Why so popular? How ChaCha used advertising to dominate mobile SMS search

It has been a good week so far for mobile search company ChaCha. The service, which answers questions that users send in by SMS, received another $7 million in funding - and was declared to be a more popular SMS search service than Google. But why has ChaCha been so successful? In this post, we look at the resons that ChaCha has made it as King of the SMS Search Services.

How does it work?

ChaCha is a “human assisted” search service - so there are actual people waiting to answer your questions. You can either call ChaCha and leave your question by voice message, or send it by SMS to a shortcode. Your question is then forwarded to the ChaCha Guide who is best positioned to answer it. The Guides themselves are a community that ChaCha maintains.

Within a few minutes, you should have your answer.

What’s the news?

Yesterday, ChaCha announced that it had received $7 million in its most recent funding round. That brings the amount of investment that ChaCha has attracted up to over $50 million dollars. Not only that, but Nielsen Mobile (the mobile branch of metrics company Nielsen) has announced that ChaCha has now overtaken Google to become the most popular SMS based search service worldwide - and that this growth occurred mainly in the first half of 2009, which saw the ChaCha marketshare jump from 7% to 28%. This is due to very smart campaigns that ChaCha ran to let mobile owners know how to use the service - perhaps most successfully in conjunction with sports events like March Madness and the Superbowl

What we think?

There are three main reasons I believe they’ve done so well:

1) It works. Because of the model of distributing the questions to a large number of Guides, ChaCha was able to guarantee that responses would always be relevant and mostly accurate. This isn’t an automated search service - even the best of which return vast amounts of noise in comparison to the actual useful information you need. So for quick answers on the go, it’s hard to bear ChaCha for convenience.

2) IT’S FREE. ChaCha only costs as much as your operator charges you for an SMS. That’s it. It never asks consumers to pay a single cent for their answers. So how do they make money? Well, that’s part of the third reason…

3) It’s an advertising bonanza. Let’s say you ask ChaCha a question via SMS. It’s now got your number. It knows you want a text in response, so it’s not being invasive. And finally, because of your question, it knows something you’re interested in. So it provides everything an advertiser really wants: targeted, non-invasive advertising to a receptive user.

ChaCha has always played very smart when it comes to advertising, launching its “pay for performance” SMS advertising service in November 2008. It has gathered a user base, and is now monetising those users via their questions. Rather than monetising the service by asking users for money, it monetised the users by asking advertisers for money. And that would appear to be a sustainable, long-term business model… the kind that attracts regular multi-million injections of funding!