Tango Messaging App Dances With Alibaba

MARCH 20, 2014, 12:00 AM Comment
Tango Messaging App Dances With Alibaba
By VINDU GOEL
Tango offers its users the ability to send free text, photo and video messages over their mobile phones.
Tango, a Silicon Valley start-up that makes a popular messaging app by the same name, is going to the senior prom — and its date is one of the hottest tech companies on the planet.

Tango announced on Thursday that it has raised $280 million in a round of venture financing, with most of the cash coming from Alibaba Group, the vibrant Chinese e-commerce giant that is planning to sell shares in the United States later this year in a highly anticipated initial public offering.
Alibaba’s $215 million investment will give the Chinese company a minority stake and seat on Tango’s board, and it’s a vote of confidence in Tango’s prospects in the competitive world of mobile messaging. The companies declined to specify how much the investment values Tango, although the figure probably tops $1 billion. In 2012, when Tango last raised money, it was valued at around $300 million.
Tango offers its users the ability to send free text, photo and video messages over their mobile phones. They can also use its Facebook-like social network to post updates to friends and play games. The company says it recently crossed 200 million registered users, double its level a year ago, and about 70 million people log in at least once a month. About one-quarter of its members are in the United States, and it also has a strong presence in Europe.
Eric Setton, co-founder and chief technology officer of Tango, said the cash infusion gives the company the capital to compete against WhatsApp — the larger messaging service that was just bought by Facebook for $16 billion plus $3 billion in restricted stock — as well as other major players like Line, Kakao, WeChat and Viber.
“This space is probably one of the most competitive in the market today,” Mr. Setton said in an interview. “We want to be capitalized as well as possible.”
He said the company remains committed to offering its service free to consumers, and will make money by selling advertising and music and by taking a cut of revenue from other developers who make apps for its platform.
Alibaba is expected to share its insights into the Chinese mobile market with Tango, which has an office in Beijing but few users there. Over time, the relationship could well go closer, said Mr. Setton.
“For now, it’s a financial investment but we’ve been talking to them about how we can convert that to something strategic,” he said. “Our objective is to be able to compete globally.”
For its part, Tango’s expertise in building a messaging service might be able to help Alibaba do better in the Chinese messaging market. Alibaba’s homegrown messaging service, Laiwang, is struggling against the market leader, WeChat, which is owned by Alibaba’s biggest rival, Tencent.
“Tango has exhibited tremendous growth because of its unique approach to combine free communications, social and content,” said Joe Tsai, executive vice chairman of Alibaba Group, in a statement. “We were simply blown away by the vision and quality of the team at Tango and believe they have a disruptive way of looking at the mobile and messaging.”
Though best known for its online commerce in China, Alibaba has invested in a number of other companies in recent years, in large part to explore businesses that could complement its core operations.
The moves have also been prompted by pressure from China’s other Internet behemoths, including Tencent and Baidu. Tencent has proved particularly aggressive; earlier this month, it bought a minority stake in JD.com, an Alibaba competitor also seeking to go public in the United States.
Alibaba now owns about 19 percent of Sina’s Weibo, a popular Chinese alternative to Twitter that is also planning an initial public offering in New York. It also owns a minority stake in ShopRunner, a retail shipping service run by a former chief executive of Yahoo, and majority stakes in AutoNavi, a mapping company, and ChinaVision, a film and TV producer.
Alibaba, whose businesses resemble parts of eBay, Google and PayPal, is expected to go public later this year in an offering that could value it at more than $130 billion.
Yahoo owns a 24 percent stake in Alibaba. The Yahoo co-founder Jerry Yang, who is also an investor in Tango, introduced Tango’s founders to Alibaba’s executives, said Mr. Setton.