PayPal 1, Citigroup 0

For Citigroup (NYSE: C  ) the bloodstains might be virtual, but they're still there. After all, when it launched c2it three years ago, it probably "banked" on wiping out PayPal. Big mistake. Next month, the financial services giant will shut down its online payment service.

While the company didn't actively hunt the same auction-space preying grounds as PayPal, it did ape the pioneer's viral nature, playing it loose with low fees and a generous referral program. But Citigroup had every reason to fail.

When eBay (Nasdaq: EBAY  ) teamed up with Wells Fargo (NYSE: WFC  ) to create an in-house PayPal, it, too, failed -- despite the home-field advantage. That eBay ultimately acquired the original PayPal was no coincidence (it certainly didn't shock David Gardner -- he'd made PayPal a top pick in Motley Fool Stock Advisor). Who was Citigroup to think that it could fare any better?

No doubt Citigroup suffered from the same case of bricks-and-mortar delusion that struck Barnes & Noble (NYSE: BKS  ) when it figured it could take on Amazon (Nasdaq: AMZN  ) and win in the dot-com marketplace.

Different playing fields impose different rules. Sometimes an offline presence can even be a liability if the company is perceived as lacking in tech expertise. Citigroup, rather, simply started the gradual process of surrender by backing away from its ambitious affiliate marketing program and letting its fees creep higher.

So, rest in peace c2it. We'll "c2it" that your tombstone reads something along the lines of: Put up a fight but ultimately fell short -- in beating eBay to acquire PayPal, that is.

Why do you think c2it failed? Was PayPal right to let itself be bought out by eBay? Was David Gardner right to keep holding eBay after it bought out his PayPal? Where does the field of micropayments go from here? All this and more -- in theeBaydiscussion board. Only on Fool.com.


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