Viber: The Underpriced App?

Viber

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?

http://www.bloomberg.com/news/2014-03-05/rakuten-ceo-aims-for-2-billion-users-with-viber-message-app-deal.html

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4 thoughts on “Viber: The Underpriced App?

  1. I’m not sure if it would be fair for me to answer the question of being able to acquire 2 billion users in 2-3 years – I have never heard of Viber or Rakuten prior to reading this post. However, with the growing popularity of WhatsApp and other messaging apps, it is a possibility. Whether or not it will be more successful than WhatsApp could depend on the market – where is Viber available? Also, with a calling option, it is more versatile than WhatsApp, which could increase its appeal to potential users.

  2. At this moment, I’m not sure if Viber users will reach 2 billion in 2-3 years but I think Viber has greater potential to attract new users than WhatsApp because it provides free call service, which WhatsApp does not have. When I lived in Japan, I was a Viber user, and l was using it everyday because everybody was using it. But I’m not using it anymore because here in the United States, not many people are using it and WhatsApp is a more convenient communication tool because everybody is using it. Again, it’s a network effect. I think if Viber with its free calling service succeeds in attracting new users outside Japan, and persuading WhatsApp users to switch to Viber, then I think we can say that Viber is a better buy than WhatsApp and Viber will be able to increase its users dramatically in a few years.

  3. I use the WhatsApp and Viber, and prefer Viber because of the call feature. However, it’s hard to see Viber outpacing the WhatsApp in growth following the Facebook acquisition. Facebook already has a billion users, so that strategic alliance, including access to their cash reserves, should really propel the WhatsApp forward. The WhatsApp CEO announced last month that they will be adding call service this year, most likely in the second quarter.

  4. I haven’t used or heard of Viber before. I think it’s a mobile messaging app whose main users are in Japan, just like Wechat in China. I don’t know whether Viber will reach its goal of 2 billion users in the next two to three years. Even though Viber and Wechat have a few additional features, such as game and free call service, I don’t believe WhatsApp users will switch to Viber or Wechat because of those features. It’s the result of network effects and high switching cost. If none of your friends are using Viber, why should you immigrate to it? Maybe it’s better for Viber to focus on Japan or Asian market and figure out how it can do better, other than competing with North American or European market.

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