The WhatsApp Effect: Alibaba Pours Cash Into Tango

The Tango app, which allows for messaging on mobile devices, just announced a huge fundraising from several investors, but primarily Alibaba — the Chinese e-commerce company that just can’t get its name out of the headlines of late.

The Tango app’s recent fundraising was for a whopping $280 million, which would put the service’s valuation at more than $1 billion. Alibaba, which already holds a minority stake, was good for $215 million of that.

The deal is just the latest mobile messaging transaction, seemingly spurred by Facebook’s (FB) $19 billion mega-deal for WhatsApp in February.

The Tango app got its start back in early 2010. The founders included two top veterans of the tech world, Eric Setton and Uri Raz, who saw the potential opportunity in a mobile video communications network.

Before launching the company, Setton was a research scientist at Hewlett-Packard (HPQ) then went onto start a video streaming company. He currently holds six patents and is the author of the first book on peer-to-peer video (back in 2007). I spoke to him last year about the rapid growth in the mobile messaging space — time, it appears, has proven him right.

Growth has been rapid, as the Tango app now has about 200 million registered users, 70 million of whom use it every month. Its footprint is strongest in Europe.

Tango makes money from advertising and games; unlike WhatsApp, it doesn’t have an annual fee.

The big financing deal also should provide more fuel for the Alibaba IPO. Remember: In the past year, Alibaba has taken an 18% stake in Weibo — China’s version of Twitter (TWTR) — but also various U.S. based companies such as Quixey (a mobile search engine) and ShopRunner (a members-only ecommerce platform). Ergo, the Alibaba IPO appears to possibly be part of a larger, ambitious strategy to get a much bigger foothold in the North American market.

Of course, anyone interested should understand that Tango is much smaller than WhatsApp, which has 480 million users — and realistically could see growth explode even more now that it has Facebook firepower behind it. (See: Instagram.)

So, while the Tango app does have more resources behind it, the competitive environment will remain intense. Other players to fend off include WeChat (355 million active users), LINE, Kakao and Viber, the last of which was recently purchased by Japan-based Internet conglomerate Rakuten. Even BlackBerry (BBRY) is a formidable competitor in the space.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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