Way2SMS, an online free text messaging service claims to have reached 10 million users, delivering over 225 million text messages to over 28 million unique mobiles every month. They claim that their user base is increasing by over 25,000 every day, and they maintain a contact database of 180 million mobile contacts. Large numbers, indeed, but the company has still not enabled advertising on SMS/text messages.

Speaking with MediaNama, Way2SMS Founder and CEO V V Raju said that they’ve been cashflow positive since May 2009, and ended the last financial year 2009-10 with revenues of $1.5 million, and a profit of less than 10 percent. They’re targeting $3 million in revenues this year.

So how does Way2SMS make money?

In an interesting online-mobile play, using mobile to fund online revenues, the company relies entirely on online advertising to fund its growth. Raju claims that Way2SMS generates over 250 million pageviews per month, and according to Comscore, has 3.5 million active users. While they have deals with advertising networks (they’re also running Google AdSense), they also have direct relationships with advertisers and agencies. Advertisers like LG, Samsung, Airtel, Vodafone, Nokia, largely telecom companies, have advertised with Way2SMS. They’re now planning to do year-long deals with advertisers. Raju declined to comment on CPM rates.

Email-to-SMS

“We took 2.5 years for the first 5 million users, and just 8 months for the next 5 million,” Raju says, adding that recent growth has largely been driven by their Email to SMS service. The service allows users to receive free alerts from their Gmail, Yahoo mail or any other email service that allows automated mail forwarding. The company claims that Email-To-SMS has 1.2 million subscribers,on an average. Users, in order to keep the service active, have to renew it on the Way2SMS website every two weeks.

Telecom Operators And Free SMS

How have telecom operators reacted to the free SMS service? After all, these would eat into P2P SMS, which constitutes a majority of their mobile VAS revenue. Raju says, diplomatically, that theirs is not an independent business. “We have to connect our pipe to the operator networks. We are encouraging the users to send SMS, instead of sending 2-3 SMS on their mobile, they send 8-10 message from ours. The operators are getting money for those excessive messages, utilizing more network capacity.”

Way2SMS is planning to go international, much like competitor 160by2 did last year, and is targeting markets like the UK and USA.