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As Messaging Wars Escalate, Social App Tango Raises $280 Million

That's a lot of scratch.


Social startup Tango announced Thursday that it had raised a massive $280 million Series D round of venture funding, the latest significant move among a handful of high-profile apps all vying to own the mobile messaging space.

The round was led by Chinese e-commerce and Internet giant Alibaba Group, which contributed $215 million, along with participation from some of Tango’s existing investors. To date, Tango has raised $367 million in venture funding from the likes of DFJ, Qualcomm Ventures and former Yahoo CEO Jerry Yang.

The moves essentially signal a new era for global Internet companies — one in which communication between people isn’t restricted to platforms like Facebook and Twitter, or even older messaging services like Gmail or AOL Instant Messenger.

Instead, more companies have recognized the power of tapping into users’ existing social communication networks, found within the average person’s mobile device phone book. Apps like Tango, WhatsApp and Viber all comb a user’s mobile contact list to instantly connect people to their network of friends.

Tango is hardly without competition. The startup’s new funding comes just weeks after Facebook announced its $19 billion acquisition of WhatsApp, the mobile messaging service that hosts more than 450 million regular users globally. And just one month earlier, Japanese Internet giant Rakuten acquired messaging app Viber for $900 million in cash.

In order to differentiate itself from pure messaging services, however, Tango has over the past year expanded its app offerings. Initially, Tango made a name for itself as a voice-over-Internet protocol service for smartphones, essentially an alternative to Apple’s FaceTime. But as text-based messaging services rose in popularity, Tango pivoted, tacking on content and social discovery elements to its app.

“We found that you can actually get a lot of growth by providing communications like voice calls and messaging,” Tango CTO Eric Setton said in an interview. Tango currently hosts more than 200 million registered users, 70 million of whom return to the app on a monthly basis.

“But typically that’s not enough. In places like North America and the Middle East, oftentimes people have free messaging or unlimited minutes on their phone. We’ve combined the communication aspect along with social networking, games and music content,” Setton said.

Some Tango users, Setton suggested, can elect to meet new people beyond their immediate friend networks using the service, or share things like music clips via a content partnership with Spotify. Tango users can also play and discover mobile games with friends over the service.

In this sense, Tango has started to look more like a host of Asian messaging companies that have risen to prominence over the past two years. WeChat, owned by Tencent Holdings, has dominated the Chinese mobile messaging market, while the startup Line holds most of the market share in Japan. And KakaoTalk, another similar messaging and content sharing service, has a grip on South Korean mobile users.

All of these apps rest on a similar premise: Mobile messaging via a user’s smartphone contacts list is the next mechanism for discovering mobile content like apps — an alternative to the traditional App Store discovery models that Apple and Google pioneered. In essence, it is via word of mouth through friend networks that you’re likely to discover the next great app. That app then, in turn, becomes the venue for more social interactions with friends.

“This is how we can take content and turn it into pretext for a conversation,” Setton said.

At the same time, Internet companies like Japan’s Rakuten, China’s Tencent Holdings and Alibaba Group are all eager to latch on to the next wave of social commerce discovery and referrals. In Asian markets thus far, early signs point to mobile messaging networks like Line, KakaoTalk and most famously WeChat as apps that could serve as the next wave of consumer portals to online commerce.

While many of the Asian markets — where text-based messaging plans remain costly — have already been carved up and conquered by incumbents like Line and WeChat, much of the Western territory is still up for grabs.

That looks to be where Tango’s efforts are focused. Setton said nearly a quarter of the company’s user base is located within the United States, a key market that has yet to declare a true victor in the messaging space. Kik messenger, an app that has largely flown under the radar of the mainstream media, is one of the top contenders for the U.S. market at the moment; nearly half of its 100 million registered users are based in the United States.

Tango didn’t delve into specifics on how it plans to spend its massive new capital injection, outside of using it to hire more engineers and aggressively scale up its infrastructure.

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