Group SMS is a very interesting space but the economics are very difficult to work with. At my first startup http://inactiv.com we had a very similar product in 2006. We were seeing about 50-60000 messages a day and that was limited only by our rudimentary infrastructure.

Over time we realized that those SMS costs add up so rapidly that you need a very good monetization to pull it off. Recovering such high ad rates will be very difficult. Maybe with Groupon/Foursquare like models, something more substantial may be possible.

It will be interesting to see the direction GroupMe takes. Do wish them the best though.

1) Why isn't this feature built in to smart phones? I know it's a big pain point for me on iOS. I assume it's not on Android if there is this much uptake.

2) How on earth are they going to make money? Their suggestion for location based sponsored group chat sounds terrible to me, because you'd be opting in to miniature twitter feed that clogs up your text inbox instead of being able to read it asynchronously.

iOS actually supports sending text messages to multiple people, and that "group" is maintained in the SMS app for later broadcasts.

However, when you receive an incoming text message you don't know whether it was coming to just you or CC a hundred other numbers, so there is no way to Reply All.

America wants to group text. At GroupFlier.com we just reached 1M cumulative texts in 12 weeks. The demand as very broad as we see traffic from just about every age and activity group.

But does America want to pay for group text?

No they won't pay but if you shift enough of the traffic onto smart phone clients and show mobile ads you have a killer business.

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I started withTXT in 2004. We had a group messaging product, GroupTXT, that was marketed to Fraternities, Sororities, and other university student organizations. The product was fairly successful, but even with the organizations paying healthy monthly fees and some advertising revenue, the messaging costs were eating us alive. At the time we had direct SMS agreements with the major cell carriers. I havent kept up with the industry and with costs, but every time I see a successful SMS messaging company sending millions of messages I always have to wonder how much investment money they are burning through.

It seems to me that the smart thing for GroupMe to do is to use push on smart phones and sms on non-smart phones. If they aren't already doing this, it's an easy win to reduce their volume over SMS.

I think this was the original value proposition behind Twitter. I would say the only reason people were originally interested in it was that it could enable SMS broadcast.

The main thing SMS has going for it is ubiquity. Too bad it is so expensive for some people - there needs to be a replacement technology whose price is in line with the costs of delivery.

What are the barriers for them to develop their own SMS infrastructure? Even if they got a crazy discount down all the way to $0.01 per text, that's still unreasonable for a message form that can fit in a single packet.

I heard somewhere once "if you own the infrastructure you can charge rent" :). Maybe at their volumes it's time they stopped leasing.

Does anyone know how much it costs them to acquire a new number? In other words, every time a user creates a new group, they are assigned a number. How much does that cost GroupMe?

They're definitely getting the Twilio volume discount price. Probably paying a lot less then the stated: http://www.twilio.com/pricing-signup/volume-pricing

I hope this company monetizes this quickly and is able to last because this is one of those few apps that as soon as I saw, I utilized. GroupMe just got 10+ active users. Haha.

Wait a second. How are they paying for all those texts to be sent out if the service is free? If they are using twilio or something similar, the costs are 2c per SMS.

Are they managing to send out the SMS for free somehow??

Last I heard they were still using Twilio.

Do the math.. ouch!

No they are (or at least were) using Twilio.

Not sure how this makes any sense from a business standpoint at this time, but I guess they must have something up their sleeves.