Rakuten of Japan Acquires Chat App Viber as an Expansion Strategy

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The Japanese e-commerce firm Rakuten Inc. recently acquired messaging and chat app provider Viber Media Inc. as part of its aggressive expansion strategy. The all-cash deal, worth $900 million, is estimated to double the number of Rakuten users to reach half a billion.

According to billionaire Hiroshi Mikitani who is also Rakuten’s CEO, “This acquisition…will take Rakuten to a different level.” This means that with the firm’s current 200 million on-line users, it will become 500 million once the 300 million existing users of Viber is integrated. The acquisition process is expected to culminate by the end of March this year.

Rakuten is Japan’s top internet retailer and is involved in online shopping, financing and online video by way of its e-commerce platform. However, with the weak consumer spending in Japan, Mikitani intends to transform his company as a one-stop website targeting the global market where vast opportunities abound. Rakuten aims to rival Ebay and Amazon in Europe where it will encourage recession-hit clients to spend by way of its famous personal touch approach.

Viber is headquartered in Cyprus and is managed by its CEO and founder Talmon Marco. Viber directly competes with other instant messaging apps like WhatsApp of the U.S., WeChat, a subsidiary of the Chinese internet company called Tencent Holdings Ltd., and Line, a Korean company. Based on the latest survey, Viber has the distinction of being among the top five most downloaded app for use in smartphone phone calls and messaging applications. The company counts the U.S., Australia and Russia as its biggest market. The Viber brand is also strong in the Middle East market.

With the acquisition, Viber can become a platform for digital content and not just limited to offering the company’s traditional services of free voice calls and messaging. Viber’s instant messaging services can be utilized by Rakuten’s users to contact an online store for their purchases. Viber has also recently launched an instant messaging app designed for personal computers rivaling Skype in the process.

As part of the “Rakuten Ecosystem” strategy or business expansion, the company in recent years spent large sums of money in order to build Rakuten’s global business network by buying several companies. Rakuten acquired Kobo, a Toronto-based e-reader business; Wuaki.tv, a Spanish online video provider as well as Viki, an online TV and film streaming app of Singapore. And in 2012, Rakuten made a significant investment in Pinterest, a social networking site.

Rakuten is very much confident in these many acquisition decisions because of its strong financial performance. Last year, the company’s operating profit leaped to 80 percent reaching $882.89 million which makes this accomplishment the sixth year of continuous record earnings and growth. Net profit doubled to $427 million and revenue increased by 30 percent to reach $5.1 billion for 2013.

Company data revealed that its cloud services as well as its call services for smartphones sales were particularly strong for that year. Also contributing to the company’s positive revenue base are the Rakuten Ichiba shopping mall, its professional baseball team called Rakuten Eagles and its credit card and travel services business.

Right now, messaging apps are gaining popularity especially coming from the younger generation of users who usually do not use email to communicate. Rakuten seeks to promote its products and services like games to this particular demographic set.

Rakuten Inc’s decision to acquire the messaging and chat app provider Viber is a calculated risk to attract messaging apps users. And this is part of its aggressive global expansion strategy.

By Roberto I. Belda

Sources:

Reuters
BBC News
Boston

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