BOKU is a global online payment company with a new mobile payment service which enables mobile phones to pay for digital goods and social experiences across the web. The company gets mobile users access to bank-grade technology, creating a viable and accessible market for consumers, publishers and carriers. Since most people today don’t have a preference for how they pay for things but just care about how fast it gets done, the company’s Pay By Mobile feature is gaining popularity worldwide, with the aim of making it a standard way to pay for digital goods.
Mark Britto, CEO of Boku, is a serial entrepreneur with over 20 years of experience in the payment industry. He began his career in senior credit and risk management roles at FirstUSA and NationsBank. He was CEO of Ingenio for five years and led the company to a 2008 acquisition by AT&T Interactive; he was also the SVP of worldwide services and sales at Amazon.
Britto’s first start-up, Accept.com, was bought by Amazon.com in 1999. Co-founder Ron Hirson, SVP of Product & Marketing, worked with Britto for several years at Ingenio as VP of Product Management and on the sale of Ingenio to AT&T Interactive. In addition to his role at BOKU, Hirson was Entrepreneur-in-Residence at Khosla Ventures. Erich Ringewald, co-founder and CTO also initially worked with Britto at Accept.com and later at Amazon.com.
BOKU closed their Series A round of $3 million 45 days ago. Since the round was oversubscribed, they closed another $10 million in a Series B last week, led by Benchmark Capital with participation from Index Ventures and Khosla Ventures. The company is not presently looking for further funding.
The idea for BOKU was conceived when Britto saw a huge, under-served market for mobile payments. He wanted to capitalize on the fact that paying with a mobile is easier and any easy payment solution helps take the friction out of the purchase process. Content in gaming and social networks and virtual goods is worth $8 billion. The low price points make it perfect for mobile payments, and with 4 billion people using a mobile phone worldwide, the market size is huge. Britto’s aim is to make BOKU the global mobile payment standard, like Visa and MasterCard are for traditional payment methods. A mobile payment solution offers publishers a higher conversion rate over other forms of payment, making available a large, untapped market, including the unbanked and card-averse. For mobile carriers, the mobile/online payment market is huge and offers a great revenue opportunity.
With the explosion of virtual goods, gaming and social networks, a number of companies are shifting their focus towards this market, with several players going after a piece of the problem, rather than the whole opportunity. The optimal way to penetrate the market is via both merchant/consumer adoption and global carrier adoption, with a payment foundation that is scalable and solid. BOKU believes that unlike other companies in the industry, it has all the features to provide users an easy and safe experience.
According to a recent Gartner study, almost 200 million people are expected to use mobile payments by 2012, which is double the number today. Also, virtual goods and gaming now represent an $8-10 billion market, with online companies such as Facebook and Zynga making millions on virtual goods already.
BOKU charges customers a fee for every transaction when a consumer purchases online virtual goods or pays into a game. This fee goes towards global coverage, analytics, fraud prevention, customer service and more. For example, when a customer purchases $10 worth of gold coins on a Facebook application, carriers will take a 20-40% cut, depending on the location. Of the remaining 60-80%, BOKU takes 5-10%, leaving the remaining 55-70% for the publisher. BOKU expects the carrier portion to reduce over time as it already has in Europe and Asia. The company has a global scope of over 50 countries and reaches out to over 1.6 billion customers worldwide. BOKU has seen revenue growth of 150% year over year.
The service targets two groups of people. The first are the unbanked in emerging markets such as Latin America and Africa, as well as for card-averse demographics like teens. The company has also seen traction from another segment, 20- to 40-year-old Facebook application users or moms playing online games.
BOKU has been operating in stealth mode for several months, during which it has signed publisher deals with several casual games, free-to-play games and social applications like Puzzle Pirates, Premier Football, hi5, Playfish and Aeria Games. It recently acquired Paymo and the Mobillcash business, two global mobile payment companies. In the future, BOKU expects to drive consumer adoption through publishers who sell virtual and digital goods and to drive carrier adoption and reach to enable more mobile consumers worldwide. As Britto says, “We are making money and building a market and if we do that well, an exit will come.”
This segment is a part in the series : Deal Radar 2009