Hyderabad: When Raju Vanapala, 31, started personal computer-to-mobile phone messaging service Way2SMS in December 2006, he had no inkling that in five years it would become one of India’s fastest growing Internet companies with 19 million users, adding an average 24,000 new users daily.
On the way, Way2SMS achieved another feat—it ended 2010 as the eighth fastest rising keyword searched on Google India in the year, behind Indian Railways website IRCTC, mobile phone maker Micromax, video sharing website YouTube, football’s governing body Fifa, social networking site Facebook, cricket live score and microblogging site Twitter, in that order.
Vanapala’s business model is simple. He buys short messaging service (SMS) packs in bulk from mobile phone companies, including Bharat Sanchar Nigam Ltd and Idea Cellular Ltd, and offers text messaging free of cost to registered users of Way2SMS, operated by Way2Online Interactive India Pvt. Ltd.
To access the free service, users log into the Way2SMS portal and Vanapala monetizes the high traffic volumes through advertisements placed on the website and by flagging ad tags—or Mobitisements— into the messages users send out.
The business model may be simple, but the challenge lay in building a technology that enables a text message to be delivered from the personal computer to a mobile platform as instantly as it is transmitted between mobile phones.
Way2SMS uses the short messaging peer-to-peer protocol, the technology that allows third parties to submit messages. On the most recent New Year’s Eve and New Year’s Day, the two busiest days for the network, it sent out 100 million messages without crashing, Vanapala says.
“Apart from telecom operators, it’s only Way2SMS that has such a robust carrier-grade messaging system in the country,” he says. “Way2SMS delivers a message in 10 seconds, and the platform we built is robust enough to handle 2,000 messages per second at a 95% delivery rate.”
Some 54% of India’s Internet users send messages from their computers to mobile phones, says a recent report, India Online Landscape 2011, released by New Delhi-based market research firm JuxtConsult Research and Consulting Pvt. Ltd. Around 79% of them use the Way2SMS platform.
Vanapala, who belongs to a farming family, faced his share of struggle before getting Way2SMS to where it is. After doing his masters in computer applications from Nagarjuna University in Guntur, he started the service with Rs 5 lakh borrowed from his parents and a staff of eight that has now expanded to 52. It took two years to balance costs and revenue.
“We were bleeding in the initial two years,” says Vanapala, dressed in blue jeans and a checked shirt, in an interview at the plush Jubilee Hills office to which he recently shifted. “SMS tariffs were high. I can still remember I bought the first bulk SMS pack at 27 paise per SMS. Online advertising hadn’t really picked up, neither Internet penetration nor mobile usage was high then.”
“The only silver lining was (that) we were adding users at a rapid pace. In the first six months, we added 3,500 users per month. Users were primarily drawn to Way2SMS because we offered SMS free of cost when telecom operators were charging 50-60 paise per SMS those days,” he adds.
The steep drop in text messaging tariffs in subsequent years helped give Way2SMS a leg-up. Currently, an SMS costs as low as 2-5 paise, when bought in bulk.
“With SMS tariffs coming down, we were able to lower our costs and generate more traffic volumes, which in turn got us good traction on the online advertising front,” says Vanapala.
After extensive research, Vanapala zeroed in on enterprise messaging service because it had few entry barriers and offered a potentially lucrative market. To start with, he served the messaging needs of enterprises like banks and financial institutions that relied on his technology to send text updates to their customers.
“This is where I came into contact with advertising agencies that sought my help to flag advertisements at the end of each message. That’s how the whole idea of Way2SMS took shape,” he says.
In the last fiscal year, revenue and traffic doubled. Way2SMS clocked $3 million (Rs 13.5 crore today) in revenue, most of it from online advertising. Vanapala says revenue is likely to double again in the current fiscal.
“I have a young user database, close to 60% of Way2SMS users are below 34, and the average time each user spends (on the site) is 10 minutes,” says Vanapala. “I am offering a great value proposition for advertisers.”
According to the latest data released by US-based Internet marketing research firm ComScore in June, nearly 4.78 million unique visitors in May logged into Way2SMS, which attracted 370 million page views in the month. But the company has a challenge on its hand as technology advances rapidly and consumers switch to new computing and communication devices.
“Players like Way2SMS were able to drive huge traffic volumes because they enabled users to send SMS free of cost,” says Sanjay Tiwari, chief executive officer of JuxtConsult Research. “But it ultimately boils down to how they will adapt their model to devices like smartphones and tablets that are going to drive the Internet and the new age social networks.”
Vanapala plans to expand by acquiring companies in the e-commerce space that have a viable business model, but are unable to attract traffic. To fund acquisitions, he may consider raising capital in the next fiscal, he says. For the present, it is sufficiently capitalized.
“Our strength is our ability to drive huge volumes of traffic. We are monetizing it through online advertisements, but I want Way2SMS to eventually become a multi-product, transaction-based portal in order to improve our bottom line,” he says.
Vanapala also plans to take Way2SMS to users of social networks such as Facebook, Orkut and Twitter, and also provide alerts for users.
“My ambition is to make Way2SMS an innovative Internet company and I believe it has all the makings (of one),” he says.
The social angle
Driving its growth, more and more communities like non-governmental organizations (NGO), schools, hospitals and offices are adopting Way2SMS for their communication needs.
Swetha Foundation, an NGO that works to provide education and clean drinking water to inhabitants of tribal areas, uses Way2SMS to communicate with members and grassroots workers in Andhra Pradesh.
“We use Way2SMS because it is free of cost, easy to use, and enables us to communicate instantly with over 40 members on updates regarding our gatherings and other activities,” says Suresh Babu, secretary of Swetha Foundation.
Way2SMS supports nearly 2,000 non-profit organizations by giving them premium accounts, which enable them to send more messages than an individual user can. An individual can send 20 messages at one go and 500 SMSes in a day per account from Way2SMS. To give them exclusivity, the Way2SMS tag is removed from the messages sent by users of premium accounts.
Vanapala, a bachelor who plays badminton and snooker when he isn’t immersed in the Internet, denies a suggestion that Way2SMS could be perceived by telecom firms as a potential competitor.
“It’s too small a business for them to concentrate on given that their plate is already full,” he says. “In fact, they need me as much as I need them. I am giving them additional revenue apart from enabling them to better utilize their infrastructure.”