Why billpoint failed

PayPal identified eBay as its user base since at that time there was no standard payment service on eBay. In , eBay launched its own payment service Billpoint to compete with PayPal, but Billpoint was a failure in comparison to PayPal and its network.

Hence, at the end of the first quarter, PayPal reported a profit and Billpoint reported a loss. PayPal was also hugely dependent on the user base of eBay, even though eBay had its own competing payment service.

This was due to the fact that there were very few successful e-commerce firms back then and eBay provided access to a high number of active user base.

For this reason, two-thirds of PayPal users were derived from eBay. Moreover, eBay decided not to compete with PayPal and focus on its main business of online retail auction, which was at that time recovering from the dotcom bubble. There were several internet companies which failed in , but large players survived, although with decreased market capitalization. Thereby, both these players survived the crisis and decided to work in tandem. It transacted , payments per day.

The acquisition proved a success for both the companies. Interestingly, if PayPal and eBay was a successful marriage then what led to the divorce? The reason behind the merger of the two entities was survival and this also caused the spin-off. In the present scenario, it would have been difficult for PayPal to survive in association with eBay as these firms were not operating at their full potential. Flag Content. Chapter 10, Problem A number of years ago, eBay offered Step-By-Step Solution.

View Sample Solution. Recent Guides View All. Financial Institutions, Instruments and Markets, 8th Edition. ISBN: Unlimited Access Free. FAQ's Is this a textbook?

Eric M. We may collect cookies and other personal information from your interaction with our website. For more information on the categories of personal information we collect and the purposes we use them for, please view our Notice at Collection. Become a Member Sign In. General Newsletters Got a news tip? Free: Join the VentureBeat Community for access to 3 premium posts and unlimited videos per month. Learn More. One of the key factors was PayPal's superior use of network intelligence.

Reid led this intelligence-gathering effort for PayPal he was executive vice president at the time and asked all the members of the team, from executives to individual engineers, to use their network intelligence to learn about Billpoint's strategy.

Billpoint's team, on the other hand, completely ignored the potential for network intelligence to provide insights into PayPal's strategy.

From conversations with other companies that were building on the eBay platform such as Honesty. First, the Billpoint team was convinced that the key success factor for an internet payments system was a deep banking relationship to combat fraud.

Billpoint's leadership felt that the Wells Fargo relationship represented an overwhelming advantage over PayPal. Second, contrary to Billpoint's belief, the companies on the eBay platform and their customers didn't consider a deep banking relationship that relevant.

They placed a far greater value on ease of use, especially in e-mail communications. Fraud prevention was a hygiene factor, not a driving force. None of this information was public, but none of it was secret either. Network intelligence should be tapped ethically; PayPal employees didn't skulk about in costumes, send questions from fake e-mail accounts, or root through Billpoint's garbage bins.