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Article from SFGate.

“EBay Inc.’s purchase of mobile-payment startup Zong Inc. for $240 million is stepping up pressure on companies such as Google Inc. and American Express Co. to make their own acquisitions in the market.

Google has held exploratory discussions with mobile-payment startups, according to two people with knowledge of the meetings. Credit card companies, including American Express and Visa Inc., also are meeting with takeover candidates, though deals may not be imminent, people familiar with the talks said.

More consumers are looking to pay for things like movie tickets, apps and other items with their phones – rather than cards or cash. That’s pitting financial-service providers, which benefit from transactions, against technology companies like Google. Both sides aim to use mergers and acquisitions to shore up their positions, said Richard Crone, who runs Crone Consulting LLC, a firm focused on mobile banking and payments.

“There’re much more M&A and roll-ups to come in this space,” Crone said. “You will see the activity happening before the end of the year.”

The total value of mobile payments will reach $670 billion by 2015, up from $240 billion in 2011, according to Juniper Research. That includes transactions for digital and physical goods, money transfers and payments using near field communication – a wireless technology that lets users tap their phones against a reader to make a purchase.

Mainstream acceptance

Many companies are shopping for startups that help users charge purchases to their phone bills. Within a year, 40 percent of all U.S. mobile subscribers will put items other than ring tones on wireless bills, according to Chetan Sharma, an industry analyst in Issaquah, Wash. That’s up from 30 percent now.

Potential acquisition targets include Boku Inc.; Payfone Inc.; BilltoMobile, which is majority-owned by Danal Co.; and Amdocs Ltd.’s OpenMarket Inc., Sharma said.

Syniverse Technologies Inc., MindMatics AG’s Mopay unit, Bango and Vindicia Inc. could be candidates as well, according to Crone. Acquisition targets will sell for 10 to 20 times their trailing 12-month sales, he said. It’s unclear how that measures up against the Zong deal because eBay didn’t disclose the startup’s revenue when it announced the purchase last week.

Still, some startups may struggle to attract a deep-pocketed suitor or land that kind of premium. And large technology and finance companies may choose to develop the capabilities themselves.

‘Pressure to act’

Representatives from Google, American Express and Visa declined to comment on any potential deals, as did Bango, Boku, Payfone, Syniverse and Vindicia. OpenMarket didn’t respond to requests for comment.

Ingo Lippert, CEO of Palo Alto’s Mopay, said the Zong deal will likely give rise to more acquisitions, though his company is “solely focused” on operations.

“We’ve been forecasting consolidation within the mobile-payments space for some time,” Lippert said in an e-mail. “With Zong’s acquisition, companies testing out solutions within the mobile-payments market will now feel increased pressure to act.”

Investments in payment startups began picking up several months ago. In February, Visa agreed to spend about $190 million, plus performance incentives, to purchase PlaySpan Inc. The company handles purchases of virtual goods in online games and social networks. In April, American Express led a $19 million funding round in Payfone, a developer of a mobile-payment service.

EBay’s buying spree

Last year, eBay acquired Red Laser and Milo, two comparison-shopping applications that allow users to scan product barcodes and read reviews. With Zong, the company will get a bigger foothold for its PayPal payment service on phones, especially in developing countries.

Zong lets people pay for things by putting them on their mobile-phone bills. That’s attractive in emerging markets, where credit card adoption is low.

“The phone is ubiquitous, and credit cards are not,” Rodger Desai, CEO of Payfone, said.

U.S. carriers lets third-party services such as BilltoMobile operate on their networks. Verizon Wireless, for instance, allows charges of as much as $25 a month. BilltoMobile also declined to comment on whether it was a takeover target.

Carrier bills contained $3 billion worth of charges for virtual goods last year, and these charges are rising at 38 percent annually, Crone estimates. Those purchases can include ring tones, dating-site subscriptions and weapons for mobile video games.

Purchases of apps charged to wireless bills reached $5 billion last year and are growing at 68 percent a year, Crone said. Consumers in countries such as South Korea are increasingly charging physical goods to carrier bills as well.

“We are seeing very rapid growth,” said Jim Greenwell, CEO of BilltoMobile.”

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Article from TechCrunch.

It’s no secret that eBay has been heavily investing in a local commerce strategy.

The central core of this is trying to capitalize on the $917 million online-to-offline buying market, which Forrester estimates will eventually reach $1.3 trillion (although this number seems low) and account for nearly 50% of total retail sales by 2013. Virtually every acquisition in the past year (besides the company’s $2.4 billionpurchase of GSI Commerce) has been of a company that is dabbling in local payments or linking to merchants (Milo, RedLaser, Where, FigCard). If you look closely, a clear strategy is emerging that positions eBay at the center of mobile shopping, local commerce, and payments (through PayPal). Let’s connect the dots.

