China’s Alibaba invests big in video chat app Tango, leading a $280M funding round

With WhatsApp selling to Facebook(s fb) for $16 billion, its over-the-top communications rivals were bound to get plenty of attention. It looks Tango is the first to benefit. The video chat and messaging specialist announced late Wednesday it has closed a $280 million funding round, with $215 million coming from Chinese e-commerce giant Alibaba.

Alibaba Holding Group — which is kind of an Amazon(s amzn), eBay(s ebay), PayPal and online international trade broker rolled into one – already has big plans in the U.S., planning an IPO on a U.S. stock exchange. Its strategic investment in Tango will make it a minority shareholder, Tango CTO and co-founder Eric Setton told me, but he added the companies will work together closely. Alibaba can help Tango rapidly scale its infrastructure around the world, and the relationship will be particularly important as Tango expands beyond the U.S. and Europe into Asia, Setton said.

“We don’t have an understanding of all the dynamics of that market,” Setton said. “Alibaba will help us with that understanding.”

Tango founders Uri Raz and Eric Setton (source: Tango)

Tango founders Uri Raz and Eric Setton (source: Tango)

While Alibaba is kicking in the lion’s share of the funding, Tango’s prior investors are contributing the remaining $65 million, though Tango isn’t revealing which ones. Its previous investors include Access Industries, Draper Fisher Jurvetson, Qualcomm Ventures, Toms Capital, Translink Capital, Bill Tai, Shimon Weintraub, Jerry Yang and Alex Zubillaga. In total, Tango has raised $367 million.

Tango is unique among the top tier OTT providers because it made its bones first as a video chat service, launching its app in 2010 at Gigaom’s Mobilize conference. “We became the de facto Facetime(s app) on the Android handset,” Setton said. But it quickly expanded into messaging and VoIP calling.

Its community now numbers 200 million registered users, 70 million of which are monthly active users. That definitely puts Tango among the heavyweights in the OTT space, though it’s still nowhere close to WhatsApp’s 450 million monthly actives. And while WhatsApp took off all over the world, Tango’s success has been concentrated in North America.

Most recently though Tango has been branching out from communications into content and gaming, seeking to become a social platform. It’s been hosting an increasing number of social games in its app – similar to the way Facebook hosts games in its social network – and last year it reversed the equation. It started providing in-game chat features to stand-alone mobile games. It now has partnerships with more than 40 game developers. In October, Tango branched out into music, partnering with Spotify to let its users share 30-second song segments within its app.

Setton told me that video chat will always be a core component of Tango’s app, but it’s no longer the sole service driving consumer toward its platform. With the windfall in new funding, Tango plans to staff up and accelerate its plans to introduce new content and social engagement features.