Ina Fried

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Indian Start-Up Turns Texts Into Dollars

One Indian start-up is trying to turn text messages into some serious ka-ching.

SMS GupShup (a Hindi word that translates to “chitchat” in English) is a 200-person start-up that has created a host of SMS-based services that, all told, account for more than 1.5 billion text messages a month.

The company’s biggest service is a text-message-based social network that lets individuals or companies send text messages to large groups of followers that want the updates. The service has taken off with 100 of the most popular feeds topping 100,000 subscribers to things like jokes, religious messages, sports scores and other information. Smaller groups might have as few as 10 or 20 followers. The service is somewhat similar to GroupMe, a U.S.-based group messaging service.

One tribe based in Northeast India uses the service to allow its 65,000 members–some of whom live far away from the area–to keep tabs on tribal goings-on.

“If someone has a child, someone gets married, someone dies, it all goes up there,” said CEO Beerud Sheth, who recently moved to Bombay after spending many years in Silicon Valley. His past work includes launching Elance, a company that matches freelance talent from around the world with people who need to hire for projects.

SMS GupShup has become a significant player in the text message market in India, accounting for roughly 5 to 10 percent of all SMS traffic, Sheth said.

But, while there is money to be made in text messages, SMS GupShup is not exactly raking it in. Some standard industry metrics on how much a company could make off text messages would suggest that the company is on pace to bring in about $10 million a year in revenue.

“That’s in the right range,” Sheth said.

Nor is the company yet profitable, but Sheth said the company hopes to turn the corner sometime in the first half of next year. Among the company’s costs is buying the bandwidth needed for all of the text messages sent by its users. Although it pays anywhere from a quarter to a tenth of what consumers pay for text messages, that still adds up. Fortunately, India is one of the cheapest places in the world to send text messages, with consumers typically paying anywhere from half a cent to a penny per message and bulk users paying far less.

To help recoup the costs, the company limits message length so that the last little bit of space can be used for sponsorship or advertising.

While SMS GupShup is the largest purely SMS-based service in India, Sheth said he does find himself competing with Facebook and Twitter in India and elsewhere, but said the strength of his service is that it is built around SMS, rather than using text messages only as a basic option for status updates.

“For them, SMS is sort of a stepchild experience,” he said.

Sheth said the company isn’t limiting itself to the social networking service. Among its other products are bulk SMS services for businesses. Companies can use the service for everything from messaging to customers to managing inventory. A text-message-based CRM application is in the works as well.

The company is also working directly with carriers in several countries to create a “reply all” feature that would allow people not only to send bulk text messages, but also to reply to a group of anywhere from 7 to 10 people, depending on the country. That’s particularly useful in small groups that may want to schedule events or do other tasks via text message, Sheth said.

“One way to think about text messaging is it is the Internet in the developing world,” Sheth said. “In this part of the world, that is a big part of how people communicate.”

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