EBay snaps up 'pay by phone' provider Zong

@CNNMoneyTech July 7, 2011: 11:46 AM ET

NEW YORK (CNNMoney) -- Want to charge your virtual cow purchases to your mobile phone bill? You'll soon be able to, thanks to an acquisition deal eBay announced Thursday.

The online auctions giant agreed to buy mobile payments company Zong for $240 million in cash. EBay (EBAY, Fortune 500) plans to combine the Menlo Park, Calif., company's technology with its PayPal online payments service. The deal is expected to close in the third quarter.

Zong lets people pay for virtual goods using their cell phones, adding the change to their monthly wireless bill. To use Zong, shoppers enter their mobile phone number at checkout and receive a text message a few seconds later. That message prompts users to verify the charge either by replying to the text or by supplying a four-digit PIN to be entered on the site of purchase.

"Our customers love the convenience of paying with their mobile numbers -- a number they know by heart, and a device that they always have with them," Zong CEO David Marcus said in a prepared statement. "We look forward to extending our services to PayPal's more than 9 million merchants around the world."

Zong, which was founded in 2008, is affiliated with more than 250 mobile networks in 45 countries worldwide.

PayPal rep Anuj Nayar confirmed that Zong will at first be used only for purchases of digital goods.

"We have not disclosed any plans beyond that, beyond saying that mobile phones and connected devices are blurring the line between online and offline commerce," Nayar said in an e-mail. "We will announce more specific details about our point of sale vision in the coming months. Stay tuned."

PayPal already has various mobile payment options, but the Zong buy is clearly meant to beef up those services with a simpler user experience.

PayPal's mobile payments sector is growing fast: The company expects to process $3 billion in 2011, up from about $700 million last year. PayPal now has 8 million customers a day making purchases through their mobile phones.

Zong is also a player in the "digital goods" market, where customers pay real cash for intangible products used in games and on social networks. The company is a payments provider for Facebook Credits, the digital currency favored by the ubiquitous social network.

PayPal, which processed more than $3 billion in digital goods payments last year, recently launched "PayPal for Digital Goods," a new offering that lets buyers pay quickly without leaving the game or site that they're using.  To top of page

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