Alibaba to invest S$274m in chat app Tango

SAN FRANCISCO — The Alibaba Group is making a US$215 million (S$274 million) investment in chat app Tango, in what is believed to be the Chinese Internet giant’s largest venture in a US company, joining a flurry of deal-making in the messaging-application market after Facebook’s US$19 billion deal to purchase WhatsApp.

The investment gives Alibaba a US-based holding in a fast-growing industry, as it prepares to file for an initial public offering (IPO) in New York as soon as April. The financing values Tango, which has 200 million registered users, at between US$1 billion and US$2 billion, said industry insiders.

The four-year-old firm, which allows video and text chats, and offers games and music, also obtained another US$65 million from existing investors, including Qualcomm Venturesand DFJ.

“It’s an incredibly competitive market and a new era for these kinds of transactions and financing levels,” said Tango co-founder Eric Setton, who added that the company had received takeover offers, but chose to remain independent. “Alibaba was very understanding that we wanted to keep leading the company.”

Alibaba’s investment follows Facebook’s agreement to buy WhatsApp last month, as well as Rakuten’s purchase of messaging service Viber for US$900 million. The deals underscore the rise of messaging apps, which smartphone users worldwide are increasingly using to communicate, instead of paying for text messages.

Yet, Alibaba’s efforts to develop an app, Laiwang, have fallen short of those of its rivals and overseas counterparts.

For Alibaba, which sources say is likely to launch the world’s largest listing at up to US$25 billion later this year, the deal with Tango could help it strengthen its presence on the mobile-phone platform and broaden its reach outside China.

Tango is available in 14 languages and has members in more than 224 countries. Its two largest markets are the US and the Middle East.

A stake in a messaging app may also help Alibaba on its home turf, where its rival Tencent dominates the market with its WeChat app, which has nearly 300 million users.

Tencent has been moving to compete with Alibaba by adding services such as shopping and gaming.

Alibaba has taken other stakes in US companies in the past few months. In October, it led a US$206 million investment in ShopRunner, a members-only site that aggregates offers from retail partners, and a US$50 million investment in Quixey, a mobile-application search engine.

With the new financing, Tango will have raised a total of US$367 million. The company plans to use the new funds to expand globally and attract engineers, as well as bring in new gaming content. Tango makes money by sharing revenue from the games played on its platform and through advertising. The company has more than doubled its revenue in the past three months, said Mr Setton, without disclosing underlying numbers. He added that Tango and Alibaba have no concrete plans for strategic cooperation, but said: “I imagine and hope that there will be a number of initiatives we can launch together.” Agencies