Gupshup - Short Message, Big Dreams

When Anna Hazare began his protest against the government’s refusal to accept the Jan Lokpal Bill, phones across the country were inundated with SMSes gathering support for the next march or demonstration.

SMS GupShup, a group messaging service, was responsible for sending several of these messages. GupShup groups like Anna, Jaibhim, newsb and JagoHaryana — each with more than 50,000 members — along with a bunch of smaller groups, sent out over 1 crore messages in a week.

The company’s success in the Hazare movement justifies its attempts at positioning itself as India’s largest social network.

It’s no surprise then that GupShup founder Beerud Sheth thinks nothing of Facebook.  “The Internet doesn’t have any meaningful impact [in India]. People say, ‘We have a community on Facebook that has 5,000 users.’ I am like, ‘What a joke!’”

GupShup has more than 45 million registered users. (“More than Facebook!” claims Sheth. Facebook had 25 million members in India as on April 31, 2011.)

Around 500 big-ticket brands such as Pepsi, Ford Motors, Puma, Dell and Lifestyle use the service as part of their marketing and advertising mix.

A postgraduate from Massachusetts Institute of Technology, Sheth, in 1999, founded Elance, one of the first companies on the Internet that allowed businesses to contact and hire freelancers.  In 2007, he started another company Webaroo, whose core product is SMS GupShup, launched in the same year.

Here’s how GupShup works: After subscribing to the service (either registering on smsgupshup.com or by sending an SMS), members join groups and communities of their choice and receive text messages (on, say, Art of Living, or Mumbai Traffic Police updates). Some messages have a short advertisement at the end. For example, the Mumbai Traffic Police’s updates are paid for by companies like Michelin Tyres or auto insurance companies that place their ads at the end of the message.

However, GupShup’s core clientele are the more than 25,000 small and medium enterprises (SMEs) who use the service to sell their products and services. And most SMEs, like GupShup’s users, are not from the metros.

Uday Patil and Satish D. are two such GupShup advertisers. Patil runs Anand Online, an e-commerce store, out of his office on Mira Road, a far-flung suburb of Mumbai. His primary products are cameras and car accessories and he rakes in an annual revenue of Rs. 5 crore. “I can’t afford ads in newspapers or on TV. This is the best way for me to reach a large number of people,” he says. In the one year that he has been using the service, Patil has sent out between 2 crore and 3 crore SMSes. At 1.5 paise per SMS, he has spent Rs. 4.5 lakh on GupShup, which brought him around 8,000 customers, and sales of Rs. 40 lakh (an average sale price of Rs. 500 per customer).

Satish D. uses GupShup to sell life insurance policies in Nashik. “I have a proper target audience with GupShup and they account for a large portion of my sales,” he says. He has sold more than 50 policies through GupShup, although he will not say what percent of his sales this accounts for.

Nimit Grover, business development manager, Letsbuy.com, echoes Patil and Satish’s views. “Though Letsbuy.com is an online company, I use GupShup. Very few people are logged on to the Internet at any given time. GupShup gives me a much better reach,” he says.
 
Overtaking the Giants
 Sheth is not looking to overtake the dozen other similar services in India in the long run. He is looking to overtake the giants, Facebook and LinkedIn.

The plan has two parts: He wants GupShup to become the Facebook of the mobile messaging space; and he wants GupShup to become the largest social network in the world. This means enabling group messaging for every mobile phone subscriber — around five billion of them — worldwide.
“It’s an audacious goal, but we can do it. SMS works on every mobile handset,” Sheth says.

Facebook, with more than 750 million active users worldwide, is on track to generate $4 billion in revenue by end of 2011. Twitter has 75 million global users and analysts project it will end 2011 with $150 million in revenue. GupShup is set to exit 2011 with a little over $20 million (Rs. 100 crore).

Despite GupShup being puny compared with the global biggies, Sheth doesn’t think his confidence is misplaced. The biggest difference between GupShup and its competitors is how big they perceive the market to be.  

“The current size of the mobile phone advertising market should be around Rs. 100 crore,” says Abhijit Saxena, CEO, NetCore Solutions, GupShup’s rival. He says the market is expected to grow to between Rs. 500 crore and Rs. 1,000 crore in the next five years. Rs. 100 crore, Saxena’s estimate of the current market size, is what GupShup is hoping to rake in by this year end.  Sheth claims that GupShup will double its number of users and its revenue by next year.

In 2009, they had 20 million users, and had to slow down the increase in the number of users in the past two years because they were growing too fast.  Every month, the service is adding around 3 million users and sends 3 billion SMSes. That’s almost 10 percent of India’s total SMS traffic.

