Citigroup took a wrong turn somewhere on the road to the ecommerce promised land. Now the question is whether the global financial giant can find its way out of the Internet wilderness.

But where to lay blame for mighty Citi's travails? The New York powerhouse, the United States's only genuine global financial institution, has inexplicably floundered online, falling behind arch-rivals such as Wells Fargo & Co., Bank of America Corp. and First Union Corp.

Whatever the answer, it's too late for Ed Horowitz, the embattled executive vice president of e-Citi who this month finally announced his resignation, which had been rumored for months.

Brought aboard in 1997 by then Citigroup co-Chief Executive John Reed, Horowitz fell victim to e-Citi's mounting losses and sinking reputation on Wall Street, internal politics, and high-profile bombs like Citi f/i, Citibank's desultory--and since aborted--attempt at an Internet-only bank.

Although big banks routinely pour millions into loss-leading Internet R&D projects, Citibank is further away than most in realizing a return on investment. E-Citi lost $179 million last year, up from $143 million in 1998 and $94 million in 1997. Equally alarming, Citi has barely any more Web banking customers today--who range in number from 600,000 to 750,000, depending on industry estimates--than it did several years ago. And apart from a few new Internet offerings such as and, a b-to-b Web portal, e-Citi has failed to hatch any unqualified e-winners.

Perhaps the final straw was the swift rise and fall of Citi f/i. After three years of rollout delays and blown production deadlines, the e-banking Web site kicked off last June--and was panned. Industry response ranged from puzzlement over why Citigroup would launch what amounted to a pilot site to analysts openly calling e-Citi's value into question. Meanwhile, consumers yawned or, worse, were simply unaware of Citi f/i's existence.

Today, Citigroup finds itself shuffling ahead into the e-banking era with only its hoary, if functional, Direct Access service, which dates back to 1984. Only a tiny fraction of its customer base uses the Web to conduct transactions.

By contrast, rivals such as Wells and BofA have capitalized on their large retail branch infrastructure to make huge strides in online financial services, with each claiming more than 1 million e-banking customers.

For Horowitz, the writing was on the wall in March, when Citi Chief Executive Officer Sanford Weill assigned Citigroup Vice Chairman Deryck Maughan to head a new Internet operating group that oversees Citi's Internet activities. In typical fashion, Weill continued to pledge support for Horowitz even as he was sharpening his axe for the coup de grace. By the time Reed officially called it quits in April, Horowitz's ouster was essentially a done deal.

Two main factors contributed to Horowitz's downfall and e-Citi's problems.

First, it's been well documented that Weill, known for his street-smart management style, never meshed with his cool, clubby co-CEO. As Reed's ally, then, Horowitz was tainted meat.

Second, since hooking up with Travelers Group, Citigroup's leadership had been divided over how to integrate e-Citi into the corporate whole. Reed's idea when he set up e-Citi in 1997 was to make it a crucible for Internet policy and direction and an incubator for electronic products. He also favored letting it operate as an independent entity, modeling it after the small, nimble Internet companies that were then leading the ecommerce charge.

And in the afterglow of the merger, it seemed like a perfect match. With Weill's savvy and Reed's status as a high-tech visionary, the pundits said, Citi would colonize the Internet with the same vigor it had demonstrated in building an international financial empire.

It didn't happen. From the beginning of his strained "co-habitation" with Reed, Weill opposed e-Citi's autonomy as a standalone business unit. Weill wanted to emulate Travelers by giving product line chiefs at Citigroup direct say about the development and distribution of Web-based products and services. Ever the gamesman, he also wanted to consolidate his power within the newly merged Goliath. That meant winning the loyalty of Citi's operating unit personnel, many of whom were against changing their way of doing business to accommodate an Internet unit that contributed little to the bottom line.

Since then, e-Citi has tottered along as a hostage to political conflict. Perhaps, too, e-Citi has suffered under the weight of unrealistic short-term expectations. Unlike Wells, for example, the acknowledged e-banking leader, Citibank lacks an extensive branch network to use as a platform for steering customers to the Web.

But if short-term hopes for Citi's Internet plans were too high, then the long-range expectations may well be too low. Turmoil at e-Citi aside, Citigroup remains perhaps the world's brawniest financial institution, with vast economic resources, tech expertise, market clout and political influence. A recent pact with America Online also suggests that Citi finally realizes the importance of strong allies on the ecommerce front. Finally, Weill has had his way with e-Citi, augmenting it with separate Internet consumer and business units.

In the end, the promised land for Citigroup may well be around the corner.

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