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Before Bitcoin: The Rise and Fall of Flooz E-Currency

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In the late 1990s, Silicon Valley entrepreneur Spencer Waxman was in Morocco on holiday when he heard an Arabic slang term for money—flooz—that stuck with him. In the dot-com boom taking place back in the United States, URLs with obscure etymology were popular. When Waxman and partner Robert Levitan decided to co-found a novel way of disrupting the online commerce industry, calling it Flooz.com was almost a foregone conclusion.

What Levitan and Waxman envisioned was a virtual gift certificate that would drive business to participating online retailers, give consumers some sense of security over their private information, and make shopping for stubbornly gift-resistant recipients easy. Rather than merely offering cyber currency, this was a service with purpose.

Unfortunately, it was also one that was doomed to fail.

A screen capture of Flooz.com
Flooz.com

Non-cash currency has been with us since the Chinese used cowry shells to sort out debt for goods and services more than 3000 years ago. In the 1960s, credit cards became an alluring alternative to saving and carrying paper bills. When online retailing exploded in the 1990s, it was only natural that startups would begin to explore virtual payment methods.

At the time, digital transactions were perceived by many consumers to be a near-guarantee of identity theft. Handing a card to a vendor in a closed-loop retail environment was one thing, but the thought of hackers seizing their information once it was entered into the borderless environment of the internet kept many away from online shopping.

As it turns out, that paranoia would turn out to be justified in our current climate of constant data breaches. It was also good for businesses hoping to turn their apprehension over credit card security into a monetized solution. Flooz.com debuted in 1999, just one year after another currency-based URL, Beanz.com, had garnered press. Beanz were a kind of earned points system, with approved transactions gifting customers with redeemable gift vouchers. Flooz took a different approach: Customers would sign up to Flooz.com and purchase gift certificates for specific retailers, which they could then use themselves or pass along to a gift recipient via email.

For businesses, it was a way of driving traffic to sites; for consumers, it was a way to keep credit card transactions limited to one vendor; for Flooz.com, being the intermediary meant taking a 15 to 20 percent cut of completed transactions on the selected retail sites, which ranged from Godiva Chocolates to Barnes & Noble and Tower Records.

To help Flooz.com cut through online marketing noise, Levitan enlisted actress Whoopi Goldberg to be their spokesperson. In exchange for company shares and Flooz.com money, Goldberg led an $8 million ad campaign for radio, television, and print that extolled the benefits of using Flooz.com.

Whether it was Goldberg’s pitch or the concept itself, Flooz.com met with a receptive audience. The company debuted in the fall of 1999, and had opened 125,000 accounts by January 2000. That year, roughly $25 million in Flooz.com money was purchased and used. (In a nod to the impenetrable vocabulary of the internet at the time, the media loved to point out that Beanz could be used to purchase Flooz.)

Bolstered by the attention and early success, Flooz.com was eventually able to raise $35 million in venture capital. Consumers could meet their gifting obligations by emailing a code to their gift recipient without having to waste time shopping. For a time, it appeared Flooz.com would become a leading method of payment for online transactions.

Actress and Flooz.com spokesperson Whoopi Goldberg is photographed during a public appearance
Paul Hawthorne/Getty Images

But it didn’t take long for the seams in the Flooz.com model to show. While gifting vouchers to family and friends was convenient for the gifter, the giftee was stuck with a very limited number of vendors that took Flooz.com as payment. If Amazon, for example, had a deal on a DVD or book that Barnes & Noble didn’t, Flooz users were out of luck. Shopping for a bargain wasn’t possible.

The second and most crippling detail was one Flooz.com was forced to make in order to strike deals with vendors. The company guaranteed its transactions, meaning that it would make good on orders even if Flooz dollars had been purchased via fraudulent means. By the summer of 2001, that commitment became a tipping point. Agents from the FBI informed Levitan that they suspected a ring of Russian hackers had purchased $300,000 worth of Flooz in order to launder funds from stolen credit cards.

This created a paralyzing cash flow problem: As their credit card processor withheld funds until Flooz.com could secure the transaction, people were still busy redeeming Flooz dollars they had already spent. Retailers then looked for Flooz.com to reimburse them. Suddenly, customers trying to pay with Flooz were greeted with error messages that the site was down.

Those issues, coupled with the fact that corporate clients had already started to move away from gifting employees with Flooz dollars, forced Flooz.com to file for Chapter 7 bankruptcy in August 2001. Court papers cited almost $14 million in liability. (Beanz.com was also a casualty of the dot-com bust, when participating retailers processing the points steadily went out of business.)

