Rakuten, a Japanese e-commerce company, agreed to buy the mobile messaging app, Viber, for $900 million. Since this deal was announced on February 14th, Viber has been adding 600,000 users on a daily basis and this number is expected to rise to 1 million new users per day. At the time of the deal, Viber had approximately 300 million users and Hiroshi Mikitani, Rakuten’s CEO, has been investing in mobile applications as well as online video platforms to expand his company beyond its online marketplace core business. Mikitani’s strategy has led to rising competition from other social media companies, such as Facebook, which agreed to buy the mobile messaging service, WhatsApp, only five days after Rakuten’s Viber deal was announced.
Rakuten is expecting to reach a goal of 2 billion users over the next two to three years by adding 1 million users per day, which equates to approximately 365 million new users annually. In addition to Viber’s 300 million users at the time of the deal, Rakuten has 200 million members, which could quickly expand its mobile messaging user base. Although the company fell 10% this year, Rakuten more than doubled its shares in 2013. Some analysts stipulate that Rakuten’s goal of having 2 billion users would actually lead to larger profits for the company in the longer term; however, this Japanese e-commerce company is expected to increase its profits by 57% this year due to its Viber deal. The $900 million deal for Viber means that Rakuten would pay about $3 for each of its 300 million mobile messaging users, which is significantly less than the approximately $40 Facebook has to pay for each of its 450 million WhatsApp users.
Mikitani’s target of 2 billion users is double of what Mark Zuckerberg, Facebook’s CEO, has set for its mobile messaging device, WhatsApp, of 1 billion users in the next few years since it’s adding 1 million users each day. Viber allows its users to make calls and send text messages for free and is now available in 193 countries, whereas WhatsApp only allows users to send text messages, as it does not offer a calling option, and requires its users to pay $0.99 USD per year after its first year of service. However, investors question whether or not Viber will be as successful since it realized a $29.5 million net loss last year and has tough competition in the mobile messaging market. Mikitani believes he can monetize Viber’s millions of users by integrating its platform to also deliver games, video streaming and electronic books, but his company just needs time to reach its goal.
How was Rakuten able to spend this amount for Viber? Was it too much or too little for this mobile messaging app?
Is Viber a better buy than WhatsApp, and why?
Do you think Viber will reach its goal of 2 billion users in the next two to three years, and be more successful than WhatsApp?