ChaCha, the SMS mobile search service, announced that it has closed an equity financing round of $12 million.
The investments will provide ChaCha with the additional capital it needs to expand its local and national advertising sales activities, including a newly opened New York office.
“Our solid position in this space will help us focus on attracting more advertisers that want to reach today’s mobile generation, a group that is beginning to make buying decisions based on what they see on their mobile devices,” said Scott Jones, CEO of ChaCha.
ChaCha also announced it is streamlining and restructuring itself to preserve its cash. The company is reducing headcount, overhead and expenditures through a series of cost-cutting actions.
ChaCha reports that it now delivers 30 million impressions per month and has had about 3.6 million users since the SMS answer service launched in January 2008.
Users don’t need a Web-enabled phone, special browsers or codes to search the Internet, and ChaCha answers go beyond directory assistance. For free, mobile customers simply text a short code or call a 1-800 number on their mobile phones, ask their questions and receive answers via text messaging.
The mobile search space is currently dominated by Yahoo and Google, as users carry their Web-based habits over to mobile. Jeffrey Lindsay, analyst for Bernstein Research, has been investigating trends in mobile search.
“What has become clear from our work is that people are taking their PC desktop behaviors over into the wireless space,” Lindsay says. “What we found was really very different than what we’d expected.”
Lindsay says efforts by Microsoft to buy its way into the space are failing. “People have a huge inertia with their search habits,” he says. “Microsoft is probably wasting their money trying to buy their way in.”
When asked how smaller startups like ChaCha are going to fare, Linsday stresses enhancements to mobile search as a way of distinguishing themselves from the bigger names. “What we think will happen is that they might be able to enhance the search in some ways. If they can do that, they’ll probably get bought up by the larger players, but just replicating what Google does isn’t going to work.”
ChaCha may be on the right track. By employing the use of human guides on the other end of the line, its able to give an answer every time, where Google often defaults to no reply on misspellings or accents.
“What makes us different is that we can answer any question in any natural language. We really distinguish ourselves through the user experience,” says Susan Marshall, vice president of marketing for ChaCha.
Marshall notes that ChaCha’s free service is supported by SMS advertising that comes embedded in text answers to the user’s questions.