Scourge of SMS spam swamps mobile users

Scourge of SMS spam swamps mobile users
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First Published: Mon, Jul 26 2010. 01 15 AM IST
Updated: Tue, Jul 27 2010. 03 29 PM IST
New Delhi: The SMS you got last night—the one that woke you up just as you’d fallen asleep, urging you to consider exquisite three and four BHKs in Supertech Noida, starting from Rs24.35 lakh all inclusive—very possibly came from Jaspreet Singh’s office.
Citi Flight Online Data Solutions Pvt. Ltd operates out of a handful of cubbyholes in a basement in Connaught Place. The walls are covered with strange blue sheets of laminated wood, and sometimes an employee may be snoozing in the claustrophobic conference room. For a data solutions firm, computers are noticeably absent, but Singh, the owner, vaguely mentions a back-end in Naraina. “And the SMSes,” he says, “I send from my laptop, wherever I am.”
Last year, noting an upwelling of demand for text-message marketing, Singh started a service called SMS4India. At the time, he had already been running, for nine years, another business called Database4India, which hawked fat databases of mobile phone numbers to anybody who wanted them. These records are, Singh realized, “the lifeline of the SMS marketing industry”, so the new venture seemed a logical step.
Today, Singh sends close to 20 million SMSes per month, roughly half of them on behalf of real estate developers, who have become the most prolific and annoying spammers in this particular medium. It takes Singh just a minute to send 100,000 SMSes, for which he charges Rs4,000; for one million SMSes, the rate drops to 3 paise per message. “If you call 100,000 people, even at 30 paise per call, imagine how much more expensive it would be,” Singh points out.
Comparisons with other media are instructive. According to Lodestar UM, a media buying agency, the cost to reach 1,000 people via print is, on average, Rs180 for an ad sized 100 column cm. Via a 30-second television advertisement, reaching 1,000 people costs Rs25.
The average response rate to these SMSes is, Singh estimates, roughly 1%, and even less for realtors—low, but acceptable for such inexpensive advertising, and higher than an Internet banner ad’s average of 0.5% for click-throughs.
The sheer ease of sending these messages and a per-SMS price that has plummeted in near-suicidal manner over the last two years, have combined to yank this industry into overdrive. SMSes go out now from every manner of business: insurance companies, realtors, bars and restaurants, neighbourhood grocers, stockbrokers, gyms, and schools. Satya Yerramsetti, founder of Hyderabad-based firm SMSCountry Networks Pvt. Ltd, says he even has, as a client, a barber in Mumbai, though he professes to not know what kind of messages this barber sends.
The largest sender of such SMSes is ValueFirst Messaging Pvt. Ltd, and its chief executive officer Vishwadeep Bajaj estimates that 150 million marketing messages—of both spam and non-spam variety—are sent every day in India; his firm sends a full one-third of these. On a half-wiped whiteboard at his office in Gurgaon, Bajaj chews through the numbers; assuming each message costs, on an average, 3 paise, that would bring the industry’s annual revenue to Rs200 crore.
“Around 30% of these are promotional SMSes,” he says, politely refraining from the word “spam”. The remaining would then be service messages—SMSes that the receiver has opted to get, such as bank account activity alerts. Bajaj insists this is the split, though the empirical experience of relentlessly spammed receivers suggests perhaps that the ratio is lopsided in the opposite direction.
As rapid as the industry’s growth has been, Bajaj predicts just as rapid a demise. “A couple of companies have driven down the per-SMS price so low that the margins are very thin,” he says. He remembers the “good old days”, in 2002, when SMSes cost anywhere between 90 paise and Rs1.50; the margin, per SMS, is now often a solitary paisa, and sometimes less. “We survive because of our scale, but other companies should just go home. Wait six or eight months, and you’ll see that everyone is going to die.” ValueFirst is already preparing, Bajaj says, to reorient itself, towards the construction of mobile applications.
The ecosystem of SMS marketing is a varied and fractured one. Most visibly, there are half a dozen big companies (such as ValueFirst and SMSCountry) and a smattering of smaller ones, all of which buy bulk messaging capacity—or “pipes”—directly from telecom operators.
Around 60-70% of the capacity used by SMS marketeers is sourced from Tata Teleservices Ltd, Bajaj says, often at rates so low that they translate into 1 or 2 paise per SMS. But Lloyd Mathias, chief marketing officer of Tata Teleservices, puts his company’s share in the market far lower. “We are not focused on this market at all,” he says. “It does form a part of the value-added services revenue that we make, but I would not be able to say how much it contributes to our revenue.” 
According to rules set down by the Telecom Regulatory Authority of India (Trai), every telemarketeer must be registered with it. Also, every marketing SMS must be stamped with a unique sender name, bearing a prefix that identifies the operator who has provided the requisite capacity. A “TM” prefix, for example, fingers Tata Mumbai; an “AD” message comes via Airtel Delhi.
Even these basic rules are now flouted routinely. “We have…started getting complaints of people sending SMSes without the mandatory stamping, which is against the rule,” a Trai official, who asked for anonymity, confirms. So an SMS simply stamped “PRIME”, advertising the Rosewood City Township in Jaipur, is, to put it most bluntly, illegal. And it can only be delivered, as per the existing system, if a rogue operator sells messaging capacity and allows the SMSes to pass through unstamped.
Another new method for bypassing the stamp—another method, in essence, that makes it difficult for the regulator to bear down on illegal telemarketeers—involves the use of modems with multiple SIM cards. “These modems are slower,” Bajaj says. “They send maybe eight messages a minute.”
But with pre-paid SMS cards, costs are low, and with spam, it matters less how fast it goes out and more that it goes out at all.
The sway of the unorganized section of the SMS marketing industry is strong: Onais Rafiq, manager of media sales and alliances at SMSCountry, estimates that only 40% of these text messages are sent by “organized” firms such as his own.
Instead, a tier below ValueFirst and SMSCountry lies a sea of resellers—mom-and-pop shops such as Singh’s Citi Flight, which purchase capacity from the big players, dice it up further, and sell it on to either still-smaller resellers or local customers.
These resellers have now become difficult to ignore. Bajaj says that ValueFirst started, last year, to sell capacity to resellers. Similarly, SMSCountry began only a few months ago to sell a white-label version of its SMS-sending software to resellers because, as Yerramsetti admits frankly, “We thought we were losing a large market share to our competitors.” SMSCountry has grown rapidly in the same time frame; from 70 employees in December, Rafiq says, they now have 300, and hope to reach 500 by the end of the year.
In the bitterest irony, though, Bajaj notes that as per-SMS prices have plunged, the smaller resellers, who have grown the industry to such mammoth proportions, suffer first and the hardest. Margins dilute further as they squeeze down the chain. “It’s the mom-and-pop guys—you know, two guys somewhere with a PC—who’re telling us: ‘Thanks boss, but we’ve had enough’,” Bajaj says. “Once upon a time, the margins for these guys used to be enough that they could buy a Honda City after eight months. Now, they can’t even buy a Maruti.”
Gouri Shah in Mumbai contributed to this story.
This is the first of a two-part series on the SMS spam industry. Next: But how did they get my number?
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First Published: Mon, Jul 26 2010. 01 15 AM IST