Executive brief: eBay buys Zong

Bambi Francisco Roizen · July 7, 2011 · Short URL: https://vator.tv/n/1c71

Want to know more about Zong, the startup that was snapped up for $240 million?

Congratulations to Zong! The mobile payments company was just sold to eBay for $240 million, both companies announced Thursday. The mobile-payment space has been called the next PayPal opportunity. It's no wonder then that eBay, PayPal's parent, decided to buy its way into this booming opportunity, rather than build.

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. The service was designed to essentially make it super simple for digital goods transactions. 

Throughout the years, Vator has covered Zong, which was founded in 2008, through posts and interviews. If you want to get to know Zong a bit more, particularly from David Marcus, CEO and founder of Zong, here's an executive brief of stories we gathered for you.

The main video was shot last year. It's very telling of the mobile payment opportunities, particularly the limitations of digital goods, which is what Zong was focused on. You'll also hear David talk about the challenges of moving beyond digital goods and his thoughts on the looming competition. 

eBay buys Zong for $240 million in cash -- PayPal plans to leverage Zong’s technology to offer consumers more payment options without having to leave the merchant’s site. “Commerce is changing. With mobile phones, we walk around with a mall in our pockets. PayPal helps to make money work better for customers in this new commerce reality – no matter how they want to pay or what device they’re using,” said PayPal President Scott Thompson in a statement. “We believe that Zong will strengthen this value by helping us reach the more than 4 billion people who have mobile phones, giving them more choice and security when they pay.”  Zong has raised approximately $30 million in funding from Newbury Ventures, Advent Venture Partners, and Matrix Partners. Advent, which led a $7.5 million Series B round in 2007 (back when Zong was Echovox), says that it has made a 7.7x return on its investment. 

Zong to stick to digital goods, for now -- 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. In this interview (conducted August 2010), 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 from AT&T, Verizon Wireless and T-Mobile.  

Zong raises $15 million, led by Matrix -- The Palo Alto-based company, formerly a division of Echovox, has some new funding. In April 2010, Palo Alto-based Zong raised $15 million, in a round led by Matrix Partners. The startup's focus falls into the very lucrative space of virtual currency for social gaming.  The company's most recent deal is quite massive.  Zong announced it is the mobile payment provider for Facebook Credits, a new virtual currency platform which will be deployed across the largest social networking site in the world. Facebook (at the time) had 400 million users and growing. Beyond Facebook, Zong said it works with thousands of other merchants in the virtual worlds space (like IMVU), social networking (Facebook), online gaming and digital content properties.  It differentiates itself from other mobile payment companies by communing carrier billing with multiple payment sources, like credit or debit, all via a cellphone.  The company said it now reaches over 1.5 billion mobile users, providing payments across 30 countries. How does Zong make money?  It takes a 5-10% transaction fee from every purchase. 

Zong strikes 10 million users -- In the fall of 2010, Zong hit a 10-million-user milestone, meaning that many people used Zong to buy a digital good. If this company gets its way, customers will never again have to type out another 16 digits, expiration date, or security code. And, looking at these latest numbers, it looks like it is starting to have its way.  Zong says it is already available in 19 countries across 100 carriers. Yesterday the company also announced it would be adding new partners in Eastern Europe, Russia, Southeast Asia, and South America.


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Bambi Francisco Roizen

Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.

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Zong is the leading mobile payments platform for sellers of digital goods and services. Its frictionless payment experience converts shoppers into buyers at rates up to 10 times greater than traditional payment methods. Zong leverages direct connections with mobile network operators around the world to provide a secure payment solution with unrivaled connectivity and service quality. Zong is the mobile payment provider for Facebook Credits and also works with hundreds of leading destination sites, such as Gaia Online, IMVU and Playdom. Reaching over 2 billion mobile users, Zong provides localized payment capabilities in over 30 countries in 16 languages. Zong is the only mobile payments platform that combines the high conversion rates of carrier billing with the low costs and flexibility of payment card networks. Zong is based in Menlo Park with offices in Paris and Geneva, and is backed by Matrix Partners, Advent Venture Partners and Newbury Ventures. For more information, please visit www.zong.com.


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