Blink and you’ll think it was just another purchase by another new-technology company with a war chest of capital.
But last week’s purchase of Zong by PayPal (read: eBay) for $240 million was anything but that. Zong sharpens PayPal’s elbows in mobile payments, and here’s why.
What PayPal has done that other payments providers have not — at least not to the same degree — is position itself for mobile payments. Mobile payments is not so much a technical endeavor, although server capacity is an important component. Rather, mobile payments have boiled down to location, as I wrote here.
This fight for mobile real estate is going to pale in comparison to the current fight over the revenue pie from mobile payments, in my view. Sure, mobile software companies might devise some ingenious ways to extract additional valuable real estate on mobile devices, but mobile phones almost by definition have a limited amount of real estate to go around. Put another way, the cry “location, location, location” takes on a whole new meaning in mobile banking.
Zong has location. The Zong site and service don’t wow. This is an SMS-based platform that simply links mobile and online service providers — mainly games — to billing platforms of utilities. That is, 250 mobile carriers. So what is Zong? Legwork. It made the deals. It pounded the pavement for partners. And the result is location, as evidenced here.
This is a lesson lost on other payments ventures. While some ventures deliberate over the intricacies of their service, as Isis appears to be doing, Zong and PayPal were out elbowing their way into channels of mobile commerce. Even PayPal’s purchase of Fig Card back in April echos this same directive.
This is a notable lead for PayPal, with Zong on its team, over other payments ventures. With Zong, PayPal adds carrier payments to its email/bank payments options. That’s a one-two punch which should daze any competitor, and it comes “partner agnostic,” by which I mean with not bias toward any particular payments channels or parties, as is Google Wallet or Isis. But this advantage is not insurmountable. Zong’s and PayPal’s simplicity are their Achilles heel. This ain’t rocket science; an SMS payments system can be replicated. If you’re willing to do the legwork.