BitPass
The business, the turning points, and the decisions behind them.
Some sections are still being researched1 / 4
Sections to complete：03
01 / WHAT IT BUILT
What the company did
BitPass was a Mountain View/San Mateo online payment company founded in 2002 by Kurt Huang and Gyuchang Jun, developing a payment system for digital content and services with micropayments ranging from one cent to a dollar. Buyers prepaid accounts with credit cards or PayPal and spent the stored value on music downloads, PDFs and other content; transaction fees were paid by content providers (15% on payments under $5). Its best-known project was Mperia, an online music store for unsigned artists launched in 2003, where artists set their own prices ($0.25-$1.50 per track, no DRM) and kept 70% of revenue. It raised about $12 million ($1.5M in 2002, $11.75M in 2004), served 500,000 buyer accounts and 4,000 merchants, counted Disney and Microsoft as clients, and acquired competitor Yaga in early 2007. On January 19, 2007 it announced it was shutting down; operations closed January 26, 2007.
02 / BitPass FAILURE REASONS
Failure reasons
Google Checkout killed BitPass. When Google rolled out its payment system for free in 2006, BitPass's paid micropayment model became superfluous overnight - the CEO had hoped BitPass's micropayment features would be integrated into Google Checkout, but that never happened. The failure was structural, not just competitive: micropayments of cents required a payment infrastructure whose fixed costs per transaction were built for dollars, so BitPass took 15% on small payments while PayPal and credit cards handled everything else. Digital content sellers never reached the volume to make micropayments a business, and the company's own showcase, Mperia, shut down with it. After raising $12M and acquiring Yaga, BitPass died within weeks of Google's entry.
03 / EVENT HISTORY
Material for this section is being gathered and checked. It will appear here once ready.
04 / CONTEMPORARY REBUILD ASSESSMENT
Difficulty of rebuilding this project today
Material for this section is being gathered and checked. It will appear here once ready.
Overall assessment: Not completed
05 / CAUSAL CHAIN
How the factors connect
- 01
A free giant can obsolete you overnight: BitPass died within weeks of Google Checkout's free launch.
- 02
Micropayments have macro costs: 15% on a 25-cent transaction cannot support a company.
- 03
Integration hopes are not strategy: BitPass bet on being absorbed by Google; Google said no.
- 04
Volume is the only currency in payments: 500,000 accounts and 4,000 merchants were not enough.
- 05
When the model dies, sell or shut: BitPass's acquisition of Yaga bought weeks, not a future.