VentureBeat

Berggi, a company whose product lets you transform an ordinary “dumb” phone into a princely one that can send e-mail, instant messages, and free SMS texts, has raised $9 million.

Avanzit, a major telecom company in Spain, led the round.

Berggi, of Houston, TX, will build new location-aware applications employing Avanzit’s mobile GPS capabilities.

Until now, the company has offered BerggiMail, a useful but relatively undifferentiated offering that packages e-mail, free SMS texting., and an instant messenger that works with all the major IM services. Berggi’s chief, Babur Ozden, says that BerggiMail has registered 500,000 users around the world since its launch in last November, and is on target to hit one million by the end of the year.

These stats are solid for a downloadable mobile application, but in order to reach them, Berggi had to make its service free. It originally planned to charge $9.99 per month, a business model that commentators like Oliver Starr criticized at the time.

Some of Berggi’s competitors, like Mig33, a similar downloadable application, and OZ, which works with the carriers to pre-load its application on their phones, have millions of users (in OZ’s case, as many as 85 million). They’re also up against the growing number of smart phones, like Blackberries and iPhones. When pressed, Babur acknowledges that only 20 percent of its users use BerggiMail on a daily basis, but says that it’s a “different 20 percent every day.”

Starr also pointed us to the fact that Berggi may have fudged its numbers in the past. When it opened its service to the market around Thanksgiving of last year, the press release stated that Berggi already had 100,000 users from a “test campaign,” but in the comments in GigaOm’s post about the launch, someone named John asserted that this number came from a deal with another company and was misleading:

Berggi recently did a bundled deal with Blinko where Berggi paid a big part of the cost to advertise a bundle of ringtones & screensavers. For a monthly fee, subscribers received a package of tones & screensavers each month. Because Berggi paid for the advertising, each subscriber got an INVITATION to download Berggi’s software to their mobile. From what I am hear, none of those Blinko subscribers downloaded Berggi email software to their phones. Berggi had a sharing arrangement with Blinko on the monthly subscriber fees and this is where Berggi’s income came from. We can safely conclude that Berggi does NOT have 100,000 mobile software users and the income Berggi claims to have is not coming from their mobile software.

Asked for comment, Babur wrote back:

In 2006 we had ran a mobile content (ringtones, wallpapers, etc) download subscription offer for $9.99/month, offer was called Berggi G-Club. This campaign registered 100,000 users by June 2006. They were Berggi G-Club paying users.

We’re not sure what to think, but it’s clear that Avantzi, the Spanish Telecom, is convinced, and this is good news for the company. In February, Avantzi, partnered with two leading mobile GPS companies, and as GPS becomes more prevalent in ordinary phones, direct access to this technology may give Berggi an edge in its effort to make dumb phones smart.