I’m thrilled to announce that Zong has reached an agreement to be acquired by eBay (PayPal) — full announcement, and PayPal CEO Scott Thompson’s thoughts on the PayPal Blog.

Getting to what I like to call this “acceleration moment” didn’t happen on its own. This journey has always been about people. People make great products, and companies. Nothing else. Every battle we had to win, every challenge we had to overcome, every product we had to launch, carrier to connect, and client to win wasn’t the result of any individual, it was the result of an amazing, collegial team working days, nights, and weekends, and having fun in the process. Even in the toughest times, you, team, made it feel so much easier. We were one, a pack, bringing down obstacles standing in our way, one after the other. Now, it’s time to accelerate what we’ve built!

I am so excited by the unique combination of PayPal’s 8 million merchants, brand power, risk management expertise, and financial stability, with Zong’s Carrier DNA, its largest direct carrier payments network, product innovation, and best-in-class carrier billing technology. This industry first is going to allow us to scale what we’ve built over the course of the past 3 years (and then some) in a massive way!

I’d like to thank all of our merchant partners. Over 2 ½ years ago after chasing them for months, Facebook accepted to start testing mobile payments in the now defunct Gift Store. We then worked very closely with its amazing teams to build the ideal experience for Facebook Credits. This whole experience has been nothing short of amazing. Experiencing the rise of the biggest social network over the course of the past couple of years to over 700 million users has been phenomenal. For having seen it from the inside over a sustained period of time, I can now say that Facebook’s success has nothing to do with luck. It’s all about vision, sheer talent, energy, and culture. Other key partners along the way include amazing companies and leaders like IMVU, Sulake (makers of Habbo Hotel), Big Fish Games, Sony Online Entertainment, Zynga, Playdom (now Disney), Bigpoint, and thousands of other amazing companies we have the privilege of serving. To all of you: thank you for trusting us at face value, when we were a tiny team in our cramped Spartan office. Stay tuned for a lot more innovation and scale, now that we’ve joined forces with PayPal. You won’t be disappointed with what we have in store for you!

To our 250 carrier partners around the world, thank you for letting us leverage your unique, and amazing capabilities to build a global mobile payments business. We’re all very excited at PayPal, and at Zong, to massively scale this business for you in the months to come.

Building a great company is also a factor of great investors. Starting with our early Angel Investors such as Eric Babecoff, and  later Ossama Hassanein from Newbury Ventures, who believed in us way back when in 2005 with Echovox. Frederic Court from Advent Venture Partners, who became our BD arm in Europe, sending us leads like a machine, and supporting us all along the way. Then finally when Zong was spun-off from Echovox, Dana Stalder from Matrix joined us, and was so instrumental in scaling our business, becoming my mentor, and guiding us in this amazing transformation that happened in the past 12-months.

I really can’t wait to join Scott Thompson’s team over at PayPal. The energy, passion, and drive of the team combined with PayPal’s unique scale and capabilities in payments convinced me this was the right way to accelerate what we’ve built. Most of e-commerce will shortly become m-commerce, and I genuinely believe that PayPal, hand-in-hand with wireless carriers around the world will win in a big way. We’ll be working very hard on things that will blow your mind. So stay tuned for a lot more mobile payment awesomeness!

—David Marcus (@davidmarcus)

This summer we were honored when IMVU, the leading avatar-based social network and industry pioneer, chose us to be their mobile payments partner. With over 40 million users all over the world, IMVU built their own in-house mobile payments solution. After operating their own platform for a couple years, they decided to try us on for size.

We think the fit is nice: IMVU is seeing a 50% lift in revenue after switching to ZONG. Learn all about the background and how they did it in our IMVU Case Study.

We’re excited to be processing mobile payments in two more countries this month. Same as in most every other country, we have 100% mobile carrier coverage to maximize your payment conversion rates. Contact us if you want to turn on these markets for your account.

Other news: check out our May Newsletter for a smattering of Zong news, humor and other tidbits.

We recently conducted a consumer survey to better understand our customers’ customers. As marketers, the downside to having a frictionless end user payment experience is that we don’t always know a lot about the people making the payments. How old are you? Why did you select the “Pay by mobile” option? Do you even have a bank account? These are the kinds of questions our survey was designed to answer.

Here’s what we learned, in classic “Myth vs Fact” format:

Myth – Mobile payment users are just a bunch of 12 year olds using their parent’s cell phones to make payments.
Fact – Over 88% of mobile payment users are 18 or older. The distribution skews younger with about 60% between 18 and 30 years old.

