Way2online, which operates person-to-person (P2P) messaging portal Way2SMS.com has acquired 160by2, a similar portal based out of Hyderabad, owned by SMS Country. The acquisition includes SMS country’s Internet asset 160by2.com, key engineering team and all intellectual property associated with 160by2.com. However, after the acquisition, 160by2 will continue to operate as a separate unit under Way2online. This story was first reported by Pluggd.in.

Way2online claims to have a registered user base of 23 million users, and says that 160by2 would add another 13 million to it. It claims that both platforms add a million users every month, and (at present) there is only a 20% overlap between the two sites’ user base. VV Raju, CEO of Way2SMS told MediaNama that the company plans to launch an Instant messaging application, which also integrates the Way2SMS service. Excerpts from the interview:

MediaNama: What’s the rationale behind this acquisition?
VV Raju: We are a consumer focused internet company operating in the p2p vertical, so the motive is to increase consumer penetration, increasing the topline and reducing costs. Through the acquisition Way2online will have control of two of the largest companies in the segment and a 95% market share, since Way2sms has close to 78% share while 160by2 has 17%-18% share. Way2sms has close to 23 million registered users and 160by2 has close to 13 million registered users. So in total we’ll have around 33 million users. We’ll also get access to advertisers and existing relationships that 160By2 has.

MediaNama: That leads to consolidation in the P2P segment. Isn’t this a defensive move after the setback from the TRAI’s SMS regulations?
Raju: It’s always good to operate in a regulated space, so we don’t think it’s a setback. Consolidation makes more sense in this space. Both the companies operate in the opt-in P2P messaging segment and have common goals. So it’s a move in the right direction.

MediaNama: The company statement mentions that you’ve acquired only the internet assets from SMS Country. What about the backend and SMS delivery gateway?
Raju: We’ve acquired the consumer facing Internet business 160By2 complete with the back-end and other assets. SMS Country also operates an enterprise business, which is not part of the acquisition.

MediaNama: How many of these users are active users?
Raju: Way2sms has 7 million active users, if you take an estimate of a month’s time and 11 million if you take into account 3 months. 160by2 has 1.6 million registered users in the one month frame, and 3 million considering 3 months.

MediaNAma: How many new advertisers will you get through the acquisition? Also what about employees working with 160By2? Will they be absorbed?
Raju: Since the two companies are operating in the same vertical, we working more or less with the same advertisers, so there were overlaps and the gain in terms of advertisers is not that significant. Around 13 employees from 160by2 have been absorbed.

MediaNama: Have you experienced a decline in number of users after the implementation of TRAI’s SMS spam regulations?
Raju: There has been a decline, but we’re recovering as consumer awareness increases. In terms of traffic, there has been a 15%-17% decline. The number of new subscriber registrations have also decreased. Earlier we were adding close to 28,000 to 30,000 users per day, now it has reduced to 23,000-25,000 users. Similarly 160by2 was adding around 15,000 users every day, which has now reduced to 10,000.

MediaNama: So what’s the way ahead for Way2SMS?
Raju: As I said, Way2Online is now a major player with 2 large properties in one vertical. So the same strategy will continue and we will focus on becoming one of the largest internet businesses.

MediaNama: But isn’t SMS on a downhill, specially after the TRAI set daily limits and after the emergence of closed mobile IM platforms such as WhatsApp and BBM?
Raju: Definitely. And we’ll have to catch up with the trend and focus on data based P2P messaging. We are launching an SMS app that will be in a way WhatsApp meets Way2SMS. We are planning to launch it in the next 45-50 days.

MediaNama: On the lines of Sabeer Bhatia’s Jaxtr? Didn’t it run into problems with the SMS regulations? Will your app work the same way or it will be based on a closed platform?
Raju: We have been operating our business in the space for quite some time, so there’s a difference between a new entrant and us when it comes to the understanding of the regulations. It’ll be flexible, if both users have the client, it’ll operate in a closed p2p data based platform, otherwise it will work through Way2SMS.