Tango Raises $280 Million as OTT Messaging Market Heats Up

Tango, the U.S.-based company behind the popular OTT messaging and social app of the same name, has raised US $280 million in new funding, mostly from the Chinese e-commerce giant Alibaba Group. Alibaba contributed US $215 million in the latest funding round, with the remaining US $65 million coming from existing investors, including Qualcomm, Ventures and DFJ. According to a report, the new financing values Tango at US $1 billion to US $2 billion. Including the latest round, Tango says it has raised US $367 million in venture capital financing to date. Tango, which was founded in 2009, allows users to send free text, photo and video messages from their phones and also provides a social network on which to post updates to friends and play games. The company makes money by sharing revenue from the games and through advertising.

This deal, of course, underscores the growing strength of OTT messaging in the mobile marketplace. According to a recent study, operator-based mobile messaging traffic (including SMS and MMS) is expected to peak in 2014 with 7.7 trillion messages and then decline in 2015 to 7.6 trillion. On the other hand, OTT messaging traffic is estimated to have reached 27.4 trillion in 2013 and to experience triple-digit growth rates, increasing to 68.9 trillion by the end of 2014. OTT messaging service LINE recently expanded its offerings to include voice calls, and WhatsApp (fortified by its US $19 billion acquisition by Facebook) plans to introduce voice, as well, in the second quarter of 2014.

But beyond that, the recent boost to Tango draws attention to some of the unique advantages of OTT services in relation to those of mobile operators (which, conversely, have potential competitive advantages of their own, as we discuss in our item on the U.K. anti-spam-text initiative, see page 4). While users initially turned to OTT messaging to save money, they are now being offered value-added enriched content and options such as Tango’s social-media aspect and gaming, not to mention more free or low-cost voice offerings.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world.