You can use the tikzpagenodes package to easily access the textarea as a node.
Code
\documentclass{article}
\usepackage{tikz}
\usepackage{background}
\usepackage{tikzpagenodes}
\usepackage{lmodern}
\usepackage{lipsum}
\backgroundsetup%
{ angle=0,
opacity=1,
scale=1,
contents=%
{ \begin{tikzpicture}[remember picture,overlay, scale=3]
\fontsize{100}{120}\selectfont
\node[text=gray!50!red,rotate=90, above=1cm] at (current page text area.west) {DRAFT 1};
\node[text=gray!50!blue,rotate=-90, above=1cm] at (current page text area.east) {DRAFT 2};
\end{tikzpicture}
}
}
\begin{document}
\lipsum \lipsum
\end{document}
Output

Edit 1: You can also place the "Draft" watermarks automatically in the middle of the margin. I assume you want them to be centered at the text area rather than the page area. While for most cases it will be almost the same, I constructed an extreme case to show the differences.
Here, the top margin is only 5mm while the bottom margin is 90mm. This leads to current page.west (orange dot) being at a much lower position than current page text area.west (green dot). So if one simply computes the midpoint via the calc library's (A)!0.5!(B) one arrives at a quite low postition (blue dot). To work around that, one can use a special syntax:
In general, the meaning of (p |- q) is “the intersection of a vertical line through p and a horizontal line through q.”
With this syntax, one can compute the position of a coordinate that runs vertically through current page.west and horizontally through current page text area.west (black dot). Then one can use the midpoint of this position and current page text area.west to find the final position where the watermark will be placed (red dot).
Code
\documentclass{article}
\usepackage[inner=30mm, outer=50mm, top=5mm, bottom=90mm, twoside]{geometry}
\usepackage{tikzpagenodes}
\usepackage{background}
% for coordinate computations
\usetikzlibrary{calc}
% allows for arbitrarily large font sizes
\usepackage{lmodern}
% dummy text
\usepackage{lipsum}
\backgroundsetup%
{ angle=0,
opacity=1,
scale=1,
color=black,
contents=%
{ \begin{tikzpicture}[remember picture,overlay]
\fontsize{80}{108}\selectfont
% nodes for illustration purposes
\node[circle,minimum width=4mm,fill=green] (PTAW) at (current page text area.west) {};
\node[circle,minimum width=4mm,fill=orange] (PW) at (current page.west) {};
\node[circle,minimum width=4mm,fill=red] (BMW) at ($(current page text area.west -| current page.west)!0.5!(current page text area.west)$) {};
\node[circle,minimum width=4mm,fill=blue] (GMW) at ($(current page.west)!0.5!(current page text area.west)$) {};
\node[circle,minimum width=4mm,fill=black] (GW) at (current page text area.west -| current page.west) {};
% the watermarks
%\node[text=gray,rotate=90] at ($(current page text area.west -| current page.west)!0.5!(current page text area.west)$) {DRAFT 1};
\node[text=gray,rotate=-90] at ($(current page text area.east -| current page.east)!0.5!(current page text area.east)$) {DRAFT 2};
\end{tikzpicture}
}
}
\begin{document}
\lipsum \lipsum
\end{document}
Output

current page.eastdoes not work, for example? – Faheem Mitha Nov 29 '15 at 23:36(0,0)approach, the "Draft" is placed at the center of the page, as expected. But as you usescale=3, the positions of the nodes are shifted, so they are far outside your page. Try withscale=1and plae "Draft1"westand "Draft2"east. – Tom Bombadil Nov 29 '15 at 23:58(north east)!0.5!(south east)business is, if one can just use(east). D'oh! I updated the answer accordingly. – Tom Bombadil Nov 30 '15 at 00:05current page.eastdoes not work, but yourcurrent page text area.eastdoes. I'm not sure what the differences between those are. – Faheem Mitha Nov 30 '15 at 08:14current pageis really the whole page, whilecurrent page text areais only the text area. So if you try to position something outside of thecurrent pageit will obviousely not show up. In my first example, change theabovetobelowto work withcurrent page. – Tom Bombadil Nov 30 '15 at 10:18tikzpagenodewas a separate package. Would usingcurrent page marginpar areabe a possible alternative? I.e. putting the text in the center of that area? I'll experiment. – Faheem Mitha Nov 30 '15 at 10:35