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Viber Deal Shines Light on Hot Messaging Space

Tickers in this article: AMZN

NEW YORK ( TheStreet) -- News Thursday night that Japan's Rakuten was going to buy Cypress' Viber for $900 million was the latest sign that messaging apps are hot.

Rakuten is known as a giant of Japanese e-commerce and plans on increasing its reach into other parts of the world. It invested in Pinterest a few months ago.

Now it's bought Viber to beef up its presence in the messaging space. Clearly, Rakuten is worried that messaging is the next big thing since mobile itself came along. And they're right to be worried.

More specifically, they're worried about losing ground to Japan against Line. Line now has 300 million users and is most popular in Japan. If it continues to grow and develop, it could pose a real threat to Rakuten's core e-commerce business.

Rakuten is probably thinking that, if Line keeps building its audience and then starts to introduce new e-commerce services to that group, it could gradually bleed away users.

They're right to be worried. And they shouldn't be the only e-commerce company worried about this.

Alibaba needs to be worried about the increasing popularity of WeChat. Amazon needs to be worried, too -- but they don't appear to be (or at least WhatsApp doesn't seem to have any ambitions to be anything other than the free messaging service that it is today).

But is Viber the answer to Rakuten's problems? I don't see it. Viber is more of a voice app than a messaging app. Voice calls appear to be a thing of the past rather than the future. Viber seems to be more designed to be a Skype competitor than a Line competitor.

Rakuten's CEO, Hiroshi Mikatani, said the deal was a "no brainer" as messaging was a hot space and Line was supposed to be worth something like $10 billion when it holds its expected IPO later this year. I think Rakuten also believes that it can take its own users and direct them over to the Viber app. So, they probably feel confident that they can make the app itself more valuable than what they're paying for it.

However, that thinking is flawed.

Viber is not part of the messaging app mix. And just Rakuten telling its e-commerce customers to start using Viber will not change that.

To me, the key players in messaging are WeChat, Line, WhatsApp, Line, Kik and Kakao. Rakuten would have probably been better off buying Kakao, which is mostly Korean-based and has seen its growth slowing. It probably would have cost more than $900 million, though.

If Line is worth $10 billion, so is WhatsApp. WeChat is as big as either of those apps and has helped Tencent double its stock price over the last year.