Levitan rebounded, founding the Pando file sharing network and selling it to Microsoft in 2011 for $11 million. Meanwhile, Flooz.com remains a barely-remembered footnote in e-currency, though it would be hard to chart the rise of digital funds like Bitcoin without it. Like with so many other good ideas, timing is everything.

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The Truth Is In Here: Unlocking Mysteries of the Unknown
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In the pre-internet Stone Age of the 20th century, knowledge-seekers had only a few options when they had a burning question that needed to be answered. They could head to their local library, ask a smarter relative, or embrace the sales pitch of Time-Life Books, the book publishing arm of Time Inc. that marketed massive, multi-volume subscription series on a variety of topics. There were books on home repair, World War II, the Old West, and others—an analog Wikipedia that charged a monthly fee to keep the information flowing.

Most of these were successful, though none seemed to capture the public’s attention quite like the 1987 debut of Mysteries of the Unknown, a series of slim volumes that promised to explore and expose sensational topics like alien encounters, crop circles, psychics, and near-death experiences.

While the books themselves were well-researched and often stopped short of confirming the existence of probing extraterrestrials, what really cemented their moment in popular culture was a series of television commercials that looked and felt like Mulder and Scully could drop in at any moment.

Airing in the late 1980s, the spots drew on cryptic teases and moody visuals to sell consumers on the idea that they, too, could come to understand some of life's great mysteries, thanks to rigorous investigation into paranormal phenomena by Time-Life’s crack team of researchers. Often, one actor would express skepticism (“Aliens? Come on!”) while another would implore them to “Read the book!” Inside the volumes were scrupulously-detailed entries about everything from the Bermuda Triangle to Egyptian gods.

Inside a volume of 'Mysteries of the Unknown'
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Mysteries of the Unknown grew out of an earlier Time-Life series titled The Enchanted World that detailed some of the fanciful creatures of folklore: elves, fairies, and witches. Memorably pitched on TV by Vincent Price, The Enchanted World was a departure from the publisher’s more conventional volumes on faucet repair, and successful enough that the product team decided to pursue a follow-up.

At first, Mysteries of the Unknown seemed to be a non-starter. Then, according to a 2015 Atlas Obscura interview with former Time-Life product manager Tom Corry, a global meditation event dubbed the "Harmonic Convergence" took place in August 1987 in conjunction with an alleged Mayan prophecy of planetary alignment. The Convergence ignited huge interest in New Age concepts that couldn’t be easily explained by science. Calls flooded Time-Life’s phone operators, and Mysteries of the Unknown became one of the company’s biggest hits.

"The orders are at least double and the profits are twice that of the next most successful series,'' Corry told The New York Times in 1988.

Time-Life shipped 700,000 copies of the first volume in a planned 20-book series that eventually grew to 33 volumes. The ads segued from onscreen skeptics to directly challenging the viewer ("How would you explain this?") to confront alien abductions and premonitions.

Mysteries of the Unknown held on through 1991, at which point both sales and topics had been exhausted. Time-Life remained in the book business through 2003, when it was sold to Ripplewood Holdings and ZelnickMedia and began to focus exclusively on DVD and CD sales.

Thanks to cable and streaming programming, anyone interested in cryptic phenomena can now fire up Ancient Aliens. But for a generation of people who were intrigued by the late-night ads and methodically added the volumes to their bookshelves, Mysteries of the Unknown was the best way to try and explain the unexplainable.

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Sally Died of Dysentery: A History of The Oregon Trail
MECC
MECC

The eighth grade students sat and watched as Don Rawitsch dragged an enormous device into their classroom. It was December 3, 1971, and Rawitsch—a student teacher at Carleton College outside of Minneapolis who taught history at a local grade school—was ready to show off what his roommates, Paul Dillenberger and Bill Heinemann, had managed to create in only two weeks of programming and with limited, amateur coding skills: a game called The Oregon Trail.

There was no screen to focus on. The computer’s interface was a teletype machine, which spat out instructions and the consequences of a player’s actions on sheets of paper. Adopting the well-worn shoes of settlers migrating from Missouri to Oregon in 1848, the students debated how best to spend their money, when to stop and rest, and how to deal with the sudden and unexpected illnesses that plagued their game counterparts. Rawitsch even supplied them with a map of the journey so they could visualize the perils ahead.

The students loved it: The Oregon Trail would eventually morph from a part-time experiment in guided learning to a staple of classrooms across the country. Kids who had never before heard of diphtheria or cholera would bemoan such cruel fates; tens of thousands of people would (virtually) drown trying to cross rivers; more than 65 million copies would be sold.