Online-To-Offline and Comparison Shopping

eBay’s first foray into the local commerce arena was though the acquisition of barcode scanning mobile app RedLaser last June. RedLaser’s barcode scanning technology allows users to comparison shop on the go. Anyone can scan a barcode on an item at a store and then automatically access any eBay listings of the product on the marketplace. Sellers can also use the scanning technology to scan an item and list the product in very little time. RedLaser’s technology was quickly integrated into eBay’s dedicated iPhone and Android apps.

The company then bought Milo for $75 million, which aggregates and lists real-time in-store product inventory for over 50,000 stores across the country; featuring over 3 million products from Target, Macy’s, Best Buy, Crate & Barrel and more.

Most recently eBay integrated Milo into a few of its core products, including RedLaser. So with a single scan of a product in a store, users can see which nearby retailers have a product in store, and at what price. eBay also integrated Milo’s results into its own marketplace, allowing users to include local shopping tab in search results to check a product’s local, or in-store, availability directly from the eBay search results page.

But surfacing local product results and integrating barcode scanning only scratches the surface of local and mobile commerce and its potential. There’s no doubt that eBay is reaping the benefits of mobile commerce (the company expects to do $4 billion in mobile gross merchandise volume in 2011).

Local Payments

And eBay realizes that in order to really capitalize on local and mobile in the ecommerce experience, the company also has to be a part of the point of sale for local merchants. And eBay has a player in this race—payments giant PayPal. PayPal has been making its own small forays into local commerce and late last year launched a new version of its popular iPhone app that allows users to find businesses near their immediate location that accept PayPal as a form of payment. The feature rolled out in San Francisco initially, but we haven’t heard much about the initiative since last November.

Why? Well, scaling this feature broadly to other cities is a challenge for even a large company like PayPal. Not only do they have to find the local businesses, but PayPal has to teach them how to use their mobile apps as a payment mechanism. Wouldn’t it be much easier to acquire a company that could help PayPal and eBay do this?

Enter Where, a geo-location service and mobile advertising company that already has millions of active users across many mobile platforms. The apps show local listings for restaurants, bars, merchants, and events, and also suggests places and deals for you based on your location and past behavior. Where also offers a location-based ad network, which allows advertisers to show their mobile ads only to people near their store, or perhaps near a competitor’s store (after the user opts in to see these types of ads). Currently, more than 120,000 retailers, brands and small merchants use Where’s network daily to reach new audiences and deliver real-time foot traffic to their doorstep.

eBay of course acquired Where a few weeks ago, and housed the company within PayPal. Not only does this give PayPal much more of a reach with its payments service, but it gives eBay a platform to to enter into the the local deals market. As Where’s CEO Walt Doyle told us after the acquisition, “eBay is about connecting buyers and sellers and Where is about connecting people with places.” Ebay can now tap into connecting consumers with local businesses and can be a part of the transaction with PayPal.

PayPal also just bought mobile payments startup FigCard, a Boston-based startup that allows merchants to accept mobile payments in stores by using a simple USB device that plugs into the cash register or point-of-sale terminal. All the consumer needs is the Fig app on his or her smart phone. The connection with PayPal is that when consumers setup their payment information, they could add PayPal as a payments option and pay for goods via their mobile phone.

Eliminating the need for an actual wallet has always been a goal for PayPal, and if the company can scale FigCard’s technology (perhaps to many of those merchants using Where?); PayPal could have a stake in the mobile wallet race.

The ‘Pivot’

In the past year, it’s fair to say that eBay and PayPal have spent over $200 million on the acquisitions I mentioned above. That’s a fair chunk of change even for a company that is making billions each year.

There’s no doubt that eBay is invested heavily in this strategy and believes that the future of the company is based on both online to offline purchases, local and mobile commerce. eBay VP of engineering Dane Glasgow recently told us that one of the challenges for eBay in this strategy is being on the pulse of technology, which is constantly evolving.

But as retail evolves, eBay is shifting its business as well, and it will undoubtedly be interesting to see if the company can connect the dots with all these acquisitions and technologies to create a powerhouse in mobile and local commerce. The challenge is that some of these initiatives aren’t really that complimentary to eBay’s core marketplace and auction business.

While eBay won’t be quitting the auction business anytimesoon, the marketplace business itself isn’t growing as fast as PayPal. PayPal now represents 39 percent of eBay’s total revenue, and nearly made $1 billion in revenue for the company in the first quarter of 2011, up 23 percent from the same quarter in the previous year. Marketplaces brought in $1.5 billion, up 12 percent from the same quarter in 2010.

Pivot is a word that tends to be over-used in the tech world, but in eBay’s case that is exactly what we are witnessing—a major pivot in the company’s business model to local commerce. It’s certainly not easy for any company to “pivot,” especially one as massive as eBay. If it manages to pull this off so late in the game, it could herald a whole new era of growth for the company.

As Glasgow tells us, “it’s a new retail environment, where the convergence of online and offline are coming to life through mobile and local experiences.” Can eBay position itself fast enough to flourish in that environment?”

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