Zong Exploits Android Gray Area To Enable Carrier Billing For Apps

One of the big frustrations developers are quick to point out about the Android platform is that its app store uses the obscure Google (NSDQ: GOOG) Checkout system for payments.

Recognizing this hurdle, mobile payments company Zong is announcing today a new way for developers to integrate carrier billing into their applications.

While the offering will be enticing to developers, the one big question is whether Google will allow it. There’s no explicit wording in Google’s user agreement that prohibits it, and since Zong is all about enabling in-app purchases, rather than selling the apps themselves, it may have found a loophole. But it’s even unclear to Zong whether it will be allowed: “I think someone has to push the limits here to see what happens,” said Zong’s CEO David Marcus in an interview with mocoNews.

To be sure, Apple (NSDQ: AAPL) doesn’t allow it. A Google spokesperson declined to say whether a service like this would be allowed without knowing all the details. In the Android Market Developer Distribution Agreement, it doesn’t explicitly mention in-app purchases, but does say that “Payment Processors” are a “party authorized by Google to provide payment processing services that enable Developers with optional Payment Accounts to charge Device users for Products distributed via the Market.”

If Google simply looks the other way, or even embraces Zong’s payment system, the well-backed Palo Alto, Calif.-based start-up may be on to something. Carrier billing is considered the creme de la creme of the mobile payment world. Users are infinitely more likely to buy something if it doesn’t include having to enter a credit card number, or having to enter a PayPal or Google Checkout account. The only other companies that have a shot at this kind of scale is Apple’s iTunes or maybe Amazon (NSDQ: AMZN) Payments, where they have access to millions of accounts. As it is, Zong’s scale will be pretty large from the onset. It’s already integrated with 179 carriers in 40-plus countries, including all the top one and two tier carriers in U.S.

Zong’s Marcus says he believes this will open the door to a lot of iPhone developers, who make their money by giving away their applications and then charging for additional game levels or virtual goods, to come to the Android platform. Well know iPhone developers, like ngmoco and Tapulous, have avoided it. That may not be feasible with the growth trajectory that Android is experiencing. Marcus sees Android becoming the dominant platform, so right now the big hurdle is on how to monetize the applications. Marcus: “We feel that Android in the long run will be 40 to 50 percent of the handset market in the high GDP countries. Over the next 5 to 10 years, it will become a reality.”

For now, the payment program will be a private beta, but Zong says it is an easy to integrate developer kit, which will literally enable one-click payments within an application. Zong verifies the phone number that the app is being used on, and the charge is automatically put on the user