Having enough money to burn before the profits start rolling in is another major factor in this business, and GupShup seems to have that covered for now: It has had four rounds of funding since its inception in 2007. The total amount invested in the service is around $37 million (Rs. 150 crore). The last round of funding took place in January 2010, when it was injected with $12 million from Globespan Capital Partners, along with additional financing from existing investors Charles River Ventures and Helion Venture Partners. Sheth continues to look for additional investors.

Infographic: Sameer Pawar

Innovating to Keep Ahead
GupShup’s is not a social network which allow one-to-one communication between members. GupShup members communicate on a one-to-many basis through SMSes.

GupShup works around its members’ interests, where users create group profiles instead of individual profiles. Members follow groups based on their interests.

So, if you are interested in Hindu mythology follow Om; if you feel for Anna Hazare’s cause, join Anna. There are communities on GupShup that have tens of thousands of followers. There are college alumni groups, or friends who want to share jokes among themselves or a North-Eastern tribe, Hmar, which uses GupShup as a news service.

Now, Sheth is set to take the service to the next level by adding voice options. A product similar to the ‘reply all’ option in email is in the beta phase. The sales team will be doubled, as the company goes deeper into Tier II and III towns. Feelers are also out in Sri Lanka, Indonesia and Malaysia to test the markets.

But with a one-to-many format, does GupShup qualify as a social network? “The only thing that you can’t do on GupShup [compared to other social networking sites] is upload photographs and videos,” says Abhishek Chauhan, an analyst with consulting company Frost & Sullivan. “Other than that, it is a social network in every way.”

GupShup, however, enables direct messaging, i.e. users can communicate with someone who begins a group or community by using their group name (like a Twitter handle).

GupShup is at a defining moment in its growth chart. It has millions of users with clearly defined interests. This is a gold mine for brands and businesses who want to advertise. But its real challenge is to sustain its business over the long term.

Sheth’s vision for the company is, however, clear: “There are 800 million mobile subscribers in India. That’s our market. If we can connect all of them… think about it.”

He says that doing business through mobile phones in Tier II and III towns is not a matter of choice or convenience like it is in big cities. It’s a matter of necessity. Milind Agarwal, vice president, sales, says, “There are around 50 lakh SMEs that we can target. These are people who cannot afford to advertise on TV or in newspapers. But they have businesses and our plans are very affordable. We have only got 25,000 of them on board. We have a lot of ground to cover. And in every Tier II and III city, there are people with money. They know about products, be it electronics or insurance or soap. They will buy from SMEs.”

But as GupShup goes to the bottom of the pyramid to mine new users, will the quality of its users fall? “You can draw parity between the 1990s mobile [industry] and this business,” says Arnab Mitra, national director-digital, Starcom MediaVest Group India. “When enterprise SMS started three years ago, it was a cheaper and innovative feature. SMS is for the youth, who are happy to get anything free, and for people who are not Internet- savvy. But this will change as time goes by. GupShup will have to innovate.”

And innovation rests on the shoulders of Viswanath Ramachandran, chief technology officer, GupShup. Ramachandran is excited about the ‘reply all’ product, for which the company is tying up with telecom companies. It will be the first GupShup product for which users will have to pay telecom operators. And, unlike other GupShup products, this won’t be a mass market one. “It’s for more intimate [groups],” says Ramachandran.

GupShup is also doing a pilot on selling goods offered by a few vendors. For instance, the main Art of Living group on GupShup has more than 1 lakh members, apart from a few thousand members in city-specific groups (Chennai, Sabarmati etc.), and groups centred around yoga, the Bhagvad Gita, ayurveda and spirituality.

The number of members runs into millions, all of whom are potential customers for Art of Living goods like ayurvedic products and DVDs.  GupShup markets these by placing ads in their SMSes and even delivers them.

A spokesperson from telecom operator Idea says mobile advertising can be big in the country. “It is yet to take off in a big way in India. When organised mobile advertising takes off through SMS, data and voice channels, it is expected to be either consent-based or context-based and non-intrusive in nature. When profiling or context is available, advertising becomes more powerful with superior response than carpet bombing. Hence, this will become affordable with better return on investment than bulk SMS,” he says.

The government wants to set up a system similar to the Do Not Call Registry for SMS as well. GupShup has read the writing on the wall and is headed there with a new product called Scrubber, which allows advertisers to not send messages to people registered with the Do Not Call Registry. But till then, it has it hands full with Anna Hazare and his Lokpal Bill campaign.