Yes, I agree with you. The revenue model should be such that Ad should be wrapped within SMS text. It should be meaningful and contextual. Better if they make it action-based. say, open the link or call the number given in SMS to mark it valid.

And this is very true that a common Indian (that includes me too) does not spend unnecessary on texting.

SMSgupshup is following such trend. But, on the other hand I have doubt on “get paid to read ads” services like mGinger. I have doubt on their conversion rate.

What if an auto driver signs up stating a software engineer and gets IT, computer related ads? It’s loss for advertisers.

SMS can do many things – Picture this:
You are travelling by train, and you want lots of people to know where your train is *right now*, what do you do?
Railways/CRIS are notorious for ill-maintaining websites. So, if you make a web2.0 pseudo-map (not graphics-heavy like Google Earth, we’re in India – the land of super slim broadband) which takes SMSes from people to update train information, does that not make a good communication channel?

Not to be limited to trains alone. <– Note.

It’s crowdsourcing by definition. The value added is the public nature of the update – for otherwise, a private phone call would do as well – Ah yes! Twitter! Now I am talking acceptedm, respected stuff (… I hope)

The cool factor is updating a sleek website – Facebook users love throwing poop on each other – Indians are sensible and spend only on stuff with some kind of real value. The cost is just one SMS.
And your name pops up with the train widget or blinking Flash object on the pseudo-map. To add real value, you could allow the user to upload a classified or a set of them and show those ads like intellitxt or snap. The rest of the webpage/screen has sufficient ads to cover expenses. And you should allow users to pin up pictures, photos, coments about their travel which moves along like a “magic carpet” with the train the user is in.
Lots of good things happen with this model. This model of communication is useful in many other situations.
People need not buy expensive GPRS devices for this. Humble old SMS is enough. WAP users always welcome.