Japan’s Rakuten buys chat app Viber for $900 million to expand digital empire

Japan’s Rakuten buys chat app Viber for $900 million to expand digital empire

5:10am EST

By Chang-Ran Kim

TOKYO (Reuters) – Japanese e-commerce giant Rakuten Inc, controlled by billionaire Hiroshi Mikitani, will buy call and messaging app provider Viber Media Inc for $900 million in a deal that would more than double the number of users in its digital empire.

Rakuten offers services from financing to shopping to online video on its e-commerce platform, the largest in Japan. But in the face of a shrinking population and weak consumer spending at home, Mikitani is trying to re-invent Rakuten as a one-stop-site for a global audience.

Privately held Viber, run from Cyprus by Israeli entrepreneur Talmon Marco, will add 300 million users to Rakuten’s existing 200 million users, Mikitani told reporters in Tokyo.

“This acquisition… will take Rakuten to a different level,” said Mikitani, who is also the company’s chief executive. The all-cash deal was announced after Rakuten reported an 80 percent jump in its 2013 operating profit.

“Developing this messaging system on our own would have been impossible,” he added, saying Rakuten users could, for example, use Viber’s instant messages to contact an online store while considering a purchase.

Viber is one of the top five most downloaded smartphone phone call and messaging apps, and counts the United States, Russia and Australia among its biggest markets.

Its chief executive Marco told the same media conference Rakuten’s acquisition would help his company become a platform for digital content, not just a provider of free voice calls and messages.

A plethora of messaging apps, including the likes of Viber, are seeking to capitalize on the appeal of their free services, especially in emerging markets.

Viber is funded from the pockets of its founders and several private investors from the United States. It competes with instant messaging apps such as WeChat, a unit of Chinese Internet firm Tencent Holdings Ltd, U.S. rival WhatsApp, and Line, owned by Korean company Naver Corp.

Viber recently launched an instant messaging app for personal computers that allows users to make outgoing mobile calls to other Viber users and non-registered mobiles, making it a rival to Skype.

The acquisition by Rakuten is expected to be completed by the end of March, both companies said.

SHOPPING SPREE

Rakuten’s e-commerce platform, Rakuten Ichiba, is the sixth largest in the world by sales.

The company puts a premium on its ability to communicate with customers. Last year, Mikitani told Reuters this personal touch will give Rakuten the edge over rivals like eBay Inc and Amazon.com Inc in Europe, where recession-hit retailers are struggling to tempt clients to spend.

Rakuten has spent big in recent years on a variety of overseas purchases to broaden its businesses and reach under what Mikitani calls its “Rakuten Ecosystem” strategy.

The company has acquired e-commerce providers from Brazil to Germany, as well as Toronto-based eReader business Kobo and online video providers Wuaki.tv of Spain and Viki of Singapore. In 2012, it made a large investment in website Pinterest.

Strong profit growth has contributed to its spending firepower.

In the 12 months ended December 31, Rakuten’s operating profit jumped 80 percent to 90.2 billion yen ($882.89 million), marking a sixth consecutive year of record earnings, though lagging the average 99.9 billion yen projected by 18 analysts polled by Thomson Reuters Starmine.

Net profit doubled to 43.5 billion yen, while revenue rose 30 percent to 518.6 billion yen.

(Reporting by Chang-Ran Kim; Writing by Miral Fahmy; Editing by Ryan Woo)

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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