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Zong to broaden eBay’s mobile reach, open up in-store purchasing

July 8, 2011

PayPal enables mobile payments for retailers like Crutchfield

EBay’s acquisition of mobile payments provider Zong brings complementary technology that will broaden PayPal’s reach and enable in-store transactions. 

eBay said it is acquiring Zong for approximately $240 million in cash. The deal gives a boost to eBay’s already significant role in mobile payments, with mobile sales expected to reach $4 billion by the end of this year.

“This deals clearly telegraphs that eBay is on top of mobile as a way of getting into the physical world and reaching customers that it traditionally hasn’t,” said Nick Holland, a senior analyst with Yankee Group, Boston.

“It is a way for eBay to get to be a real-world payment brand rather than one just for people who are shopping online,” he said.

The real world
The deal for Zong taken in conjunction with eBay’s acquisition of RedLaser last year points to the company’s focus on bringing PayPal into the real-world shopping, per Mr. Holland. 

Red Laser is a price comparison tool that enables iPhones to read a barcode and provide information about where the same item can purchased for cheaper.

Zong could enable physical world mobile transactions for PayPal through merchant accounts that would enable shoppers to make an in-store purchase and charge it to their mobile phone bill instead of a credit card. 

Mobile payments is a quickly growing space with several different technologies competing for consumers’ wallets.

More than 8 million customers make purchases on their mobile phones through PayPal to the tune of $10 million in mobile payments per day, according to eBay.

Zong offers a carrier billing solution that allows consumers to pay for purchases from their mobile phones through direct carrier billing. Consumers enter their mobile phone numbers and Zong then verifies that number and clears payment on the customer’s existing wireless service account.

The company also has connections with more than 250 mobile network operators in 45 countries. The eBay deal gives Zong access to PayPal’s more than 9 million merchants around the world

“We believe that Zong will help strengthen PayPal’s leadership position in digital goods and mobile payments, because it brings complementary technology and employee expertise that we expect will help grow the business even faster,” said Hill Ferguson, vice president of product and marketing at Zong, Menlo Park, CA.

For PayPal, the significance of this deal lies in enabling PayPal to provide payment solutions to a broader range of consumers.
“eBay is putting put a lot of money on the table – it looks like they are taking this very seriously,” Mr. Holland said.

“What this really does is open up to eBay billing for transactions for people who don’t typically have bank accounts,” Mr. Holland said. “It has been difficult for these consumers to be eBay customers before.”

There are many consumers who may have a mobile phone but no bank account, including teenagers and others, per Mr. Holland.

Zong’s reach is more than 3.2 billion consumers in 45 countries, many who do not have a credit card or bank account, according to company.

Digital goodies
Zong’s complementary technology could also help strengthen PayPal’s position in the sale of digital goods, which are growing via mobile.

“Zong helps to enable digital goods merchants to increase conversion, because it offers a faster, easier way for consumers to pay without leaving the merchant’s site. PayPal can now offer this option to its millions of merchants,” Mr. Ferguson said.

Digital goods merchants are able to offer a way for consumers to pay without leaving the merchant’s site with Zong, just as they can with PayPal for Digital Goods. The new PayPal service was launched earlier this and lets buyers pay in two clicks without leaving gaming or content sites.

Other companies such as Google and ISIS are also trying to enable mobile payments for goods via Near- Field Communications and other technologies.
“I think a lot of the interest in having mobile phones as a means of doing physical purchases is around NFC but [carrier billing] is a legitimate play as well,” Mr. Holland said.

“Mobile payments is clearly a market that is going mainstream very rapidly,” he said.

Final Take
Chantal Tode, Assoc. Editor, Mobile Commerce Daily

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