What Makes Viber Attractive?

With its proposed deal to buy Viber Media, Japanese e-commerce company Rakuten is stepping into a war zone.

The world of smartphone communications apps is fiercely competitive with many powerful players, and Viber’s success isn’t guaranteed. So why is Rakuten paying $900 million to get into this market?

For Rakuten or any other company that offers online services, messaging and communication apps are attractive assets because people use those apps many times a day to chat with friends. The apps’ high level of engagement and ability to occupy smartphone users’ time and attention could be a key factor in building a strong platform for all kinds of mobile services, says Tim Shepherd, an analyst at Canalys who covers mobile apps.

Japanese electronic commerce giant Rakuten president Hiroshi Mikitani. delivers the opening speech at a conference of the New Economy Summit last year.

 

Agence France-Presse/Getty Images

The market for communication apps is “challenging but also rewarding,” Shepherd says.

Rakuten is surely not the only one interested in messaging apps. Facebook last year offered to buy Snapchat, a fast-growing messaging service from Silicon Valley, for about $3 billion, even though Snapchat declined the offer. Chinese Internet company Tencent HoldingsTCEHY +3.68%, which runs the popular messaging app WeChat, has also expressed an interest in Snapchat.  In China, local e-commerce giant Alibaba Group has been trying to promote its own messaging app called Laiwang as part of its efforts to attract smartphone users to its shopping sites and other services.

According to Rakuten, Viber has 300 million registered users, including more than 100 million monthly active users. That certainly makes it a big player among communication apps that offer free voice calls, text messaging and other social networking featrures.

But Viber also faces powerful competitors with overlapping services. As a free voice call service, Viber competes against Skype, which has been popular since the pre-smartphone era. As a mobile instant-messaging tool, Silicon Valley’s WhatsApp is a dominant player. The company, founded by former Yahoo engineers, said last year that it had more than 300 million monthly active users globally, almost three times Viber’s user base.

Unlike Viber, WhatsApp doesn’t offer voice calls.

The market for communication apps is particularly vibrant in Asia, where homegrown apps are rapidly expanding.  Tencent’s WeChat  is ubiquitous among the country’s hundreds of millions of smartphone users. Last year, Tencent spent up to $200 million to promote WeChat overseas, in Asian emerging markets as well as Spain, South Africa and other countries. The app, which offers text and voice messaging as well as various social networking features, now has 272 million monthly active users in China and abroad, according to the company.

Another giant from Asia is Line, which offers voice calls, messaging and many other social features. Line, operated by the Japanese subsidiary of Korean Internet firm Naver, says it has more than 300 million registered users.

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