PayPal Buying Zong for $240 Million to Bolster Carrier Billing, Digital Goods

The deal makes sense for both parties: eBay will buy Zong to strengthen and support mobile PayPal, gain access to a global set of carrier relationships and get deeper into virtual goods. Zong gets an exit as much bigger and more powerful companies threaten to marginalize them over time in the mobile payments space. 

The deal is worth a reported $240 million in cash. 

Zong has relationships with carriers around the world (approx. 250). PayPal launched a digital goods business at the end of last year. This will dramatically accelerate that effort.

Until very recently Zong's entire business was about paying for online virtual goods (e.g., gaming credits) with your phone and carrier billing. Transaction limits are small, sub-$10. The company moved last year credit-card based mobile payments

Here's what eBay said about the deal in its release: 

With Zong, PayPal will have greater ability to offer consumers even more choices in how they want to pay – virtually anytime, anywhere. Both Zong and PayPal help to enable digital goods merchants to increase conversion, because they offer a faster, easier way for consumers to pay without leaving the merchant’s site. 

Some stats on PayPal:

  • PayPal claims 100 million active accounts globally
  • 8 million customers are making purchases on their mobile phones through PayPal; $10 million in mobile payments per day
  • PayPal processed $3.4 billion in payments for digital goods in 2010  

Recently eBay has been on a bit of a buying binge and Zong is a very logical acquisition for the company's PayPal unit; its most dynamic division. It will need all the assets it can bring to bear on mobile payments as the market becomes increasingly competitive. However PayPay asserts that the digital goods market (via gaming) is already worth $10 billion -- an amazing stat. 

In that context $240 million looks like pocket change. 

See past posts on Zong: