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Facebook’s WhatApp Deal Preceded by Rakuten’s Viber Buy

HONG KONG – The rivalry between global internet conglomerates to get into messaging was underlined by Facebook’s proposed $19 billion acquisition of WhatsApp.

That now makes last week’s purchase of rival message service Viber by Japanese giant Rakuten look prescient.

Rakuten, which is one of the world’s largest home shopping groups, Friday unveiled its agreed $900 million takeover of Viber, an instant messaging and VoiP operator with over 100 million active monthly users. Viber grew from a base in Israel and is now Cyprus-domiciled.

“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. In the past, consumers had been using conventional televisions and fixed line telephones for contents as a means of communication, but this has been shifting to mobile contents and apps. Viber’s globally popular messaging service is seeing a rapid increase in numbers of registered users, and this will strengthen our digital strategy. The company aims to be the global No. 1 internet services company,” Rakuten said in a statement. Rakuten means “optimistic” in Japanese.

Investors were more cautious. They marked Rakuten’s shares down by 14% to JPY 1,499 on Monday, the first trading session after the announcement, and the shares continued to sink to JPY1,462 in Thursday trading after the Facebook announcement. At that price Rakuten has a market capitalization of some $18.9 billion (JPY1.93 trillion), compared with Facebook’s $173 billion.

Rakuten will pay cash for the deal, largely financed by its own reserves and bank borrowings. The deal is expected to close in March. The company also announced 2013 profits of $208 million (JPY21.1 billion).

Rakuten aims to integrate Viber with the other online services in its ‘Rakuten ecosystem’ which currently includes 200 million users, especially to expand the linkage between messaging and transactions. A Rakuten motto is “shopping is fun.”

In doing so it will step up the rivalry with other messaging services such as Naver, WeChat and WhatsApp, and give it a social media edge currently to compete with other e-commerce giants such as Amazon, China’s Alibaba and Korea’s CJ. (eBay previously owned VoiP service Skype, but sold it to Microsoft in 2011.) Other firms are trying to turn social media and messaging into gaming, and gaming platforms into transactional marketplaces.

Rakuten was established in 1997 and is still headed by founder Hiroshi Mikitani, reputed to be Japan’s third richest man. In recent years it has acquired companies in the U.S. (Buy.com, now called Rakuten.com Shopping), the U.K. (Play.com), France, Germany and Brazil. Last year it acquired the innovative video streaming operation Viki.com. It also controls European Vod and video streaming firm Wuahi.tv and Canadian e-reader Kobo. It owns a stake of unknown size in Pinterest, having led an investment consortium to back the popular photo sharing outfit.

Viber claims some 280 registered users and 100 million active monthly. In comparison WhatsApp has 450 million registered users and claims that 70% (315 million) are active daily. Facebook agreed to pay $4 billion in cash and $12 billion in Facebook shares, plus a further $3 billion in shares which vest four years after the deal completes.

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