Bootstrapping an App to $10 Million in Revenue: Christophe Bach, CEO of TextMe (Part 5)

Sramana: Can you give me some idea about how the company ramped in terms of users beyond May 2012 when you brought to market the product with the more advanced functionality.

Christophe: We had 9 million downloads at the end of 2012. Today we have 20 million.

Sramana: That’s pretty fast. May 2012 to December 2013, 20 million – that’s good ramp. Can you talk about monetization? I understand that you already are a $10 million company. Tell me more about how did that happen?

Christophe: As a startup, before even creating the company, we had the business model in mind. We said: “Well, we need to give this for free and we need to make sure that the business model is working.” Very early on with my partner we consulted a lot of networks and potential partners to make sure that our business would be a real business from day one. The first day we launched the product, there was some advertisement.

But from very early on we had profitability built into our business, meaning that every SMS that we would send, we would make sure that we get enough money and make some profit out of it. Of course, overall operational profitability took longer.

Sramana: Do you remember how long it took you from the launch of the first product to profitability?

Christophe: Yes, 2011 was not profitable, bottom line, but 2012 was. I would say that probably profitability was hit somewhere in mid 2012.

Sramana: That’s pretty fast though still. All right. Julien, you want to talk about more specifics of how you handle the advertising? Do you work with networks or do you have your own ad server capabilities? How is all this monetized?

Julien: I think one thing that impressed me the most when I met these guys was the way a bunch of engineers actually started with an awareness about making money, which you rarely find in a company. They had thought about this partly because it was their own money, but also because they had thought very deeply about the way the company would work and the way the product would work. Skype-out or Skype-credit was popular.

There were several games coming up with virtual currencies where people gain currencies by doing certain actions. Their original idea was to apply this to telephony at a large scale.

The ecosystem is vastly different in mobile and most of the mobile-efficient ecosystems are used to working with games. They don’t work with anyone in the telecom space. For many of them, we are their first telecom customers. The idea was to apply some game mechanics and create a virtual currency and let people interact with third party brands. And by virtue of doing this, we will make money and we will re-attribute the user’s part of that money back. This turns out to be a very healthy model from the word go, because the users are pretty happy; they feel they can buy a premier product for free.

For them, calling abroad is a premier product and they can do this without paying. It’s good for the brands because the brands are paying not only for eyeballs before engagement, but our users are doing things with them. They are viewing videos, they are completing an offer, they are doing something with the brand and it’s good for us, because we can do this in a way that makes both parties happy while retaining a very nice margin. I think that was a brilliant idea for the business model to start with and then it’s been a function of launching it and optimizing and getting better with all the details of it.

I looked at lots of advertising businesses, whether it was at Skype and even at Amazon. This is the first time I’ve seen one where the user doesn’t say this is an ad, but thinks it is a feature. If you look at the reviews on the store, people say: “I like TextMe. The core criteria are great. It’s a quick app. It’s fun,” etc. But they also say: “I love the way I can earn credits,” which by the way means, “I love the way they monetize.” This is very interesting because we have an ad model which not only is okay for the users, but one that the users like and ask us to do more of.

That’s the core. Apart from this, we also deal with traditional banner ads, which was a healthy way to start the revenue when we were small. We also had some virtual credits that you can pay from the app. You can buy ring tones or customize the apps.

This segment is part 5 in the series : Bootstrapping an App to $10 Million in Revenue: Christophe Bach, CEO of TextMe
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