Few things in telecom are as ripe for disruption as the giant ripoff that is text messaging.
Carriers get customers to spend up to $20 per month — $240 per year! — to send tiny bits of data, under the guise of convenience and simplicity.
It is a great service and has been wildly popular. It has also been a great racket for wireless carriers, but now some companies are starting to build disruptive services that could jeopardize those easy profits.
One such company is Pinger, a Silicon Valley startup whose iPhone app, “Textfree Unlimited,” has now been used to send and receive more than 2.6 billion text messages, up from 1 billion earlier this year.
The idea is pretty simple: You download an iPhone app, Textfree, and you can send and receive unlimited text messages for free. (There’s one big catch — you need a second phone number. See below.) The app uses the iPhone’s built-in real-time “push notifications” system to let you know right away that there’s a new message for you, and the Textfree app can access all the numbers from your phonebook.
And because its text messages are just short Internet messages, they don’t count toward the SMS package you buy from AT&T.
That means that if you can move most of your text messaging into Textfree, you could potentially get rid of your $5, $15, or $20 monthly SMS plan, or at least downgrade to a cheaper plan. That could potentially save hundreds of dollars over the course of your iPhone contract.
As a result, Textfree users have become hooked: The average user sends 72 text messages per day. (No doubt there’s a generational aspect to this, too, but still.)
Pinger cofounders Greg Woock (CEO) and Joe Sipher (chief product and marketing officer) stopped by our office today to share some data on their progress.
In late May, Pinger made a big change that made the service even easier and more useful — Textfree users can now sign up for a free phone number to give out for receiving text messages — and growth is shooting upward as a result. (This is especially useful for Apple iOS devices that don’t have phone numbers, including the iPod touch and iPad, which represent 70% of Textfree users.) But this is a hurdle, too. Most people probably don’t want a second phone number, making this service less convenient than iPhone’s built-in texting.
Either way, since then, Pinger has given out 1.5 million phone numbers, making it one of the fastest growing telecom companies in the country. And the service is now used to send and receive 20+ million text messages per day, or more than 600 million per month — dramatic growth from June, when the company was handling about 5 million messages per day.
Textfree generates revenue through ads that display at the bottom of the app while you’re writing or reading text messages — now some 1.1 billion ad impressions a month, spread across a bunch of different mobile ad networks.
Textfree obviously isn’t generating anything near for text messaging what the wireless providers are. But that’s why it’s disruptive. The startup zoomed “well past $1 million” in revenue in June — suggesting a ~$15 million annual revenue run rate — and is profitable, its cofounders say.
Up next: VoIP voice service, including ad-supported and Offerpal “deal”-supported phone calls, which will give Skype some competition on the iPhone. And Pinger may introduce an Android version this year.
Interestingly, the company’s success comes from a big “pivot” it made several years ago. When we first saw Pinger demo three years ago at a telecom conference in Chicago, it was trying to build a “Twitter for voice” which people could use to send short voice messages to each other. That obviously didn’t take off.
When the iPhone app store came out, Pinger first tried a “free” text messaging app, which allowed unlimited text messaging for $5.99. But it soon found out that its users were engaged enough that it could make more money from ad revenue, so it went all-free.
Another reminder that not every successful company is doing well because their first idea was a hit.
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