Tango offers users the ability to text, make voice and video calls, play games and stream music from Spotify — all free of charge. The app operates over 3G, 4G and Wi-Fi networks, and currently boasts more than 200 million users.
The move by Alibaba comes less than a month after Facebook bought WhatsApp for $16 billion. While messaging apps such as Tango and WhatsApp are not household names in the U.S., they have found a rabid user base in countries that are quickly adopting smartphones, including India, China and Brazil. The ability to communicate for free helps users in these markets keep mobile expenses down.
The capital will help Tango try to keep up in what has suddenly become the market of the moment.
"We're competing in the most active space in mobile today," Eric Setton, Tango's chief technical officer, told media website Mashable. "In order to position this company and this service for the long term, I think we want to be able to be as aggressive as these other [companies]."
Tango originally started as a free video-calling service, but has recently expanded into social networking, gaming and streaming music through a deal with Spotify.
Setton said about 25% of Tango's users are in North America, with the rest spread across western Europe. He added that the app has a "quasi-dominant" market position in the Middle East. What's more, Tango has experienced rapid growth, doubling its users in the past year.
"The most immediate need for us is to be able to staff up, and to bring to this team the best talent that we can find on the engineering front, especially in Silicon Valley, where we're competing with Google and Facebook, and in Beijing, which is very much as competitive as the U.S.," Setton said.
Neither Alibaba nor Tango would discuss the valuation of the deal. However, based on the $42 per user that Facebook paid for WhatsApp, Tango would be valued at around $8.4 billion.
The investment gives Alibaba a stake in a suddenly highly sought-after market, as well as a strategic partnership that could put its online marketplace on millions of phones. Tango users already pay for games through the app.
“Tango has exhibited tremendous growth because of its unique approach to combine free communications, social and content,” Joe Tsai, executive vice chairman of Alibaba Group, said in a press release. “We were simply blown away by the vision and quality of the team at Tango, and believe they have a disruptive way of looking at the mobile and messaging opportunity.”
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