eBay Acquires Mobile Payments Company Zong to Boost PayPal

Today, eBay announced that it has purchased mobile payments company Zong for $240 million, to integrate into PayPal.

By buying Zong, eBay is attempting to position PayPal to be a leader in mobile payments for the years to come. Mobile payments are expected to be a $670 billion industry by 2015 according to report from Juniper Research. Zong is a middleman connection between merchants and telephone companies that allows users to make mobile purchases with carrier billing. Can Zong keep PayPal relevant in the mobile payment arms race that includes Google, Square, Verifone and many others?

Buying Zong is a talent acquisition by eBay as much as it is a technology addition. “The company expects that Zong will add complementary technology and talent that help strengthen PayPal’s leadership position in mobile payments and digital goods,” eBay said in a press release. Zong is connected to 250 carrier networks worldwide and claims a reach of 3.2 billion mobile devices.

The idea is to be able to use PayPal with the nine million merchants worldwide that accept the payment from the platform. Users can also buy digital goods with PayPal through Zong. PayPal expects to process $3 billion in mobile payments in 2011. Juniper said that mobile payments will be a $240 billion industry segment this year.

PayPal is definitely feeling the pressure of the competition. When Google Wallet was announced, PayPal executives were one of the first to offer comments to ReadWriteWeb. Here is what Anug Nayar said at the time:

“Put simply – before you try mobile (or any other payments) solution, you need to be great at payments. There is so much more than just technology involved to get payments right … Any new solution must deliver something better than the existing way to do it. Not just different … better.”

Will Zong make PayPal better? Probably. It will also help it become a more ubiquitous option among all cellphones (smart and feature phones) devices across the world, which could make it a very important acquisition for eBay.

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