Alibaba invests $215 million in messaging app Tango

Alibaba invests $215 million in messaging app Tango

(Reuters) - Tango, the mobile messaging app-maker, announced Wednesday it has raised $280 million in a new funding round led by Chinese e-commerce giant Alibaba Group Holding Ltd (IPO-ALIB.N).

By almost any measure, the investment amounted to a staggering sum for a mobile app developer. The deal, which came one month after Facebook Inc's (FB.O) stunning $19 billion acquisition of Whatsapp, underscored the lengths that Internet companies are willing to go to gain a foothold in mobile communications.

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 Inc (YHOO.O), Tango said.

The investment gives Alibaba a minority stake in a messaging service with 200 million registered users and 70 million active users. Tango claims significant traction in North America, the Middle East, Taiwan and Singapore.

Alibaba, which views Chinese rival Tencent as its most serious competitor, has long recognized the threat posed by Tencent Holding's (0700.HK) WeChat, a massively popular messaging app that has slowly morphed into an e-commerce platform. Alibaba recently introduced a WeChat competitor called Laiwang, but the service has so far struggled to the extent that Alibaba founder Jack Ma, according to various media reports, urged Alibaba's entire workforce last year to recruit new users.

Tango is the latest in a string of investments for Alibaba, which is preparing for an highly anticipated initial public offering in New York that could value the company at $200 billion.

MESSAGING WARS

In an interview, Tango co-founder Eric Setton told Reuters that he believed his company, which offers games, multimedia sharing and other content, would eventually beat Whatsapp, which offers purely text and voice communications.

"The platform approach I believe is the winning strategy," Setton said. "We've now seen it in a number of key markets, with Kakao in Korea or Line in Japan."

Tango, which has offices in Mountain View, California, Beijing and Austin, Texas, was introduced to Alibaba through Yang, who in 2005 led Yahoo's investment in the Chinese company.