Rakuten, the Japanese ecommerce giant has done it again. They have bought another company that has raised alot of questions about their merger and acquisition strategy. Viber, the messaging company that uses wireless internet to do phone call is now a Rakuten company.
The issue with Rakuten for me is that they have little or no strategy on acquisitions in comparison to their direct competitors like Amazon, Alibaba and eBay. The company seems to be moving away from being a commerce based business to being a media distribution company. Their recent acquisitions: Wuaki.tv (streaming movies), Pinterest (crowd sourced curated content), Kobo (eReader) are all not really commerce related but bolt on acquisitions for a company that does commerce.
Viber is a messaging and VoIP service operator and has approximately 280 million global registered users, and monthly active users over 100 million. Viber apps on smartphones allow users to have conversations, and through its high quality functions users can send and receive messages and images, thus Viber offers a hybrid range of services rarely found on competing platforms. Viber is rapidly growing numbers of users, especially in emerging countries.
The Company decided to acquire Viber to strengthen its global platform through the use of Viber’s range of customers in the Company’s E-Commerce and digital contents services.
Kara Swisher did an interview with Hiroshi Mikitani, hours after the acquisition that lead to a few interesting quotes from Mikitani.
“We have content and games and commerce and markets and services, but they need the ability to reach out and talk to customers wherever they are,” said Mikitani. “With this, we can make buying more secure, but also more human.”
“Messaging apps are taking over the world and, while search is one of the strongest platforms, what is happening in communications is very, very important,” he added.
It sounds like Rakuten has used global distribution as a selling point for potential acquisition targets. In some cases this has happened at an accelerated rate (Wauki.tv was available in Europe via Rakuten businesses inside 12 months of acquisition) but in other cases it has not happened at all (Pinterest has not used the Rakuten connection).
The real reason for the acquisition
This was a defensive move by Rakuten and the $900M they spent is to ensure that they stay relevant in their main region of domination (Asia). Asian ecommerce is being influenced by messenger services such as WeChat, Line and Whatsapp. Whatsapp does not have commerce in its DNA and is a pure communication platform. WeChat and Line does have ecommerce in its DNA, the gorilla in the room is Alibaba’s messenging app.
- Line has done flash sales to great effect and is on the way to an IPO
- Tencent’s WeChat has also been working on adding ecommerce to its offering and has also added location specific information to its offering
- Alibaba’s Laiwang has games and powers the communication between sellers and buyers on Taobao
Notice the omission – Asian ecommerce via messaging and not a single mention of Rakuten. Rakuten bought Viber to ensure that their Asian competitors (Alibaba, Tencent and Line) does not encroach on their dominant markets (Japan and Thailand).
The other reason why Rakuten was able to acquire Viber is that they were open to talks over an acquisition.
Simply, Viber is the messaging app with the greatest scale that is most open to being bought.
- WeChat: 270 million active users and owned by Internet giant Tencent — no sale
- WhatsApp: only Facebook eclipses it for international social reach — no sale: too expensive / unwilling to sell to a company unfamiliar worldwide
- Line: busy (reportedly) planning an IPO; has a solid business model and plenty of ambition — no sale
- Kakao Talk: 150 million users, also linked with an IPO, and has global ambition — sale unlikely: price multiple billions
- Kik: 100 million users is not the scale of Viber, is focusing its efforts on enabling the mobile Web and Web apps — sale unlikely
- Viber: still in its early days of making money, claims 280 million registered users and has raised no external money (that’s a big potential pay day) — bingo
Rakuten paid a steep $900M for Viber whom has no clear monetisation strategy compared to Line and Kakao Talk. Rakuten will need to ensure that when they add Viber to their ecosystem that they dont alienate Vibers current users. They should stay away from changing the DNA of Viber to a game platform as if they do that they might have a situation like what was seen between eBay and Skype.
The question about messenger apps and commerce is what is the story outside of Asia. Is it a case of providing users a reason to leave Whatsapp or is it a case of the messenger apps just being a single function app outside of Asia?