Philippines’ Largest Mobile Carrier Backs Zong Payments for Facebook Credits

The Philippines largest mobile carrier, Smart, is putting its marketing power behind mobile payments for Facebook Credits, underscoring Southeast Asia’s growing importance to the Facebook developer ecosystem. The country is Facebook’s sixth largest market behind the U.S., Indonesia, Turkey, the U.K., and France.

Zong, the mobile payments platform powering the service, lets users buy virtual goods in games from companies like Zynga and Playdom through their phones. These deals in the Philippines could introduce up to 70 million mobile subscribers to Credits and to the social network, which has 18.1 million users there.

In this Zong integration, users click “Get Facebook Credits” or the Zong button in a gaming environment, type in their mobile phone number and then wait a few seconds to receive a text message with a 4-digit PIN. They type the number in the game to confirm the transaction, which will deduct that amount from their mobile bill. Zong gets a 5 to 8 percent cut of every transaction it facilitates.

Southeast Asia is becoming a key region to Facebook; Indonesia recently eclipsed the United Kingdom as the social network’s second biggest market. Malaysia and Thailand are also posting promising growth. Thailand’s Facebook user population has grown 265 percent in the last year while Malaysia’s has more than doubled — see our Inside Facebook Gold report for more market data.

However, the revenue Facebook makes from these users is a fraction of what the company can earn in Western countries. The suggested cost-per-click for a user in the Philippines is about 16 cents, compared to about $1.80 in the U.S.

Virtual goods are thought to be a promising way to raise revenue-per-user in these markets, and Facebook has made a few in-roads already through a partnership with MOL Global to bring Credits to thousands of real-world kiosks throughout Southeast Asia.

Zong’s chief executive David Marcus said a significant hurdle stands in the way of successfully monetizing through virtual goods in these developing countries. Most gaming companies are still charging the same prices for virtual goods across the world even though local living incomes are quite different. A $1 virtual cow might be nothing to an American consumer, but it is significant in countries like India, where the GDP per capita is $1,017. One potential solution to that problem is differential pricing, but that could introduce a new problem, fraud: users could route their connections through IP addresses in emerging markets where virtual goods are cheaper.

Marcus said more than 75 percent of Zong’s payment volume comes from outside the U.S. Western European countries are still the largest international region, but Southeast Asia comes in right behind that. He said Zong spent six to nine months securing the deals in the Philippines.