Mobile Payments on Social Platforms: Q&A with Zong’s Hill Ferguson

As Inside Social Games continues to track the convergence of games and social platforms, a key theme emerging in 2009 is the rapid pace of innovation happening in payments. Entrepreneurs are rapidly moving to fill the market need as social game developers increasingly turn to microtransactions to monetize their games on Facebook, MySpace, and the web through the sale of virtual goods.

One such company moving rapidly in this space is mobile payment service Zong. Zong, a division of Echovox, offers developers of games and social applications a way for users to pay for digital goods with their mobile phones. (Note: Zong is also a sponsor of this blog.) Inside Social Games sat down with Hill Ferguson, Zong’s VP of Product Management and Marketing, to get his perspective on the state and future of the space. Below, Ferguson discusses Zong’s approach to the market, challenges posed by mobile carriers, and insight into which games and publishers are monetizing best.

ISG: For those that may not be familiar with Zong, can you give a brief history of the company?

HF: Zong is actually a division of Echovox, a company originally founded in Switzerland back in 2000.  We got our start by providing SMS services to major media companies.  For example, we run the “text to vote” services for several hit TV programs in Europe (think American Idol).  After building out connections with the 70+ wireless carriers in 13 countries to power these services, we realized the enormous potential of building a global payment service for merchants and game publishers looking to better monetize their audiences.  So, David Marcus, our founder and CEO, moved his family to Silicon Valley from Geneva about a year ago to create a presence in the US.  Soon after we launched Zong, and so far the response from the market has been incredible.

When did Zong take interest in payments on social network platforms?

The social networks were one of the first places we went for distribution.  Beginning last year we started to see this confluence of a couple very powerful forces which gave us confidence that social networks would be a great channel for Zong.  First, we saw some weakness in the advertising market, making it harder for social applications to monetize.  Then the capital markets tightened up and there was this rush to monetization by application developers.  The response for a lot of developers has been to monetize apps through the sale of virtual goods, currencies, subscriptions, etc., which is right where we want to be.  Fortunately we had the right product at the right time to meet the demand for alternative payment methods.

There are several payment solutions in the market right now. What makes Zong different?

We offer the most frictionless payment experience for consumers.  We don’t require consumers to register and we don’t require that consumers open an account or even have a bank  or credit card account for that matter.  All you need is an active mobile phone and that’s it.  This user experience translates into incredibly high conversion rates, turning more “would be” buyers into actual buyers.  So “ease of use” is our number one differentiator right now.  We obsess over the user experience every day but we know we can continue to improve it.

Another key differentiator for us is how we provide coverage in each country.  When we enter a new market, our goal is to achieve at least 95% consumer coverage.  This means we need to connect with all Tier 1 and Tier 2 carriers.  In the US, for example, we have about 97% of the mobile consumer population covered while our nearest competitor is about 50%.  Furthermore, over 80% of our carrier connections are direct  versus connecting through aggregators.  This results in better payouts to our customers and higher technical reliability.