Peter Kafka

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Virtual Goods + Mobile Payments = Small Market Worth Fighting For?

princess-brideThe promise of “virtual goods”–pretend things you buy with real money in cyberspace–has lured entrepreneurs and venture capitalists for years. Same goes for mobile payments–using your iPhone instead of your Amex to buy stuff. But what if you combined the two?

You’d have a market that barely exists yet is worth fighting over. At least that’s what Zong, a Swiss-based company, and Boku, a rollup of two other mobile payment companies (Mobillcash and Paymo) are doing. Both offer the same thing: The ability to buy stuff online that gets billed to your wireless account.

In theory, you could use the same technology to buy actual stuff as well, but the businesses are really geared around microtransactions–pretend weapons on the “Mob Wars” Facebook app, piratey stuff on Puzzle Pirates–for which it wouldn’t make sense to use a credit card. They’re also assuming that many of their customers won’t have credit cards, either because they’re kids or because they live in countries where it’s more common to own a mobile phone than a Mastercard.

Both companies are happy to explain why they’re better than their rivals–who covers more territory, who has the better carrier relationships, who has less onerous fees, etc.–but I won’t bore you with that. Similarly, while Boku is formally announcing its presence today, along with $13 million in funding from Benchmark Capital, Index Ventures and Khosla Ventures, the Zong guys argue that this is really a rebranding of Mobillcash, which had previously received funding from Index and Khosla. Whatever.

The real story here will be if and when the really big platforms for virtual goods–like, say, Facebook, News Corp.’s (NWS) MySpace and game companies like Electronic Arts (ERTS)–decide they want to formally integrate one or more of the mobile payment guys, and under what terms.

Right now, for instance, Facebook isn’t involved in any of the microtransactions that any of its apps are generating, and the same goes for mobile payments–each app is free to work with whatever vendor it chooses. But that could change in the near future as Mark Zuckerberg and company start testing their own payments platform. If there is going to be a big market for virtual goods bought via mobile payments, it could get carved up in the near future.