Flooz.com

» see flooz.com as it lived, on the wayback machine

~ the eulogy ~

Flooz launched in February 1999 in New York City. Robert Levitan had co-founded iVillage and left with a thesis that the web was missing a layer sitting between the credit card and the merchant. Flooz would be that layer. You bought flooz credits with a card, or you got them as a corporate gift voucher, then you spent the balance at a list of partner shops. The name came from the Arabic word for money, fluus.

The marketing was loud. Whoopi Goldberg fronted the television campaign and the brand had a national footprint inside its first year. Across two and a half years the company raised somewhere between 35 and 50 million dollars. The loop never closed. Merchants did not see enough flooz traffic to justify integration. Shoppers did not see enough partner merchants to justify holding flooz balances. The product depended on a network effect that was never reached. Burning through the ad budget did not produce one.

In summer 2001 the FBI told Flooz that an organized fraud ring with Russian and Filipino members was using stolen credit-card numbers to buy flooz credits, then cashing them out through compliant merchants. The exposure was concentrated enough that processors froze the company's funds. By then Flooz was already running on fumes from the broader dot-com capital drought. It filed for bankruptcy on August 26 2001 with roughly 325,000 creditors holding balances they would never spend.

i was 17 in 2001, on a 56k modem at home. a payment instrument with US-store partners was not part of any internet i had access to. flooz did not reach turkey at all. i learned about it years later from dot-com retrospectives, where it usually shows up next to pets.com and beenz as a parable about pre-bitcoin alt-currency dreams.

~ the dossier ~

~ the whoopi goldberg ad ~

The Whoopi Goldberg campaign was the loudest thing about Flooz. Goldberg appeared in commercials during prime time pitching flooz as the smart way to give a present over the internet. The spots were not cheap. A serious portion of the burn rate went to convincing American households that flooz was a real category of money. The ads succeeded at brand recall and failed at the next step. People remembered the word flooz without remembering what to do with it.

~ the fraud ~

The mid-2001 fraud incident was the trigger event. A foreign crime group bought flooz balances using stolen card numbers, then routed the credits through a small set of merchants who would convert them back into goods or wired payouts. By the time the FBI got in touch, the fraudulent share of consumer card activity at Flooz had reached about 19 percent. Card networks treat that number as a kill signal. Once the chargebacks were locked, Flooz could not pay the merchants for the legitimate transactions either, which broke the rest of the network.

This is a recurring failure mode for early digital-money systems. The product is liquid enough to be useful for criminals before it is useful for normal customers, because the criminal use case does not need scale, only tolerance. Flooz had the tolerance and not yet the scale.

~ what flooz was actually solving ~

The use case Flooz handled best was the corporate gift voucher. In 1999 an employer who wanted to send an employee a small online reward had no clean way to do it. Paypal was not yet the default. Amazon gift cards as a separate product line did not yet have the mindshare they would later acquire. Flooz pitched itself to HR departments and got real traction there before it got traction with general consumers. The trouble was that the corporate gift market alone could not carry a brand burning national TV money.

Paypal won the broader payments fight a couple of years later. Amazon gift cards eventually owned the corporate-reward use case. Flooz fell into the gap between those two outcomes and became the first famous dot-com cautionary tale about funding a network business past the point where the network was visibly not forming.

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