Helion Ventures Confirms Investment In SmsGupShup.com – A look at Strengths & Weaknesses of Each Player in this space..
We had quoted Ashish Gupta saying that they had not funded SmsGupshup but its quite possible that at that time which was about three months back the deal would be in process and not confirmed for him to commit to the funding. But now Helion has made a confirmed announcement and a total of 11 million has been pumped into Smsgupshup. The other VC particpating in this round with Helion Ventures is Charles River Ventures.
According to the release the funds will be utilised for business growth, product development and increased sales and marketing. Well as mentioned in our earlier post the money might well be going in the telecom operators pockets as at 10 million smses a day Smsgupshup could be paying Rs.5 lakh each day (@ 5 paise every msg) which totals upto 1.5 crore a month and keeping growth in sms stagnant it means 18 crores a year which is roughly 4 million dollars i.e. almost 40% of their funding.
Now there is no word on the amount of equity taken but given the fact that VC’s dont take majority stakes I would peg the valuation of Smsgupshup anywhere between 35-50 million $’s.
Now given that high a valuation at such a nascent stage it seems like that VC’s are betting this market to be atleast a 300-400 market in terms of advertising dollars. But the question that comes into the scene is who has advertiser access in today’s scene? After all advertiser access and NOT technology could be the key critical factor for turning the tide over on this cost heavy business of sending smses until and unless one of these guys can actually partner with operators to build the network and be a beneficiary of sending smses free of cost.
Lets analyse the Strength’s and Weaknesses of the Players in this space with a focus on advertiser access (being critical factor)
Strength’s
Great tech expertise (probably the best in the space)
Great traction (From the statistics they claim they are certainly the largest player)
Product focus ( Given their product centric focus better features can be expected off them)
VC Funded (Given they are the only player that has raised funding they have access to funds)
Consumer facing – Their name smsgupshup describes their offering and hence they are by far the most consumer facing sms product i.e. smsgupshup as a name can be a household name vis a vis the other brand name i.e. Mytoday or Google Smschannels. The one to give smsgupshup a fight on th brand name front could be vakow a player which seems like an underdog at this stage. Also they are far more into ugc driven sms than any other player again except vakow.
Weaknesses
Advertiser access - Smsgupshup is a typical american style product focussed company (think the youtube of the sms space) and unlike the indian media companies like indiatimes and rediff which have more sales staff than tech staff Smsgupshup has little or no sales staff as of now. Their way of looking at things is that once they hit a critical mass which would be 30 million + essentially the size of the internet userbase advertisers would have no option but to sit up and take notice. Interesting approach though this is based on the premise that numbers are everything.
Good Technology – Again a good tech team behind this one.
Good Traction – Given the numbers claimed based on the userbase they are the second largest player in this space.
Publisher centric model – Mytoday has lesser consumer centric focus and a more publisher driven model i.e. in many cases they are the publishers themsleves while users are passive subscribers. They do claim to send more smses (12 million vs smsgupshup’s 10 millon) than smsgupshup in a day and this could be because of quality of content.
Weaknesses
Advertiser Access – For Mytoday as well the problem of advertiser access remains and it is also very much in the same boat as smsgupshup.
Google Sms Channels
Strengths
Its Google! – Need anything else be said?? Well google brings in technology, advertiser access, money, great people, and the ability to wait out or even acquire an existing player.
Weaknesses
Late Entrant – It is possibly the latest entrant in the market. Even the third largest player i.e. Vakow.com claims 1 million smses sent a day. Creating that kind of traction doesn’t happen online.
Another Product Not a Brand – Sms channels is another product from google and cannot be a consumer brand which is the opportunity for both smsgupshup and vakow.com.
Strengths
Advertiser Access – Vakow is the ONLY player (besides for google) which can boast of an advertiser access courtesy its investors which is Rediff.com. Rediff.com which is possibly one of the largest players in the Indian online space and which has earned its bread, butter and nasdaq listing out of selling digital advertising to indian advertisers is the perfect advertiser access vehicle any business could ask for. Most people will agree that Rediff employees more sales people than tech people and that is the strength that Vakow could possibly leverage.
In my recent discussion with Rahul Gupta of Vakow I came to know that there are just 3 team members at Vakow and that they dont plan to scale his team beyond 10-12 people. This comment made me believe that for sure rediff sales reach would be exploited for vakow and could very well have been part of the strategic investment. In the long run this relationship with rediff could be key in the way vakow scales.
Weaknesses
Third largest player in a market of Big Players – Vakow is the third largest players in a market of three very big players in Smsgupshup, Mytoday and Google.
Conclusion: I feel advertiser access whether acquired over time or acquired via the kind of investors you get on board is critical in this space. Also teh earler these players start knocking on the doors of advertisers and building advertisers centric products for monetization the faster they would scale. This space has become very interesting with the entry of google and given the numbers of mobile subscribers. It would be a hard fought battle among these players and I wont be surprised if google acquires one of them just incase smschannels doesn’t quite scale to their expectations.
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Thanks for the enlightening analysis. I do agree with you that access to advertisers is finally going to win the game for one or more of these players.
One thing I am not sure about however is- how serious Google is in this game? I don’t see them actively creating content for consumption via sms channels, nor do I see them employing a sales force (like Gupshup) to tie up with colleges and campuses to build up a subscriber base. Sending snippets of RSS over sms is something that can be hacked together in a couple of days, and so I wonder if this is just a testing out of their sms infrastructure (which they have been using in google calendar as well) for the coming of something bigger? an integration within orkut? how will that potentially affect the other players, given Orkut’s reach and status as a Youth Icon? we will only have to wait to find out.
Came across an interesting post “Google SMS channel goofs up” http://tiny.cc/Z1SWO