Myth – Mobile payment users only use mobile because they don’t have bank accounts or credit cards.
Fact - 76% of mobile payment users have a bank account or credit card.

Mobile payment users have plenty of options, which begs the question, “why do you use your mobile phone to pay?”

We’re glad we asked:

34% said they used mobile because “it’s fast and easy”
22% said because “it’s fun”
20% said because “i know it will work”
14% said because “it doesn’t seem like I’m spending real money”
10% said because “i don’t have a bank account or credit card”

Folks, mobile payments are becoming mainstream.
Good stuff.

One of the most talked about “pain points” associated with mobile billing are the fees levied by carriers.  While it’s true that carrier fees can be laughably high, it’s important not to miss the forest for the trees.  If you’re selling products with a marginal cost to produce approaching zero (e.g., software, games, virtual goods, digital content, etc.),  what matters most is the conversion rate of shoppers to buyers.  Yes, mobile payments are “expensive” on a direct cost basis, while credit/debit cards are relatively “cheap”.  However, focus on the rate at which consumers complete a payment across different payment methods and you’ll start to see the impact on incremental revenue is driven more by payment conversion rates than by the direct cost of payment processing.  And it’s not even close.

Let’s say you’re selling virtual goods as a way to monetize your wildly popular online game.  Whenever a user intends to buy a virtual good, there is a chance that he won’t buy when faced with the task of actually completing a payment.  For the sake of this example, we’ll define the payment conversion rate as the rate at which your customer actually completes a payment after intending to do so.  More specifically, the payment conversion rate is the rate at which a user gets to the “payment completed” page after clicking the “pay now” button, generically speaking.

Now let’s take a look at mobile payment.  For every 100 people who intend to buy by clicking “charge my mobile phone” about 50 will actually end up successfully completing a payment.*  There are several reasons to explain such a high payment conversion rate: 1) user knows his mobile number by heart; 2) it’s a phone, not a bank account, so user isn’t worried about security; 3) there is no other personal information required – just the mobile number.  So, for every 100 users who intend to pay you $5, 50 actually will.  This yields $5 x 50 = $250 – $100 (direct cost for payment processing) = $150 in net revenue.

As you can see it’s not even close ($23.50 vs $150).   Your net revenue is far more sensitive to your payment conversion rate than it is to your direct payment processing costs.

PS – Wondering where the “breakeven” point is for credit card conversion rate?  It’s 30%.  So if you’re getting a 50% payment conversion rate on mobile payment and 30% on credit card, your net revenue will be virtually the same ($137).  Only difference is that with mobile payment, you’ll get 67% more paying customers than with credit card.  After all, if you’re going to make the same amount of money, wouldn’t you rather have more paying customers?

*Actual aggregate payment conversion rate data shared by our customers.

Today at Techcrunch50 we will unveil what kept our relentless team of coding ninjas from sleeping in the past months: our brand new hosted payment solution for Web apps.

Zong is now the first and only mobile payment system enabling Facebook application developers and Web Publishers to seamlessly bill 95% of the US and European wireless subscribers on their phone bill.

This new solution converts web visitors into active buyers up to 10 times better than any other payment mechanism such as credit cards. It is already live on leading Facebook virtual currency solutions providers and we have a strong pipeline of deployments that will be completed in the coming weeks.

Implementation in an existing web application takes no more than 2 days including testing.

This hosted payment solution has been developed on top of Zong‘s existing platform and API, with the same tools that are available to any developer setting up a free account.

Customers cannot provision themselves for this service yet. But we can setup new accounts on our backend. If you’re interested in implementing it for your service, please contact Tamer: tamer(at)zong(dot)com. We will provision an additional 10 to 20 partners before opening up self-service configuration on Zong.com, so please provide us with as much detail you can about your app, traffic and unique users in order for us to get back to you quickly.

For live demos of the solution and live services using Zong, please visit our “booth” at Techcrunch50 in the exhibitors area located in the demo pit room.

Come and meet us September 8-10 at the Techcrunch 50 event in San Francisco!

As exhibitors, we will be showcasing our new Zong based hosted mobile payment solution that enables any Web publisher or Facebook application developer to add frictionless mobile payments to their app in less than a day.

We will also have a lot of exciting news to announce and few good surprises for the TC50 audience!

If you want to setup meetings and book demos in advance, please contact your trusted mobile monetization guru, Tamer: tamer[at]zong[dot]com.