SMS Games Carve Profitable Niche, Earns One Startup $170M In Revenue

You’ve probably never heard of the concept of SMS gaming, unless of course you’re one of the millions of people paying a monthly fee to play games based solely on text messaging.  Though the thought of SMS gaming seems shrouded in obscurity, startups are already capitalizing on the concept and reaping huge profits along the way.

One such company, Snackable Media, reportedly earned over $170M in 2009 revenue based solely on charging users for text-based games via wireless carriers.  The aspect of carrier-billing and the fact that anyone with a cell phone can utilize SMS to play the games provides a unique and obviously very profitable business model for innovative startups.

While mobile gaming on phones such as the iPhone and Android devices seem to be the latest craze, the fact remains that not everyone has an iPhone or an Android device.  In fact, a vast majority of mobile users still carry simple feature phones- though they’re simple in nature, they’re all capable of SMS.  This dramatically widens the market and is already proving popular with an ever-growing number of sans-smartphone users.

To be fair, the $170M in revenue Snackable Media earned via its SMS games were divided in a 50/50 share with wireless carriers.  Still, the company’s CEO says they’re profitable.  Overall revenue in 2009 was up from $90 million in 2008 and $30 million in 2007.  The company has never accepted VC funding, and drives user-awareness via aggresive direct-to-consumer Online advertising.

Simple call-to-actions are used Online directing people to sign up for the games via SMS.  Once they sign-up, or opt-in, a $9.95 monthly charge is added to their wireless bill.  According to the company, people usually sign up for 3 or 4 months on average.  The games are developed to be extremely simple and addictive, such as a text-version of “Deal or No Deal,” or Predicto, the company’s most popular game- boasting well over a million active monthly users.

It’s an interesting concept and one that will likely always be around, but as smartphones become more economically viable and their proliferation continues, more advanced graphics-based mobile games will undoubtedly triumph.