eBay’s Expands Mobile Payments Platform with Zong Purchase
eBay (NASDAQ:EBAY) recently completed its takeover of Zong, a mobile payments provider. [1] The takeover should further bolster eBay’s online payments division PayPal, which showed its first billion-dollar quarter in Q2 2011 growing around 30% over Q1 2011. [2] The PayPal service competes with Google (NASDAQ:GOOG) Checkout and credit card companies like American Express (NYSE:AXP), Visa (NYSE:V) and MasterCard (NYSE:MA). We believe the Zong acquisition could help eBay make further inroads into the mobile online payments business which is currently booming.
We currently have a price estimate of $39 for eBay’s stock, which is about 30% above the current market price.
Zong Should Complement PayPal Further
Zong works with about 250 mobile operators from 45 countries enabling users to buy virtual goods and online games through social networking sites such as Facebook. With the total value of mobile payments expected to reach $670 billion in 2015 from $240 billion by 2011, [3] PayPal should see further penetration into the mobile payments market as it takes advantage of Zong’s existing network of mobile operators.
The integration also widens the scope of eBay’s online payments business as users now would have more instant payment options if they feel the need to impulsively buy a product/service. We could see an upside of 5% to eBay’s stock if total PayPal accounts reach around 150 million by 2012 as compared to our current estimate of roughly 120 million.
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