But Rawitsch was oblivious to the cultural touchstone The Oregon Trail would become. He didn't foresee the simple game having much of a shelf life beyond the semester, so at the end of the year, he deleted it.

 
 

As low-tech as it was, the first version of The Oregon Trail was still miles ahead of anything Rawitsch could have imagined when he set about trying to engage his students. As a 21-year-old history major, Rawitsch was young enough to realize that his teenaged students needed something more provocative than dry textbooks. In the fall of 1971, he decided to create a board game based on the precarious movement of 19th-century travelers looking to head west to improve their living conditions.

On a large piece of butcher’s paper, he drew a map that provided a rough outline of the 2000-mile journey from Independence, Missouri to Willamette Valley, Oregon. Along the way, players would have to contend with a morbid series of obstacles: fire, inclement weather, lack of food, outdated sicknesses, and, frequently, death. Every decision played a part in whether or not they'd make it to the end without keeling over.

A screen shot from 'The Oregon Trail'
MECC

Rawitsch showed his idea for the board game to Dillenberger and Heinemann, two other seniors from Carleton, who both had experience coding using the BASIC computer language. They suggested Rawitsch’s game would be perfect for a text-based adventure using teletype. A player could, for example, type “BANG” in order to shoot oxen or deer, and the computer would identify how fast and how accurately the typist finished the command—the quicker they were, the better chance they had of securing dinner.

Rawitsch liked the idea, but he was due to start teaching westward expansion in just a couple weeks, so there was no time to waste. Heinemann and Dillenberger worked after-hours for two weeks to get The Oregon Trail ready. When it made its debut that December day in 1971, Rawitsch knew he had a hit—albeit a transient one. Like a teacher who had supervised a special crafts project for a specific classroom, Rawitsch didn’t see a need to retain The Oregon Trail for the future and promptly deleted it from the school’s mainframe system.

Dillenberger and Heinemann took permanent teaching jobs after graduation; Rawitsch found his number called up in the draft. He declared himself a conscientious objector and as part of that found work at the newly-formed Minnesota Educational Computing Consortium (MECC), a state-sponsored program that sought to modernize public schools with computing supplies. It was 1974, and Rawitsch believed he had the perfect software to go along with their initiative: The Oregon Trail. Even though he had deleted the game, Rawitsch had kept a printout of the code.

Typing it in line by line, Rawitsch had the game back up and running and available to students across Minnesota. This time, he consulted actual journal entries of settlers to see when and where danger might strike and programmed the game to intervene at the appropriate places along the path. If a real traveler had endured a 20 percent chance of running out of water, so would the player.

Rawitsch got permission from Dillenberger and Heinemann to repurpose the game for MECC. It’s unlikely any one of the three of them realized just how much of an institution the game would become, or how MECC's business partner, Apple—then an upstart computer corporation—would revolutionize the industry.

By 1978, MECC was partnering with the hardware company to sell Apple IIs and learning software to school districts around the country. Rather than being a regional hit, The Oregon Trail—now sporting primitive screen graphics—was becoming a national fixture in classrooms.

 
 

For much of the 1980s and 1990s, school computer classes across America devoted at least some portion of their allotted time to the game. The covered wagon and its misadventures offered something that vaguely resembled the hypnotic, pixely worlds waiting for students on their Nintendo consoles at home. In that respect, The Oregon Trail felt a little less like learning and a lot more like entertainment—although completing the journey in one piece was an unusual occurrence. More often, players would be defeated by malnutrition or drowning in attempts to cross a river. They'd also be confounded by the idea they could hunt and kill a 2000-pound animal but were able to take only a fraction of it back to their wagon. (Confronted with this during a Reddit Ask Me Anything in 2016, Rawitsch noted that "the concept represented there is supposed to be that the meal will spoil, not that it's too heavy," and suggested incorporating a "fridge with a 2000-mile extension cord.")

A screen shot from 'The Oregon Trail'
MECC

An updated version, Oregon Trail II, debuted on CD-ROM in 1995. MECC would change hands a few times, being acquired by venture capitalists and then by the Learning Company, and was even owned for a period of time by Mattel. Attempts to update it with flashy graphics felt contrary to the spirit of the game; like the settlers it depicted, The Oregon Trail seemed to belong to another era.

Today, both Dillenberger and Heinemann are retired; Rawitsch is a tech consultant. None of them received any profit participation for the software. Their joint effort was inducted into the World Video Game Hall of Fame in 2016 and was adapted into a card game that same year. Today, players of the popular role-playing game Minecraft can access a virtual Oregon Trail world; the original game is also playable in browsers. Technology may have advanced, but you can still die of dysentery as often as you like.

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