Tango raises $280M as OTT messaging market heats up

Tango, the company behind the popular over-the-top messaging and social app of the same name, raised $280 million in new funding, mostly from the Chinese e-commerce giant Alibaba Group. The new funding underscores the heightened interest in mobile messaging and OTT services, especially in the wake of Facebook's (NASDAQ:FB) $19 billion deal to acquire WhatsApp.

Alibaba contributed $215 million in the latest funding round, with the remaining $65 million coming from existing investors, which include Qualcomm (NASDAQ:QCOM), Ventures and DFJ. According to a Bloomberg report, which cited unnamed sources, the new financing values Tango at $1 billion to $2 billion. Including the new round, Tango said it has raised $367 million in venture capital financing to date.

Further, the deal gives Alibaba a U.S.-based holding in the messaging market as the company files for an initial public offering in New York as soon as April.

Tango said it has doubled its registered users to 200 million compared with a year ago, and the number of its monthly active users has reached 70 million.

Founded in 2009, Tango lets users send free text, photo and video messages from their phones and also access a social network to post updates to friends and play games. The company makes money by sharing revenue from the games users play and through advertising. Tango has more than doubled its revenue in the last three months, co-founder Eric Setton told Bloomberg, without disclosing underlying numbers.

The OTT market is getting more competitive. Earlier this week OTT messaging service Line announced a new calling service allowing people with Line accounts to make voice calls direct to landlines and cell phones from the Line app. The service, LINE Call, will initially be available in eight markets: the United States, Japan, Mexico, Peru, Columbia, Thailand, Philippines, and Spain. Line said it plans to roll out the service to other countries in the future.

As of February, Line said it had 340 million users, but it did not say how many of them are active.

WhatsApp CEO Jan Koum said in February the company plans to introduce voice calling services sometime in the second quarter. The company hopes to roll out its new voice-calling service first to Apple's (NASDAQ:AAPL) iOS and Google's Android (NASDAQ:GOOG)  and then later to Microsoft's (NASDAQ:MSFT) Windows Phone and some BlackBerry (NASDAQ:BBRY) phones. Koum didn't provide many details on the service or a more specific launch date when he made the announcement during a keynote appearance at the Mobile World Congress trade show. WhatsApp counts 465 million monthly active users and 330 million daily active users.

Setton, who also serves as CTO, told the New York Times that the new funding will let the company compete against WhatsApp as well as other major players like Line, Kakao, WeChat and Viber.

"This space is probably one of the most competitive in the market today," he said. "We want to be capitalized as well as possible."

According to Ovum's Mobile Messaging Forecast, operator-based mobile messaging traffic (including MMS, SMS, A2P SMS) is expected to peak in 2014 with 7.7 trillion messages, declining in 2015 to 7.6 trillion messages. On the other hand, Ovum estimates OTT messaging traffic to have hit 27.4 trillion in 2013 and expects triple-digit growth rates to 68.9 trillion by the end of 2014.

For more:
- see this Tango release
- see this Re/code article
- see this Bloomberg article
- see this NYT article

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Facebook's WhatsApp to offer voice calling in Q2
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