China’s Alibaba is the latest Internet giant to make a bet on the messaging space, and it’s a big one. The company is spending $215 million for a minority stake in the messaging and free-calling app Tango, the startup revealed today. The investment is part of a $280 million funding round that Alibaba is leading, which also will see other current investors in Tango stump up more capital.
The round values Tango at $1.1 billion, based on a regulatory filing sourced by research firm VC Experts, who estimate that Alibaba’s stake lies somewhere between 20 and 25%. Two people close to the deal confirmed the estimate.
The deal comes just weeks after Rakuten , the Japanese e-commerce giant, bought Tango-rival Viber for $900 million, and Facebook spent $19 billion in cash and stock on the global messaging behemoth WhatsApp, which boasts 480 million active users.
Apps like Tango, Viber and WhatsApp allow users to send free texts or make free calls over a data connection. They pose a growing threat to traditional carriers by siphoning away the fees people normally pay for texts and calls.
Tango is among a collection of messaging services that are broadening themselves out to become social platforms on which users not only communicate, but play games and share photos as they might through Facebook.
Asian messaging services like Kakao, LINE and WeChat have pioneered this platform strategy. Japan’s LINE, for instance, booked revenues of $338 million in 2013 from selling games, sponsored content and digital stickers.
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