Zong has seen tremendous growth over the past year from when the company debuted its mobile payments service from the TechCrunch50 demo pit. Zong’s model of billing micropayments to your cell phone bill caught our eye and sure enough, less than one year later, the startup is picking up serious traction, including a partnership with Facebook to power the purchase of the social network’s new currency. And in 2009 alone, Zong has processed mobile payments for over 10 million unique users worldwide. Today, Zong is launching a new feature that not only expands its payment services, but could make a lasting impact on the micropayments field.
Zong is launching Zong+, a extension of the mobile payment startup which lets users bill microtransactions to credit, debit and prepaid cards. We have an exclusive demo of Zong+ by the startup’s founder and CEO, David Marcus, below. So in addition to making online purchases through their cell phone bill, Zong customers will also be able to link any type of payment card to their Zong account through a one-time entry process and continue to purchase goods by simply entering their mobile number and confirming the security transaction code sent to their phone.
So if I wanted to buy credits on Facebook via Zong’s payment service, I would now have the option to enroll and pay via Zong+. Once I create and account with all of my credit card info, Zong will automatically bill my card. But each time I want to make a purchase via Zong+, I will only need to enter my mobile number. Zong will then send me a transaction code via SMS, and I will need to enter that code to complete the transaction.
Zong is also incentivizing the use of Zong+ by offering users merchant credits (a cost which Zong swallows) if they purchase a certain amount. In fact, Zong will double whatever amount of credits your buy, if you sign up for Zong+. And there are benefits to using Zong+ (besides the incentives). Zong allows you to make larger transactions, in the range of $9.99 or higher, via Zong+.
Zong’s other method of payments, via your mobile phone carrier account, works in a similar fashion. You enter your mobile phone number to pay for a virtual good and then you get a text message on your phone with a pin number. Once you enter that pin number, the charge will be reflected in your cell phone bill.
But this cell phone carrier model has proven to have some complications, which may be why Zong is looking to expand its offerings to different models. Zong and other mobile payments platforms, such as rival Boku, face high fees that mobile carriers charge to the payment systems (which are inadvertently passed on to the consumer via the merchant), creating a potential obstacle in the business model.
Zong recently launched a subscription feature to mitigate this issue and potentially produce lower fees for the end users. Marcus told me in September that many U.S. and European carriers that Zong works with are contemplating reducing these fees by building large-scale models to process payments that would in turn lessen the pressure on the mobile payments startups as well as the applications and social networks using the systems.
But this new system will undoubtedly open new channels for Zong and perhaps even attract additional merchants to adopt its payment systems. Merchants who may have previously been frustrated with the high fees from carrier rates, will now find themselves able to enjoy greater transaction completion at the typical card rates. And as Zong+ is able to increase the amount of the tendered transaction, the startup could even give PayPal a run for its money.
One of the first merchants that will be utilizing Zong+ is social network hi5. The social network’s director of business development, Rajat Kongovi, says that because of Zong+’s flexibility and frictionless model, hi5 will be able to offer a wider variety of virtual goods at more varied price points and give users more freedom of choice. Of course, it’s important to point out that the mobile payments method via cell phone carrier has gained serious traction internationally, where many virtual goods buyers don’t have a credit or debit card but do have a cell phone. So Zong+ may not be take off in some regions, but the service will undoubtedly offer users a more varied and dead, simple way of using your credit card for purchases.
So when will Zong and Zong+ hit Facebook more extensively? Marcus told us that while Zong is currently being used on a limited number of apps to buy currency at the moment, the mobile payments system will be rolled out to a greater user base “soon.” I think that Zong+ only enhances the service and definitely gives it a leg up over competitors on the mobile payments space as well as competitors in the micropayments space such as PlaySpan and Live Gamer. Zong has become a powerful hybrd with the launch of Zong+. Watch your back, PayPal.
Anything is better than PayPal.
I love how some people make such simple statements like “Anything is better than PayPal.” but don’t back it up with why they say it.
What exactly is the issue that some people have with PayPal? I simply don’t get the angst!
I love Paypal too. It’s fast and it works. I had a problem one time with an Ebay seller not sending the item. I went through the steps and got my money back with in 2 weeks.
So yeah, what’s wrong with paypal?
a lot of people have used paypal as merchants on eBay… it’s not a pleasant experience
their willingness to shut down access to your money on a whim with terrible customer service and great difficulty in getting it back is legendary… it’s not a minor thing and it doesn’t just happen occasionally – nor only to folks selling questionable stuff or with high fraud risk… it’s quite bizarre
watching my wife’s eBay business and her friend’s and the PayPal problems they had made me suddenly understand the anti-paypal sentiments around – it’s likely they’ve caused others similar issues… maybe it’s not this but it was an eye opener for me
cool!
mmmm…requires registration and giving card information? why is it any different that PayPal with is tens of millions of customers already in place?
