eBay Acquires Mobile Payments Provider Zong for $240 Million in Cash

EBay said this morning that it is acquiring Zong, a venture-backed mobile payments provider, for about $240 million in cash.

Zong enables consumers to post payments to their mobile phone bills, mostly to pay for virtual goods inside of games.

EBay said Zong will strengthen PayPal’s payment platform, which in the past has focused on microtransactions and digital goods, but did not enable payments to be posted to the mobile phone bill.

Ebay has been on a spending spree, most recently acquiring GSI Commerce for more than $3 billion, and other companies including Where, Fig Card and Milo.

Founded in 2008, Menlo Park, Calif.-based Zong was spun off from Echovox, and had raised about $30 million from investors including Matrix Partners, Advent Venture Partners and Newbury Ventures.

PayPal CFO Patrick Dupuis said it became obvious, during discussions over the past few months, that the two companies shared the same vision for the market. “We’ve been growing by leaps and bounds ourselves, so it was nice to find someone who shares so closely how we can transform commerce.”

Zong has access to 3.2 billion mobile users through about 250 carrier connections around the world, and perhaps is best known for working closely with Facebook to sell the social network’s virtual currency over the phone.

It competes heavily against such other payment alternatives as Boku, Billing Revolution, BilltoMobile and mopay.

In a letter on Zong’s Web site, CEO David Marcus wrote: “Most of e-commerce will shortly become m-commerce, and I genuinely believe that PayPal, hand-in-hand with wireless carriers around the world will win in a big way.”

In an interview, Marcus elaborated that he’s excited to be able to accelerate what Zong has been doing for the past few years. “PayPal has nine million merchants, so accelerating what we are doing on the merchant piece is key, and branching out into other things … It will make us a clear leader.”

PayPal recently revised its estimates to say that it will process $3 billion in mobile device payments this year, up from the company’s previous projection of $2 billion.

A lot of companies believe the industry is worth duking it out for, but there are so many alternatives being explored, it’s not clear which payment solutions consumers will end up adopting.

Carrier billing is just one of them.

Google has its own Wallet solution; Square is trying to replace registers with iPads; and the wireless carriers have their own initiatives as well.

As the industry evolves, it’s becoming increasingly clear that carriers do not want a lot of extra charges appearing on the wireless phone bill, and don’t want to take on the risk of consumers paying for it at the end of the month.

So far, with small purchases, such as virtual goods, it has not been an issue.

PayPal is exploring a number of mobile payment initiatives, including in-store mobile payments, and microtransactions in applications and on the mobile Web. Earlier this year, it launched PayPal for Digital Goods, a new product that lets buyers pay in two clicks without leaving their gaming experience or content site.

“Exciting” doesn’t even begin to describe how much activity is going on in the space right now, Dupuis said. “Everyone is talking a lot about this, and we’ve been a wallet in the cloud forever. We want customers to have choice, and this adds one choice. In the end, we want people to pay anytime, anywhere, with a whole suite of options. This is centered on the customer — the less friction the better.”

EBay said it does not expect the acquisition of Zong to have a material impact on its financial guidance issued in its first quarter earnings release. The deal is expected to close in the third quarter, pending regulatory review.

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