Viki at the knees

Japan’s Rakuten plans to take over the web—but not the one you’re familiar with

September 2, 2013
Obsession
abenomics
September 2, 2013

Rakuten’s acquisition of Viki, coming as it does over a holiday weekend in the US and featuring two companies relatively unknown in the West, will probably pass without much notice. That would be a shame.

Rakuten is an unlikely company. It is based in Japan, a country where business dealings are wrapped in layers of etiquette and respect. Yet its CEO, Hiroshi Mikitani, casually introduces himself as Mickey to colleagues and underlings. More radical is the policy the company instituted in July last year, which made Rakuten the only Japanese company to use English as its operational language. And Mikitani is also an ally of Shinzo Abe as the prime minister tries to shake up the country’s economy. It should come as no surprise then that Rakuten’s ambitions are just as unconventional: Mikitani’s declared goal for his company is to make it “the world’s number one internet services company.”

That is some way off. Rakuten is worth 1.57 trillion yen ($15.8 billion), a minnow compared to Amazon ($128 billion). But it is growing rapidly—its market cap is up 50% over summer last year in yen terms. The company has interests in everything from travel to baseball but it makes most of its money from Rakuten Ichiba, an online marketplace. That needs to change: growth in Japanese e-commerce is slowing and the company got out of a joint venture with China’s Baidu last year. Rakuten is therefore buying aggressively in media. In the past few years, it has acquired Kobo, a Canadian e-reader; Wuaki, a Spanish video-on-demand service; and a stake in Pinterest, a social network.

All of which make’s Rakuten’s latest purchase particularly noteworthy. AllThingsD reported last night that Rakuten has acquired Viki, a video-streaming service, for $200 million. Viki features television shows and movies from across Asia and beyond. It looks and works a lot a like Hulu, but with a twist: viewers are encouraged to subtitle shows as they watch them so that others can enjoy foreign entertainment too. Think of it as a video-streaming site crossed with Wikipedia—indeed, that’s where the name comes from.

In theory at least, Viki could help Rakuten just as much as Rakuten could help Viki. In countries such as Japan, where it is well established, Rakuten could push the video service. In others where Viki has a presence, the smaller firm could help introduce its new parent. Viki offers an “approach to video that is inherently global (as opposed to acquiring content market-by-market). This makes it a far more efficient model for entering new markets,” a Rakuten spokesperson told Quartz. “As Viki is already accessible in most markets, the question is what markets will Viki take Rakuten to?”

If Mikitani’s declared ambition is serious, it makes sense to look beyond China and America, the biggest online markets. There seems little to gain from competing with domestic behemoths. Instead Rakuten is focusing its efforts—and money—on relatively underdeveloped markets, where there is plenty of room to grow. Even if it doesn’t become the world’s biggest internet services company, it could certainly be a major force.

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