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.
Over the past year, we’ve written frequently about mobile payments startups and the potential future of this technology. Rivals Zong and Boku both offer essentially the same service—the ability to make a payment for a micro-transactions via your mobile phone. And both companies have been growing steadily, with Boku making acquisitions and expanding internationally and Zong picking up traction via a partnership with Facebook.
Today, Zong is upping the ante by offering a subscription service, which lets Zong customers to extend a recurring bill-to-mobile option of up to $9.99 a month. Basically, Zong users can now charge a flat-rate for multiple purchases instead of the existing pay-as-you go model.
Mobile payments for micro-transactions on the web are catching wind and there are several players in the space vying for the top spot in the field. Today, Boku, a recently launched mobile payments conglomorate of sorts, is announcing a slew of new customer acquisitions as well as details of its international expansion.
Boku, which acquired competitors Paymo and Mobillcash and raised $13 million in Series A funding back in June, doesn’t require users to have a credit card or bank account to make a micropayment. Users enter their cell phone number on the site, reply to a text message and then all virtual charges are automatically charged to the user’s monthly cell phone bill. As we’ve said in the past, it’s ridiculously easy.
While advertising revenues have been disappointingly low for most applications on Facebook and other social networks, another option app developers are increasingly turning towards is micropayments for virtual goods or premium features. Both Facebook and MySpace have admitted that they are working on their own payment systems, and Apple could play a role as well since it already has a payment system in place for iPhone apps (although even Apple is running into some bumps).
While the bigger players are fiddling with their payment system plans, nimbler startups are moving in to fill the gap. One of these is Spare Change Payments, which is trying to become the Paypal of micropayments. A year after launch, more than 700 apps across Facebook, MySpace, and Bebo use Spare Change for micropayments. Spare Change is processing $2.5 million a month in micropayments, which is a $30 million annual run-rate. The apps that are having the most success with micropayments are games and ones that sell virtual goods.
Now, the company is making it easier for consumers to pay through Spare Change with a new payment widget that pops up in each app instead of sending people off to a separate payments page.
Global mobile payments network Paymo and social network hi5 have partnered to let members in 24 countries use their mobile phones to purchase hi5 Coins, hi5’s virtual currency. Countries where Paymo will be made available to hi5 users include the U.S., Canada, France, Hong Kong, Thailand, Russia and Colombia.
Paymo’s mobile payment system doesn’t require users to have a credit card or bank account. Users enter their cell phone number on the site, reply to a Paymo text message and then all virtual charges on hi5 are automatically charged to the user’s monthly cell phone bill. It’s pretty easy and similar to UK mobile payments service, Zong. Paymo says that over 75 percent of the online community worldwide does not have a credit card but 3 billion consumers own a mobile phone. With that in mind, the company is hoping their system, which avoids credit cards or bank accounts, will take off.
Users are increasingly choosing dead simple SMS mobile payments for micro-transactions on social network applications and gaming sites (it fills the void while they wait for more direct options), but super-high transaction fees are limiting growth.
The problem is that legacy transactions – specifically scams that give users a “free” ring tone with the fine print mentioning a monthly charge as high as $20 – have brought in so much cash to the carriers that they’ve gotten used to taking 50% or more of the total payment in fees. For the market to grow to encompass legitimate transactions, those fees have to drop dramatically. For that to happen, the social networks need to get involved directly in carrier negotiations.
Two companies, both headquartered in Europe, are already targeting mobile payments for apps – Mobillcash (UK) and Zong (Switzerland).
When you buy a virtual shotgun on Mobwars, for example (and they are selling a lot of them, up to $1 million per month) you have to pay real cash. You can choose to pay via a number of services (Facebook doesn’t offer a direct payment solution yet), including either Mobillcash or Zong.
Mobile payments startup Zong, which is one of our DemoPit companies at TechCrunch50, thinks it has the answer to micro-payments on the Web for social apps like gaming, dating and classifieds. It uses your mobile phone as a way to pay for things such as virtual goods in Facebook apps.
The way it works is that you enter your mobile phone number to pay for something on the Web, maybe a virtual cowboy hat for 5 cents. Then you get a test message on your phone with a pin number. If you enter that pin number in a widget on the Web, the charge will be reflected in your cell phone bill.
Loren Feldman’s puppet video show, which parodies a video interview show run by Shel Israel called Global Neighborhoods, has landed an official sponsor, Feldman says. Meanwhile, Global Neighborhoods itself remains sponsorless.
In the videos, a naked puppet interviews people (or other puppets) to talk about “social media,” making fun of Israel’s interview style. The puppet is naked as a spoof on Israel’s book, Naked Conversations, about the importance of blogging for companies.
The new sponsor, Zong, a Switzerland-based mobile platform company, is providing “significant funding” to sponsor the parody Shel Israel show created by Feldman.
This will be a serious ego blow to Israel, who has been mocked by Feldman and bloggers around the quality of the show and has publicly attacked Feldman over the parody.
The fact that the parody, but not the official show, is now receiving financial support from third parties is a reflection of the entertainment value of the two shows. Not only do some people find the parody very funny, Feldman has also landed fairly well known entrepreneurs in his interviews. Now that Feldman is making money from the show, it’s probably here to stay, much to the real Israel’s chagrin.
As I’ve disclosed before, Feldman and Israel are both friends of mine. I hosted the launch party for Shel’s book, Naked Conversations at my house in February 2006, and Feldman is staying at my house this week.
