Mobile Payments Provider Zong Raises $15 Million In Its First Venture Round
Zong, one of the larger mobile payments companies and Facebook’s partner for its upcoming Credits system, has raised $15 million in an exclusive funding round from Matrix Partners. The round is officially Zong’s first, although the company has had the support of parent company Echovox over the three years since it was spun out.
The round comes about three months after Zong’s biggest rival, Boku, took its own $25 million funding. Zong’s CEO, David Marcus, tells us that his company plans to use the money for a hiring spree. “We’ve been growing like crazy in the past couple quarters, and we need to hire more people in all of our departments,” he says.
Zong’s service lets users buy virtual currency using their mobile accounts. A user will make the purchase, typically for a social game, then receive a text with a confirmation code on their phone. They’ll enter that code in the game to access the currency.
Right now, Zong has relationships with 174 carriers in 22 countries, besides its partnership with Facebook. Marcus says that one of his company’s larger advantages is having direct relationship with most of those carriers, about 80 percent. “The other guys are using aggregators, platforms that were originally developed to sell ring tones and similar goods. Our take is that they won’t be able scale with the volume,” Marcus says.
The company also allows customers to link their credit and debit cards to their mobile account to make larger purchases, a service it calls Zong+. Mobile phone companies typically have a low spending limit on each account to keep customers from using their phones like credit cards. Marcus tells us that the linked credit card not only results in larger purchases, but also to make more individual transactions.
Since its launch, the company has processed payments for about 20 million unique customers. Over the coming year, besides hiring more employees, Zong will also try to expand the range of things people buy with their mobile phones. “We want to address new market verticals,” says Marcus. “Up to now it was limited to virtual goods and currency, mostly in gaming. Now that the cost is coming down, thanks to Zong+ but also to carriers lowering fees, we’re gearing up for new markets.”
For more on Zong’s strategy, you can also check out a lengthy interview we did with Marcus last May.