While I’m in no way suggesting that PayPal is insecure, I would think that requiring users to enter a PIN received on their cell phone adds an additional layer of security to the process. This might reduce fraud and benefit both merchants and customers, don’t you think?
will try this!!!!!!!!
This is called turf wars – or at least stepping on each others toes in the small incestuous world that makes up the virtual currency/monetization industry. A super cluster of companies that get together at virtual goods summits but at the same time squander and steal one another’s publishers by running up strategies like this.
Zong was about paying by mobile and now they do this? Geez.
@nustik, I run Product Mgmt and Marketing for ZONG and just wanted to address a couple of your comments:
1) “Small, incestuous world that makes up virtual currency”. Huh? Wake up. VIrtual goods is a multi-billion dollar business today and growing like a weed. Of course there is competition, and of course the players, are fighting to take share. That’s just business.
2) “ZONG was about paying by mobile and now this”. Actually, we’re *still* all about paying my mobile. ZONG+ just adds a new funding mechanism (card networks) to it’s already popular and robust carrier-based billing networks. At the end of the day, the money all comes from the same place and the method of effecting payment is the same: your mobile phone.
Hill
Nice one. Any plans of expanding out of Mobile Payments and going straight to the heart of what PayPal is doing?
Hill,
Do you guys have any solutions for merchants who sell physical goods and dont want to absorb or pass along the high fees that the carriers charge. I looked at your service a few months back but perhaps you have more options now?
Thanks,
Dan
Fighting is an understatement. There are more payment providers than there are big fish publishers which means that this is a buyer-driven industry which further means that the business gets even more commoditized (which even further means that it’s a price wars game causing companies to HAVE to augment their primary business (in your case mobile payments)) with another strategy as an insurance policy).
Bravo !
zong is just a fantastic product, it’s working great and the company is full of idea and innovation.
Congrats to David and his team.
This is what we need! A credible alternative to Paypal
Finally! It should happen sometime and Zong brings really flexible payments to us.
For those who ask “what’s wrong with paypal”: just try to find the way to open a merchant account and receive money from so-called developing country like Ukraine or Russia. Hope Zong will have no problem with those.
Great concept but until they lose that annoying Flash with audio from their homepage I am not taking them seriously.
I always thought going mobile was Paypal’s next move, especially since emails go straight to people’s phones now. I’m sure they could’ve done something cool via Cell # like Zong
Either way, I’ve never had a problem with Paypal – but Zong actually looks promising.
http://www.goog...8148470ea1f7ec2
Paypal must die!
Kill the head and body will die.
Great products and solid team. Zong is a real credit to Silicon Valley – and immigrant entrepreneurship in the US. Well done, David and team!
You have to compare apples to apples and Zong is something quite different than PayPal – definitely not a PayPal killer. It’s extremely expensive and only works for virtual goods, which, yes, is a growing market, but still nothing compared to the overall commerce.
Google Checkout was supposed to be a PayPal killer, so was Amazon FPS, but they are nowhere close to PayPal. With Adaptive Payments PayPal will rule yet another market segment and in general as a developer and a merchant, I am pretty happy with PayPal – people still continue to shit talk about them based on experience from 10 years ago, but today PayPal is very different and much better (even from policies and customer support) than its competitors.
One might say that the only reason mobile payments are expensive is because of the hefty fees that mobile carriers impose on the payment providers to bill through them.
Zong+ bypasses the carriers and bills through the consumer’s credit/debit card instead. The only step in the whole process where mobile carriers come in is in the delivering of the PIN sms, which should be charged at the standard rate.
Transaction fees will be much lower, which naturally translates to higher profits for both Zong and the merchants.
I’ve been waiting for the day when SMS billing for large ticket items can really take off (big time) but have my worries because the round trip delivery times of transactions can lag and a small but significant number of transactions fail altogether? We monitor SMS for and see that there is huge variance in performance times.
I’ve accidentally purchased the same ringtone several times thinking that the first transaction failed. Its easy to write off a 99 cent ringtone, but 10+ bucks is another thing altogether. I hope that Zong+ has nailed it, because I’m tired of carrying around both a smartphone and my George Costanza-esque wallet.
Sorry to say this process already exists in most European countries. Credit card fees, charge back,… make it a non viable model and most companies who launched that kind of service just stopped it.