Rakuten’s $200 million acquisition of Viki — the video streaming site where users worldwide contribute subtitles to premium content — is a clear sign of how Rakuten wants to use digital content to build out its e-commerce marketplace. But the deal didn’t happen in a vacuum. Before talks got serious between Japan’s Rakuten and Singapore-based Viki, Viki CEO and co-founder Razmig Hovaghimian tells me the latter was in the process of raising a Series C round to keep growing its business and make more inroads to new markets. (Past investors in Viki, which had to date raised $24.3 million, included Andreessen Horowitz, Greylock and Charles River Ventures, along with a number of individuals). And it wasn’t just VCs in the picture. A source also tells me that other suitors besides Rakuten included Google and Yahoo.
Rakuten CEO Hiroshi Mikitani (“Mickey”) and Hovaghimian wouldn’t confirm what other companies had approached Viki. There really there is no surprise in either of those names, though, considering that Google owns YouTube, Yahoo has long been looking how to make more headway in video content, and, like Viki, both are ad-based businesses looking for ways of growing revenues outside the U.S., which is exactly where ad-based Viki is growing the most. It will be interesting to see if their attention turns to other international video sites instead.
Meanwhile, both CEOs did talk, however, about how Viki came to find itself getting courted by Rakuten, what Rakuten’s bigger plans may be for the site, and why Rakuten decided to buy it rather than simply make a strategic investment as it did with Pinterest.
Viki meets Rakuten. Not too long ago, Viki added two new strategic investors to its board, Blake Krikorian (ex-Sling and now at Microsoft) and Dave Goldberg of Survey Monkey. Given the timing of those appointments I asked Hovaghimian if they played a role in the acquisition. Turns out that in fact the connection came from MIT Media Lab director Joi Ito, one of the company’s earliest investors and a board member. “He’s helped me open up the Japan market, and I got the introduction to Mickey from him,” he said. It came at the same time that Hovaghimian was travelling to Silicon Valley speaking to VCs and other interested companies, he said, and not looking for a buyer. “It can be exhausting fundraising in Silicon Valley when you are not there,” he admitted.
While Viki “works very closely” with Yahoo in Asia and is one of YouTube’s approved multichannel networks, he says that Rakuten was a better fit “at a culture and chemistry level.” It helped that both companies are based in Asia, he said.
“It took 10 meetings over one month, and it just felt right and clicked, so the process moved very quickly,” he said. “I liked the person [Mickey] and his company’s vision. They’re swinging for a home run, from Japan. We had a lot of inbound interest and that was exciting, but Rakuten happened to be the most exciting of all of them.”
Viki to remain independent, for now. Hovaghimian notes that both the Yahoo partnership and the YouTube deal — which hasn’t really been promoted much since it only got just before all the M&A and funding business — will remain intact, as will partnerships with the likes of Netflix and other would-be Rakuten competitors. “I wanted to go for a long game,” he says of the original intention of raising a Series C and not entering acquisition talks with other parties. In that regard, Rakuten is going to give Viki a long leash for now, letting it continue to grow its footprint, long-tail catalog and user numbers under Hovaghimian’s leadership. “This way we don’t have to worry every six months about raising more money.”
He says that the way to think about Viki’s longer term strategy with digital content is “moving up the funnel,” with subsequent partnerships giving it more content to offer out to its users both to watch and group-subtitle.
It’s still a big step behind YouTube in terms of traffic — in July, it had marked 400 million words translated by its users over 163 languages, covering content from 100 partnerships with premium content brands and millions of views on its most popular programs. But advertising is very promising already, with CPMs on ads run alongside its videos “like Hulu in some regions,” with some campaigns coming in “north of $50 on CPMs” and some inventory selling out.
Why acquisition instead of investment? I asked Mickey why Rakuten decided to full-out acquire Viki rather than invest, as it did when it took a $100 million strategic stake in Pinterest last year. “Pinterest was too expensive for us,” he joked, with the pinboard-based sharing site very much the site of the moment at the time of the deal. “Also it was not directly strategic to our core ecosystem the way that Viki is.” He says he sees Pinterest mainly as a “facilitator and traffic generator” with Pinterest already providing strong traffic to Rakuten’s Linkshare affiliate marketing network. This has yet to be turned on in Japan, however, since Pinterest has yet to officially launch in that country.
Longer term, it’s not just about video. More importantly, Mickey points out that Viki has a clear complement to what Rakuten is already trying to do with video — it owns a Netflix-style OTT video streaming company in Europe called Wuaki, and there are plans to put more of that kind of Rakuten content on to devices made by Kobo, the e-reader and tablet company owned by Rakuten. But Mickey sees this as more than just about video.
“The biggest difference between Pinterest and Viki is that Pinterest is a U.S.-centric service at this moment while Viki as very global. Rakuten is expanding to many countries and our vision is to provide our e-commece market place all over the world. The translation part will become very important,” he says. “So we are buying the business and the ability to apply that translation technology to more than just video. It is not just about video.”
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