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Back to The Future: Power of SMS-Native

It is the one message-space on your phone that you always pay attention to: SMS text messages.

Not just “messaging” broadly, as there are numerous apps where people send and receive communications & messages.  Couple that noise with the flurry of AI/messaging startups from a few years back (set off by Facebook’s WhatsApp acquisition), in conjunction with app developers’ notification euphoria… all of which have resulted in a state on our mobile phones where “our brains being overloaded with push notifications about nothing.”

How do consumers cut through all of it?  They don’t.  Instead they limit what channels they actually pay attention to.  And SMS text messages are at the top.  Call it the ultimate priority inbox.

Yes, there is something truly special about SMS… it’s:

  1. Universal.  Every U.S. phone user has it.
  2. Prioritized.  The SMS inbox consumers treat as sacred, but when it’s opened up to a new “contact,” it implies a high level of trust and importance.
  3. Immediate.  Not only is it prioritized, but users also tend to address & react to any incoming message immediately.
  4. Personal.  Most important, yet the most subtle, SMS implies a personal interaction.  Historically there’s always been a person at the other end, not a “machine,” so users interact with these messages fundamentally differently.  This context opens the possibilities for fostering a truly unique relationship.

Because of the above, are a handful of services (many from startups) which have emerged recently which take advantage of these attributes.  On the commercial side, increasingly ecommerce retailers have started to use SMS as a two-way communications channel with their customers.  The shockingly high engagement rates go beyond the one-way “promotions” over email which have now been relegated (and buried) in their own tab in Gmail.  (Our NextView portfolio company, Attentive Mobile, provides a tech platform for these retailers to employ these text campaigns.)

Even more forward-thinking for an online retailer is the service Jetblack, one of Walmart’s incubations under Marc Lore, a “personal shopping service over text message… [in which consumers] simply text your shopping requests to Jetblack anytime day or night and consider it done.”  Recently the Wall Street Journal profiled this offering, and while acknowledging it’s “money-losing,” to me the eye-opening stat that “Jetblack members are spending an average of $300 a week for products because the ease of the service encourages more frequent purchases” highlights the power of the channel.

Along those lines, there was a set of personal concierge models which launched a few years back like MagicOperator, and 26 other alternatives (including my own personal favorite Delegate, as I’m a happy customer).  It’s unclear to me how sustainable the business models are, but there’s no denying that the immediacy & directness of the text message UI lends itself to consumer services which can become incorporated into the daily rhythm of people’s lives.  If someone’s any wish can be granted with a simple request, SMS lowers the friction to those fulfilling those dreams.

My personal startup investment hypothesis is that a SMS-native service need not be an all-encompassing genie, but rather a focused one with a narrowed-yet-functional scope (and therefore scalable cost-structure) which can overdeliver expectations.  At NextView, we’re investors in The Nudge, a lifestyle “planner friend in your pocket” that text consumers three times a week nudging their members to a range of fun activities.  In their first launch city of San Francisco, the service has become a mini-phenomena… nearly 25% of all of millennial-aged women in the city are members.

Other SMS-native service rhyme with that focused approach, including Shine, which empowers users to “start each day strong with a free, motivational message.”  It’s a “daily self-compassion coach in your pocket,” giving users a way to “to talk to yourself like a friend.”  And if it’s a true friend you’re in need of, another service, HuggingFace, will always be there for you, as it’s social bot “who learns to chit-chat, talks sassy and trades selfies with you.”  A SMS interaction which is deeply emotional, and feels personal, because of the intimacy of the channel.  Is it your friend if it’s not “real”?  I don’t think it even matters, and in part, because the SMS medium makes it feel like you are.

Where we are with SMS I akin to where we were with email a ten years ago.  Considered an “old” technology & channel in the context of the rise of social networking, 2009 was seminal for the email marketing space.  That year, MailChimp launched their freemium offering that lowered the barriers for even wider adoption for senders, setting the stage to usurp then-market leader Constant Contact.  Meanwhile, SendGrid was founded that year, too, providing enterprise-grade/-scale delivery of email (and subsequently acquired for $2B).  In the following decade, email-native services like The Skimm (7M subscribers) and BookBub(10M members) have emerged, as well as a myriad of daily deal services which have integrated into people’s lives.

I believe that we’re at that same spot now for SMS-native content and services.  It’s 2019 and we’re going back to the future with SMS.  Perhaps counter-intuitive for another older technology, but now is the time for startups to experiment with SMS-native services, as it’s the one channel which can immediately cut through the clutter on a mobile phone to reach consumers directly.  Like with email, there is risk that the channel becomes diluted and somewhat tarnished as more companies focus on it.  But similarly, it SMS will still persist as an enormous channel for a long time.  And SMS-native services are in a key position to capitalize on that enduring opportunity.

David Beisel

David Beisel is a co-founder and Partner at NextView Ventures. He has been focused on early stage Internet startups his entire career, both as an entrepreneur and venture capitalist. As an investor in the digital media space, David was most recently a Vice President at Venrock and previously a Principal at Masthead Venture Partners. Prior to becoming a venture capitalist, David co-founded Sombasa Media, an e-mail marketing company best known for its flagship product BargainDog. Sombasa was successfully acquired by About.com where David served as Vice President of Marketing. David holds an MBA from the Stanford Graduate School of Business and an AB in Economics, magna cum laude and Phi Beta Kappa, from Duke University. He also founded and leads the Boston Innovators Group, an organization which holds quarterly entrepreneur events drawing a thousand attendees.