Zong to stick to digital goods, for now

CEO David Marcus on the challenges of going after the bigger e-commerce market

The mobile-payment space has been called the next PayPal opportunity. While we're far from using our mobile phone like a credit card at our local grocery store, typing in a seven-digit cell number on social networks to make purchases rather than a 16-digit credit card number is becoming more commonplace.

And, Zong is one of the leading startups flush with cash - it recently raised $15 million in venture funding led by Matrix Partners - positioned to be a dominant player in this nascent opportunity of mobile payments.

Zong is a mobile payment platform that allows anyone to use their mobile phone to make purchases on the Web. Rather than someone having to type in all their credit card info, they simply have to type in their mobile phone number. It's frictionless, and produces higher conversions, said David Marcus, CEO of Zong, in our recent interview.

It's no wonder therefore that this alternative payment solution has been adopted across many of the top social networks and virtual worlds, such as Gaia Online and IMVU. For the last six months or so, people have also started using Zong to purchase Facebook credits. 

According to David, analysts estimate that transactions on Facebook alone could be $1 billion, meaning the market opportunity for social networks alone is pretty large.

But not as large as e-commerce.

In this interview, David and I talk about the use cases of Zong and the market opportunities to support online payments. Specifically, he talks about the challenges supporting the e-commerce market. "It's a bigger market, but a very tiny-margin market... [additionally] it's a complicated thing to do," he explained. Moreover, the e-commerce market is attracting much larger and deep-pocketed entrants. Recently, it was reported that AT&T, Verizon Wireless and T-Mobile are joining forces to create a mobile payment service.

Stay tuned for our next two interviews, in which David talks more about Zong's opportunities as well as lessons he's learned building a mobile payment platform.