ChaCha raises $14M from VantagePoint and Rho Ventures

Q&A website has raised a total of $82 million

SMS mobile search company ChaCha has raised $14 million in funding, the company announced Monday.

The round was led by investors VantagePoint Capital Partners and Rho Ventures. ChaCha had previously raised  $12 million in equity financing in March 2009, $4 million in July 2009, and $3 million from Qualcomm Ventures in January 2011.

The company is funded by VantagePoint Venture Partners; Rho Ventures; Bezos Expeditions; Morton Meyerson, Chairman and CEO of Perot Systems; Rod Canion, founding CEO of Compaq Computer; the Simon family; and Silicon Valley venture capitalist Jack Gill. The company has now raised a total of $82 million.

The money that the company has raised will be used to big out the company's Go Big experience, Scott Jones, CEO of ChaCha, told VatorNews in an interview.

While the site used to pay people to answer questions on the site, the Go Big experience involves using unpaid experts or fanatics about a particular topic to answer questions about a topic that they are interested in without being paid. Jones says that while testing this process out, the company found that the answers were as good, if not better, than the ones given by the paid experts. Right now the balance between paid researchers and those who do it for free is 50-50, but Jones sees it going more in the direction of unpaid answerers going forward.

ChaCha is a Q&A site that answers those question in real-time, using its unique "ask-a-smart-friend" platform. The site has answered over 2 billion questions since being founded in 2006 and has over 45 million unique monthly users. It is available on desktop, iPhone, Android, mobile text and voice. Once a question is answered it is stored, so the next time a person asks the same question they will get an automatic answer. 

The majority of questions are answered in between two and 20 seconds, said Jones. 70% are answered through the database, and are sent automatically. Around 20 to 25% of questions require some kind of human resource, simply because of how the question was asked. Those take around 20 seconds to get answered.

The other 5 to 10% are typically location based, and require a person to do research to answer them. They can take anywhere from one and a half to three minutes to answer.

Over the past year, ChaCha says it has seen monthly visits to its website more than double to 68 million, and also saw its unique visitors go from 25 million to 45 million.

ChaCha makes its money off advertising, and has partnered with hundreds of leading brand advertisers. It recently launched a product called Social Reactor, which is a social engagement platform that provides advertisers with access to over 270 million engaged followers of social influencers and celebrities across social channels including Twitter and Tumblr.

The company has also made a deal with New York City to answer questions sent to 311. This costs the taxpayer less money to get their question asked, and gives ChaCha more money than it would get from an advertiser, Jones said. For this reason, the company is attempting to make similar deals with other cities.

The company is "sometimes profitable," but is not right now since it is expanding. ChaCha made $12.2 million in revenue in 2012.

The company is headquartered in Carmel, Indiana, and has offices in New York City, San Francisco, and, soon, Los Angeles. It was named by Forbes as one of America's Most Promising Companies, and is a Red Herring Global Top 100 Company.

Competition

ChaCha is going up against some big players in the Q&A space, though Jones says that no other Q&A site offers the same real time service that ChaCha does.

There is Quora, which raised $50 million at a $400 million valuation in May 2012. In August, Quora added an embeddable quote feature that lets any website host its content and makes citations and trackbacks easier to show. 

Quora is different, Jones says, because it contains long form, blog-type posts, and is formatted closer to Wikipedia than to ChaCha.

There is also a company called Beepl, which focuses on finding experts on different topics before the questions are posed on the site and uses a semantic search engine to direct people to the experts regarding the questions they have. It launched in January 2012.

Another competitor is Pearl, a website dedicated to connecting people with professionals in hundreds of different categories who can help users answer their questions on everything from law, to health to how to fix a car. The company announced in October that it had raised $25.7 million in Series B funding, bringing the total amount raised to over $50 million. The company was on track to generate $100 million in revenue last year.

Though Jones says that ChaCha and Pearl do entirely different things, including the fact that Pearl charges for answers, he says that he could see the two partnering at some point in the future. Experts could answer questions on ChaCha, and then refer to Pearl for more detailed answers, he said.

ChaCha also has to go up against YahooAnswers, Answers.com and Ask Reddit.

In August 2012, Answers.com announced that it would be purchasing customer review website ResellerRatings for an undisclosed amount. ResellerRatings is a site for consumers to rate products and retailers. It currently features around one million reviews of around 40,000 online stores, including Home Depot, Barnes & Noble, Newegg and TigerDirect. 

If there is one service that he sees being the most like his company, Jones says it ir Siri, which also attempts to give answers to questions in real-time, along with helping users in other ways. Eventually, he said, he could see ChaCha being integrated with Siri to help it answer questions quicker.

At least one there is one less competitor for ChaCha: Facebook Questions, which launched in July 2010 was discontinued by Facebook in October 2012.

What really sets ChaCha apart from all these other services, Jones said, is the percentage of results that they give. Users need to have 90% of questions answered to feel satisfied. Not even ChaCha gets that high, hovering in the 73% range, but it does better than all the other Q&A services, which only answer 50%.

With the Go Big app, Jones says he expects ChaCha to be able to answer over 80% of questions asked.

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