Two-Thirds of the World’s Mobiles Are Dumb Phones. Meet the Company Getting Them Online

This might be the worst Facebook experience ever.

And yet U2opia mobile, a Singapore-based company founded by Indian entrepreneurs, has catapulted to 17 million users in 36 countries as a result. To understand why, you have to unlearn Facebook—its blue background, viral videos, photo uploads—as you know it. And put yourself in the position of someone who has never been on the internet before.

U2opia takes dumb phones and uses the so-called Unstructured Supplementary Service Data (USSD) protocol to allow such phones to connect to specific internet services such as Twitter and Facebook tailored for the small screen and text-only functionality. This is done through the company’s proprietary platform Fonetwish, which has signed agreements with Facebook and Twitter. An estimated 62% of the phones used in the world are dumb phones, officially called “feature phones” by manufacturers and networks. Their market share is much higher in emerging markers.

Since its launch in 2011, the platform has steadily acquired users on 53 operator networks in 36 countries. They’re in places as far apart as Senegal, Somalia, South Sudan, Chad, Niger, Haiti, Honduras, Columbia, El Salvador, Cambodia, Palestine, Iraq, Yemen, Afghanistan, Sri Lanka, Bangladesh, India and Mauritania, among others. To get online, they dial a short three-digit code and then they use the alphanumeric keypad.

Operators in several markets, such as Dialog Axiata in Sri Lanka, run promotions allowing Facebook on USSD access for free for a limited period. In India, the platform was used before elections by the think tank Association of Democratic Reforms to make candidate info such as declared assets, education, and criminal records available to rural voters.

The service is available currently in seven languages—English, Spanish, French, Arabic, Malay, Swahili and Albanian. Vietnamese is on its way. Now, 1.5 million users are signing up each month to use Facebook and Twitter in this manner.

U2opia’s real achievement is not in making Facebook available on feature phones. It is that it used the global lure of Facebook and Twitter to build an emerging markets user base that is of interest and value to all manner of clients. A European football club wants to develop an interactive application for their fans in Africa. A large UK media company wants to reach a far-flung audience. An American health care nonprofit wants to reach parts of the emerging world. A US seed company wants to do a field trial with farmers in Andhra Pradesh. All are in talks with U2opia to build those services on top of U2opia’s technical platform.

Market research firms are in talks to use Fonetwish to reach a demographic that is typically tough and expensive to survey.

“The service works as sort of a springboard to data usage. People who use our service, move to data faster,” says Sumesh Menon, CEO of U2opia. He named the company after his favourite rock band, U2.

USSD is a protocol that is as old as SMS and similarly built into the architecture of mobile phones. This means there is no need to customize the service to suit a handset maker or model. Smartphone users no longer need USSD, but most mobile phone users have used it at some point. It is the same protocol that allows you to dial a code—something like *123#, for instance—to check the credit in your mobile phone.

“So user friction is very little. Most of our customers are familiar with how USSD works,” Menon says.

The experience might be barebones, but the functionality is surprisingly full-fledged. A user can access her newsfeed, update status, post on a friend’s wall, review friend requests, read and send messages, and see notifications. When a user dials the code, a session is created and the user can browse using codes for back and forward, and other functions. Most mobile operators offer bite-sized subscription packages. In India, I tried the service using Airtel and was charged Rs10 (17 cents) for a week.

Menon says that 60% of users who sample the service return to use it. And demographics are favourable for long-term growth—some 90% of users are below the age of 24. Interestingly, 5% of Fonetwish users access the service from smartphones. Many users in emerging markets don’t subscribe to data despite owning smartphones, which they use to watch and record videos.

U2opia now has 180 employees and offices in New Delhi, Singapore, and Dubai. Menon started the company in 2011 with co-founder Ankit Nautiyal. They used to be colleagues at the Singapore startup Bubble Motion. The company raised a round of funding from Matrix Partners India in 2011. Menon declined to discuss numbers, but said revenues were growing 20% quarter-on-quarter. The company makes money through telecom companies sharing revenue from the Fonetwish platform.

The company has been profitable since 2013 and is not looking to raise money immediately. U2opia has its immediate task cut out for it—to capture more of the mass market it is targeting. Through the 50 operators worldwide it works with, its services can be accessed by one billion users in emerging markets . In India alone, out of the 900 million-plus mobile subscribers, 550 million can access Fonetwish services, thanks to a slew of deals with several major telcos, including the state-run BSNL.

In fact its reach has become the main competitive advantage of U2opia. There are others that provide similar services—the French-Swiss company Myriad, for instance. But U2opia’s deals with operators mean it practically has the emerging world covered. It is currently working on launches in Vietnam, the Philippines, Zimbabwe, and Morocco.

While operators typically negotiate hard with companies offering value-added services on their network, they like to work with U2opia because people who use Facebook on USSD tend to soon subscribe to mobile data, a business that typically offers higher margins than voice.

The company is now opening its app-development platform so clients can build and test their applications and select the networks around the world they want to deploy. Because U2opia has bought a USSD code (say *315#)with all these operators, it can easily implement a client’s solution on a sub-code (*315*55#).

India’s banking regulator has also recommended USSD and SMS Toolkit (a secure form of SMS) as the preferred protocols for the development of mobile banking in India.

But while the near term appears attractive for U2opia, there is no wishing away the long-term trend—smartphones and data plans will continue to become cheaper, and users will upgrade to better ways of accessing Facebook. For the first time, smartphones outsold feature phones worldwide in the last quarter of 2013, accounting for 57.6% of total sales .

But U2opia has time on its hands. And Menon says the company is developing some other products, too—this time, for smartphones.

Reprinted with permission from Quartz . The original story can be found here .