EBay to Buy Mobile-Pay Service Zong for $240 Million in Cash
EBay to Buy Mobile-Pay Service Zong for $240 Million in Cash
Tony Avelar/Bloomberg
EBay Inc. signage is displayed at company headquarters in San Jose, California, U.S.
EBay Inc. signage is displayed at company headquarters in San Jose, California, U.S. Photographer: Tony Avelar/Bloomberg
EBay Inc. (EBAY), the world’s largest online marketplace, agreed to buy closely held mobile-payment provider Zong Inc. for $240 million in cash, accelerating its expansion of smartphone services.
The deal is expected to close in the third quarter and won’t have a material effect on earnings, San Jose, California- based EBay said in a statement today.
EBay is pushing deeper into smartphone services as its PayPal unit faces growing competition from Square Inc. and Google Inc. (GOOG), which offer products making it easier for customers to make purchases with mobile devices. Last year, EBay acquired Red Laser and Milo, mobile comparison shopping applications that let users scan product barcodes and read reviews.
EBay is “pushing faster and harder on mobile than any other company in the e-commerce payments landscape,” Colin Gillis, an analyst with BGC Partners LP in New York, said today in an interview. Zong is “one of the best private mobile plays out there and there aren’t many.” Gillis has a “buy” rating on the shares.
Ebay rose 41 cents, or 1.3 percent, to $33.33 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 20 percent this year.
Zong, which lets consumers pay for virtual goods such as game credits on Facebook Inc., will help PayPal tap the increasing number of online transactions such as streaming movies and newspaper subscriptions. PayPal said it processed about $3.4 billion in digital goods purchases last year.
Mobile Payments
Zong’s relationships with about 250 wireless carriers in 45 countries will help PayPal increase its mobile payments service, Patrick Dupuis, PayPal’s chief financial officer, said in an interview.
The total value of mobile payments for virtual and physical goods is forecast to almost triple to $670 billion by 2015, according to Juniper Research. About $240 billion in mobile payments will be made this year, Juniper said.
Zong is one of several recent acquisitions EBay is using to bridge the Internet and in-store buying experience, Ken Sena, an analyst with Evercore Partners Inc. in New York, said in an interview.
Using Zong, customers who find a better deal elsewhere might soon be able to make the purchase more easily on their phone, Sena said. While it is possible to type in a credit card number in a payment form on a smartphone, Zong’s solution is easier for consumers, he said.
Higher Fees
Still, Zong charges merchants more than PayPal for a comparable transaction. PayPal transactions carry a fixed fee of 30 cents in addition to 2 to 3 percent of the purchase. Merchants who use Zong receive between 70 and 92 percent of the purchase amount, said Brooke Hammerling, a Zong spokeswoman.
The high fees could hinder the service’s adoption for physical goods, said Richard Crone, chief executive officer of Crone Consulting LLC, which advises on mobile payments. Merchants may also offer the pay-by-phone service and use discounts to encourage customers to make purchases using a transaction method with a lower fee, such as a credit card or checking account transfer, he said.
-- With assistance from Joseph Galante and Douglas Macmillan in San Francisco. Editors: James Callan, Niamh Ring
To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net.
To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net.
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