Japanese firm Rakuten splashes $900M for OTT service Viber

Japanese retailer and e-commerce company Rakuten, which owns Kobo e-readers and online retailer Play.com, is acquiring Viber Media and its popular Viber over-the-top messaging service for $900 million.

Viber allows users to send messages and place calls via an Internet connection.

In a statement, Rakuten said that it "aims to be the global No. 1 Internet services company, and in addition to our existing e-Commerce and Internet finance services, this acquisition will allow the company to build on several digital contents services, and advance into new markets."

Viber lets consumers send free text messages, photos and location updates and make free, HD-quality calls over 3G/4G or Wi-Fi connections across mobile operating systems including Android, iOS, BlackBerry (NASDAQ:BBRY) and Microsoft's (NASDAQ:MSFT) Windows Phone. The service has around 280 million global registered users, and monthly active users of more than 100 million.

Viber's app competes with the likes of Microsoft's (NASDAQ:MSFT) Skype, WhatsApp, Facebook (NASDAQ:FB) Messenger, Apple's (NASDAQ:AAPL) FaceTime and others. The acquisition highlights the growing importance of OTT services compared to traditional carrier-based messaging, something operators are trying to catch up on via Rich Communications Services and Voice over LTE.

Viber doesn't yet make money. The firm posted a net loss of $29.5 million on revenues of $1.5 million for the year ended in December, according to the Wall Street Journal. However, according to the Journal, Rakuten CEO Hiroshi Mikitani said at a news conference that the company wanted to get Viber because of the huge potential for growth, especially for customers in emerging markets where Rakuten has struggled so far. Viber has users in 193 countries, including Brazil, Russia, Vietnam, and Myanmar. Rakuten had $5.1 billion in annual revenue from its main businesses last year.

"If we didn't buy [Viber] now, I don't think we could have bought it later, it's growing so fast," Mikitani said.

The push into OTT messaging makes sense for Rakuten, since the market is likely to boom in the years ahead as more people around the world get smartphones. Research firm Analysys Mason said in a recent report that the total volume of messages sent from mobile devices via IP services exceeded the volume of SMS messages for the first time in 2013, at more than 10.3 trillion compared with 6.5 trillion SMS messages worldwide. Messaging volumes associated with OTT services are expected to almost double in 2014 and will reach 37.8 trillion messages sent in 2018, the firm found.

"This is a no-brainer," Mikitani told Re/code. "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 noted.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this Bloomberg article
- see this Re/code article

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