with paid content, something in the astrology space as well. Mumbai traffic police sends traffic alerts through our system. The hard issue with listings and classifieds is that you need large number of buyers and sellers for every category and every location. We’ve done diamond auctions for Rs. 2000-20000 jewelry.

What about payment collection?

We have multiple payment mechanisms on our site, including Credit card, bank deposit, bank transfers, but clearly collection is a problem.We’re experimenting with phone based and pre-paid card collection. I’d love to do carrier billing if I could, but what we need from carriers is flexible and quick mechanism to be able to introduce and launch products, alongwith the ability to have lower revenue shares in certain instances where the cost of goods is very high. We’re figuring out alternative payment and billing mechanisms, and I’ll have more to share on that over the next couple of months.

Part 1: On Revenue Streams, Revenues, Users and Active Users, DNC, Facebook, Google SMS

– SMSGupShup To Launch Realtime Search, Web Features
– Updated: Facebook Inks Mobile Deal In India With SMS Gupshup
– How SMSGupShup Is Monetizing: Content Store, Premium Groups, Paid SMS
– Why Webaroo Would Need As Much As $10 Million In Funding
– Google Gets Into The Push SMS Business In India, Takes On MyToday, SMS Gupshup

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