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TextNow claims to be the largest provider of free mobile phone service in the U.S., supported by advertising
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The company got its start as a student project at the University of Waterloo in Canada
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It’s now adding a free mobile data offering
TextNow didn’t plan on debuting its new Free Essential Data offering at the same time the Affordable Connectivity Program (ACP) was winding down. But it just so happens that the free data service is now ready for prime time.
“We always felt our service fills a need that ACP doesn’t fill,” said TextNow co-founder and CEO Derek Ting, noting that TextNow doesn’t use government subsidies.
“This is something that people can rely on” without worrying that it will change with the political climate or budgets in Washington, D.C., he said.
TextNow has been offering ad-supported free mobile phone service for a while now. But it’s now reached a point where its costs are low enough and it’s making enough money from ads that it’s able to go beyond free calling and texting to offer some amount of data for free.
Launching today, TextNow’s Free Essential Data offers customers free data for more than 25 email, navigation and rideshare apps, including Apple Maps, Google Maps, Waze, Uber, Lyft, Gmail and Microsoft Outlook 365. To get started, customers download the TextNow app, sign up for an account and order a SIM card from the app.
Customers also can buy an additional hourly pass for 99 cents, a daily pass for $4.99 or a monthly pass for $39.99. There are no contracts and the company says customers can change or cancel data plans anytime with a few taps.
It’s a BYOD and Wi-Fi first kind of model. Calls are made via Wi-Fi most of the time; it otherwise uses T-Mobile’s 5G network. TextNow's MVNO status started with Sprint and transitioned to T-Mobile after the merger.
How it all started
TextNow was founded in 2009, emerging from a project that Ting, 36, started during his junior year at the University of Waterloo in Ontario, Canada, where he was required to do an internship every other semester.
He had two more internships to go before his graduation and thought it would be fun to work on something he and a classmate felt passionate about – and it was around the time the iPhone debuted at AT&T.
Basically, they watched as AT&T wanted to charge people $20 a month for calling, $20/month for data and then on top of that, another $20/month for texting. They thought that was a rip-off and that texting should be free.
So, they designed an app that people could download and not have to pay AT&T for texting. Back then, there were no ads; that came later. They released their app into the world and watched it grow.
But they were surprised about who was using it. They had figured it would attract AT&T customers looking to drop their text packages, but they soon discovered that 90% of their users were using it on their iPod Touch.
“That’s when we had our ah-ha moment," he said, where they were attracting people who could afford a device but not the phone plans.
Nowadays, TextNow has 8 million monthly app users, which includes Wi-Fi only and wireless customers. The customer base is diverse, but a typical customer is lower income, making less than around $30,000/year. Some customers are looking for a second phone line and others are mom & pop shops.
Broadly speaking, cell phone bills are on the rise among the bigger providers. By comparison, TextNow says it’s “the first carrier to get advertisers to pay for cell phone service,” so customers can spend their money on other things.
The company employs about 212 people, with offices in Waterloo, Ontario, as well as San Francisco, Seattle and New York. The company’s basic philosophy is all about working to make things even more affordable.
In its early stages, TextNow raised $1.5 million a seed round, but it hasn’t gone back for more because, Ting said, the business model is profitable.
“It supports itself. That’s the beauty of this free service is people can count on it,” and there’s no chance of investor money drying up. “It’s sustainable,” he said.
And customers are OK with the ads? Apparently. The company’s customer research team did a recent study and found that for most people, ads did not heavily impact their overall rating of the app experience. Customers understand why the ads are there and overall, they’re grateful to have access to phone service supported by ads, according to Ting.
With ACP no longer providing subsidies, offering an affordable data alternative is attractive. “We’re excited to get it in people’s hands,” he said.