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Startup Zong Bets on Mobile Payments

As Facebook builds its virtual-currency business, a startup called Zong appears to be an early beneficiary.

The Palo Alto, Calif., company, which provides a mobile-payment service that lets users of widget software on Facebook and other sites buy virtual goods using their cell phones, is announcing on Apr. 27 that it has landed a $15 million round of venture capital funding from Matrix Partners. Matrix general partner Dana Stalder, a former executive at PayPal and eBay (EBAY), will join Zong's board of directors.

Zong Chief Executive David Marcus says the company will use the cash to market its brand and branch out into handling payments for additional online markets. "We're trying to diversify into areas that make sense, like video and music," says Marcus. "We're trying to build a consumer brand."

Zong links wireless phone numbers to credit- and debit-card numbers so users can buy virtual goods inside online games and on other sites by entering a unique PIN sent to their mobile phone as a text message.The company's technology is one of three payment options available for Facebook Credits, a virtual currency system that the big social network is testing.

no terms or valuation revealed

Zong says that its approach reduces Web developers' transaction fees and that its simplicity helps them attract new customers. Zong processes payments for some 20 million people who buy virtual goods on the Web, according to Marcus.

Zong didn't disclose the funding's terms, including what value investors are placing on the company. The investment coincided with Zong's spin-off from Echovox, based in Geneva. As part of the spin-off, two original Echovox investors, Advent Venture Partners and Newbury Ventures will remain shareholders in Zong.

Matrix general partner Stalder had worked at eBay and its PayPal division, and left in 2008 to join Matrix. He had also worked at Netscape and AOL (AOL) and currently sits on several startups' boards.

Stalder says Zong's broad reach and security make it an attractive investment. "It has a strong consumer proposition because it's convenient and secure. And it gives merchants a way to reach 1.5 billion mobile-phone customers," he says.

Hesseldahl is a reporter for
With Carlos Bergfeld in Silicon Valley

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