Think Google Inc. has the mobile search space all sewn up? Think again.
ChaCha – heard of ‘em? – claims to have delivered search results to 1 million users since its launch earlier this year, answering more than 27 million queries via text message. And while closer analysis may draw skepticism – the Carmel, Ind.-based startup launched just nine months ago at the Sundance Film Festival, after all – the figures are supported by Nielsen Mobile. ChaCha grew from only 7,000 unique users in the first quarter to 211,000 users in the following quarter, according to Nielsen Mobile, expanding from a non-entity to No. 4 among SMS search providers.
“It’s a clear demonstration of just another step in the execution of what was a well-developed plan,” Jay Highley, ChaCha’s chief sales and marketing officer, said of his company’s growth. “Our business plan is now playing out just as we had hoped. Frankly, we’re a little ahead of our plan.”
And ChaCha isn’t the only player gaining substantial ground in text-based search, according to Nielsen Mobile. Google – which, unsurprisingly, tops the chart – saw its audience more than double to 2.7 million from the first quarter to the second. 4INFO saw explosive growth, increasing from a half-million users to No. 2 at 2.2 million faithful. And Yahoo Inc., which doesn’t exactly trumpet its SMS search service, grew more than threefold to 828,000 users.
In fact, unique users of text-based search among the top five providers – YellowPages.com rounded out the list – more than tripled from the first quarter to the second, surpassing 6 million unique users.
“I think it’s a wide-open space; SMS is just so widespread,” said David Gill, director of mobile media for Nielsen Mobile. “You’ve got something on the order of 200 million people in the U.S. just sending transactional text messages. The opportunity, when compared to the mobile Web, you’ve got a potential market 4.5 times that size. That’s just a reach opportunity. There are certain segments you’re just not going to get with a mobile Web or downloadable client search.”
Indeed, while WAP search draws more users, it’s doesn’t come close to mirroring its text counterpart in terms of growth, Nielsen figures indicate. Google saw its audience grow about 7% to 9.7 million users from June to July, while Yahoo’s wireless Web search activity held firm at roughly 4.2 million users. (Yahoo’s figures don’t include searches initiated from carrier decks or from its downloaded applications.) Meanwhile, Ask, MSN and AOL have seen their wireless Web search activity plateau or even fall off in recent months.
Google was one of the first on the SMS playground with a simple service to deliver local business listings, and 4INFO has gained impressive traction by expanding into ad-subsidized content such as sports scores, weather, celebrity gossip and horoscopes. What’s more, 4INFO has inked a few impressive deals with traditional media outlets, using tie-ins with USA Today to drive traffic and delivering ads into NBC’s user-requested text traffic.
But ChaCha offers an impressive – if costly – twist on most text-based search services: The company employs more than 35,000 “guides” who work their own hours and use ChaCha’s proprietary search technology to find answers and respond to text and voice queries. As a result, ChaCha can deliver far more than just news headlines: a quick test-drive of the service revealed that Harrison’s Ford first film role was an uncredited gig in 1966′s “Merry-Go-Round,” and that Jon Rauch is the tallest player in Major League Baseball, “edging out Randy Johnson.”
Whether ChaCha’s business model is sustainable, though, is unclear. Guides make either 10 cents or 20 cents per message, depending on how well they perform, meaning the company’s overhead is likely substantially more than its competitors. Highley said ChaCha has raised $19 million from “primarily private investors,” but the executive declined to discuss other financial matters.
So while ChaCha has effectively differentiated itself to users – providing trivia tidbits and other information that less-sophisticated, automated services can’t – its success may hinge on whether it can differentiate itself to advertisers. It is already delivering targeted ads “on a very selective basis” for a handful of partners, Highley said, with one recent campaign for Coke Zero scoring an impressive 5.2% response rate.
And the startup will be able to deliver more highly targeted ads as it builds profiles for users based on the kinds of searches they perform. A user who constantly requests sports information late at night might be a good target for a message from Budweiser, for instance, while someone looking for trivia about “High School Musical” might be receptive to a pitch for Hannah Montana tickets. Advertisers will happily pay more if those kinds of campaigns are more successful through ChaCha than its competitors, Gill noted.
“I think it’s all about the ad rates they can command,” Gill said of ChaCha’s prospects. “If they have enough contextual data about their users to make their inventory appealing to brands and advertisers, then yeah, I think it can work.”