Alibaba buys stake in Sil­i­con Val­ley startup mes­sag­ing app

China Daily (Canada) - - ACROSSAMERICAS - By MICHAEL BAR­RIS in New York and MENG JING in Bei­jing

Tango, a Sil­i­con Val­ley startup com­pany that makes a mes­sag­ing app, said it raised $280 mil­lion in a round of ven­ture fi­nanc­ing, with the bulk of the in­vest­ment com­ing from Chi­nese e-com­merce jug­ger­naut Alibaba Group Hold­ing Ltd.

Alibaba’s $215 mil­lion in­vest­ment — an­nounced days af­ter it said it would hold a highly an­tic­i­pated New York ini­tial pub­lic of­fer­ing that could value the com­pany at $200 bil­lion — will give it a mi­nor­ity stake and seat on Tango’s board. Com­ing on the heels of Face­book Inc’s $19 bil­lion ac­qui­si­tion of What­sapp, the deal il­lus­trates the lengths to which In­ter­net com­pa­nies will go to en­ter the com­pet­i­tive field of mo­bile com­mu­ni­ca­tions.

“The plat­form ap­proach I be­lieve is the win­ning strat­egy,” Tango co-founder Erikc Set­ton said. “We’ve now seen it in a num­ber of key mar­kets, with Kakao in Korea or Line in Ja­pan.” Tango’s of­fer­ings of games, multimedia shar­ing and other con­tent are seen as even­tu­ally tak­ing mar­ket share away

The‘

plat­form ap­proach I be­lieve is the win­ning strat­egy.” ERIKC SET­TON TANGO CO-FOUNDER

from What­sapp, which of­fers purely text and voice com­mu­ni­ca­tions, Set­ton was quoted by Reuters.

Alibaba, which has been on an in­vest­ment spree of late, sees Chi­nese ri­val Ten­cent — and Ten­cent’s WeChat mes­sag­ing/ e-com­merce plat­form — as a se­ri­ous threat. Alibaba re­cently in­tro­duced a WeChat com­peti­tor called Lai­wang, but the ser­vice has strug­gled. Tango’s ser­vice counts 200 mil­lion reg­is­tered users and 70 mil­lion ac­tive users with its great­est pop­u­lar­ity in North Amer­ica, the Mid­dle East, Tai­wan and Sin­ga­pore, ac­cord­ing to the com­pany.

The com­pa­nies de­clined to spec­ify how much the in­vest­ment val­ues Tango, al­though the fig­ure is be­lieved to be more than $1 bil­lion. In 2012, when Tango last raised money, it was val­ued at around $300 mil­lion. Alibaba in­vested $215 mil­lion while the re­main­der of the fund­ing came from Tango’s prior in­vestors, which in­clude Ac­cess In­dus­tries, Draper Fisher Jurvet­son and Jerry Yang, a co-founder of Ya­hoo, Tango said.

Tango has of­fices in Moun­tain View, Cal­i­for­nia, Bei­jing and Austin, Texas.

The in­vest­ment was dis­closed in a blog writ­ten by Set­ton, the startup’s chief tech­nol­ogy of­fi­cer, and co-founder and Chief Ex­ec­u­tive Uri Raz on Thurs­day.

The two ex­ec­u­tives wrote that they were look­ing for­ward to mov­ing into new growth ar­eas in so­cial net­work­ing and con­tent. “We know that we can’t do it on our own, and, for that rea­son, we couldn’t be more ex­cited to an­nounce our new­est in­vestor, Alibaba Group,” they wrote.

De­spite the fact that Tango has no busi­ness in China, its mil­lions of users spread across the US, Europe, the Mid­dle East and Asia will bol­ster Alibaba ahead of what would be the largest US IPO ever, while strength­en­ing the com­pany’s pres­ence in the mo­bile com­mu­ni­ca­tions field.

Zhuo Sai­jun, an an­a­lyst with the Bei­jing-based In­ter­net con­sul­tancy Analysys In­ter­na­tional, said with the in­vest­ment in Tango, Alibaba will be able to tell a bet­ter story to in­vestors. “Be­cause Ten­cent’s WeChat en­joys a dom­i­nant po­si­tion among mo­bile chat­ting apps in China, Alibaba des­per­ately needs to find a strong tar­get to fill its gap in this area,” Zhuo said.

No prod­uct is as strong as WeChat, which has 600 mil­lion reg­is­tered users in China, so Alibaba has to look for can­di­dates in mar­kets out­side China, he added. “There is the pos­si­bil­ity that Alibaba will in­tro­duce Tango to the Chi­nese mar­ket or bring in the com­pany’s tech­nol­ogy or patent into China,” Zhuo said.

Jane Zhang, prin­ci­pal re­search an­a­lyst with Gart­ner Inc, a US in­for­ma­tion tech­nol­ogy re­search and ad­vi­sory firm, echoed the view, say­ing Tango is not only a mes­sag­ing app but also a con­tent plat­form with video, so­cial and gam­ing, which could bring busi­ness ex­per­tise to Lai­wang, Alibaba’s own mo­bile mes­sag­ing app.

De­spite some cash-burn­ing pro­mo­tions, Lai­wang, which was launched last year by Alibaba as a weapon to com­pete with Ten­cent’s WeChat, has so far failed to turn many heads. The app, which has more than 10 mil­lion users, lags far be­hind WeChat.

Apart from its un­ful­filled am­bi­tions re­gard­ing mo­bile chat­ting, the in­vest­ment in Tango could po­ten­tially help with the ex­pan­sion of Alibaba’s over­seas on­line com­merce busi­ness.

An­nie Xu, US gen­eral man­ager for Alibaba, told the Fi­nan­cial Times the group was ex­plor­ing how it could ex­pand its cross-bor­der work.

While Alibaba’s core busi­ness re­mains in China for the fore­see­able fu­ture, she said, it is also look­ing at ways it can use its ac­cess to Chi­nese cus­tomers and whole­salers to fa­cil­i­tate more com­merce.

Se­nior ex­ec­u­tives of Tango con­firmed that as part of this fi­nanc­ing, Michael Zeisser, head of an Alibaba in­vest­ment team in the US, will join Tango’s board of di­rec­tors. Con­tact the writ­ers at michael­bar­ris@chi­nadai­lyusa.com and mengjing@chi­nadai­lyusa. com.cn.

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