When India’s telecom regulator banned Facebook’s Free Basics service last week, it was a sign of validation for Jana, the Boston tech company that also provides free Internet access to those in emerging markets struggling to afford it—albeit in a way that doesn’t violate the principle of net neutrality. Unlike Facebook’s Free Basics, Jana’s mCent service lets users earn free airtime for any purpose, not just to access a select group of online destinations.
”This is their bet on emerging markets.”
Now comes another sign of validation for the nearly 7-year-old company: Jana announced Thursday morning that it has raised a $57 million Series C round led by Verizon’s venture arm, with participation by existing investors Spark Capital and Publicis Groupe. The new round—which is considerably larger than the previous $36.6 million it has raised—will help the company expand into more emerging markets, as well as grow its current 85-person headcount, which includes increasing its sales teams in Boston and elsewhere.
"We’re a strategic move for them,” Jana founder and CEO Nathan Eagle told BostInno, speaking about Verizon. "They’re looking to build a much larger audience as a media company, and emerging markets are where the people are. This is their bet on emerging markets."
Eagle said more possibilities of their relationship will emerge in the future.
"There's a ton of synergies that become possible with an investor like this, so I’m really excited not just about the capital but the potential partnerships we can form where one plus one equals something far greater than two," Eagle said.
At least for now, Jana has gained a powerful ally on its advisory board: Tim Armstrong, CEO of AOL, which was acquired by Verizon for $4.4 billion last year.
"I’m excited that Verizon Ventures has invested in a company that is seeking to transform access to the Internet," Armstrong said in a statement. "By 2020, more than 5 billion people will be mobile, and new, engaging ways to access data will become increasingly important worldwide."
When you learn about how Jana’s mCent service work, it can be easy to understand why a company like Verizon would have a lot of interest: basically, mCent operates as a mobile marketplace where users can send text messages and agree to try out new apps in exchange for receiving a few megabytes of free airtime to their data plans. Advertisers interested in getting their apps in front of these users in emerging markets pay for the airtime.
On average, mCent users have redeemed 56 megabytes of free data while spending out-of-pocket for another 150 megabytes, the company said.
"Getting access to the Internet in emerging market seems to be a lot more top of mind," Eagle said. However, he added, "the solution to the problem isn’t as sexy as the headlines," citing stories about how drones are being developed to beam Internet over uncovered areas and other recent developments that can be more eye-catching than Jana’s mCent service.
At the end of the day, Eagle said, the bigger problem is not expanding Internet access to more underserved areas—which is still an important issue—but making that Internet more affordable to people in those emerging markets.
"The core problem is the fact that majority of smartphone users in a market don’t connect their phones to a data plan, not because they don't understand it, but because of the price per megabyte,” Eagle said. "It comes down to the unit economics for the cost of a megabyte: if you’re making minimum wage in a market like India and Brazil, you have to work for 30 hours to get a 1-gigabyte data plan. What we’re trying to do is, ‘how do we offset those costs?'"
That question is part of what separates Jana and Facebook, Eagle said. Whereas Jana focuses on answering that question, Eagle said Facebook’s Free Basic services, which only offers free access to certain websites, is focused on how to get users to pay for more data over time. While Jana pays for free Internet access with advertisers, Facebook has mobile carriers eat the costs.
"We were dominating them because we were providing more value, literally unrestricted free Internet access."
"That’s how Facebook pitches to carriers: you get people to start data for the first time, they try it , then they start paying for it," Eagle said. "Spending upwards of your day’s wage on connectivity is an awful lot, so finding ways to squeeze even more money of them doesn’t sound like it’s a scalable plan."
Jana entered India as its first market in July 2014, about seven months before Facebook introduced Free Basics there. Even though Jana had a small head start, Eagle said mCent managed to attract 10 times as many active users than Facebook’s Free basics did before it was banned.
India currently represents about two-thirds of mCent's more than 30 million users, which is double the total amount of users Free Basics has, the company has claimed. What's more, Jana has signed up with 311 mobile operators in more than 90 countries, whereas Facebook has only signed with 20 operators in 30 countries.
"We were dominating them because we were providing more value, literally unrestricted free Internet access,” Eagle said. "And the downside is, ‘hey, you have to engage with advertisers, and there’s no advertisers in Free Basics,' so there are tradeoffs. But I think the users have spoken that they would rather have advertisements and get full access to the web then have none and just get access [to a select few websites.]"
