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

iStock
iStock

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.

Up in the Air: When 'Balloon Boy' Took Flight

John Moore, Getty Images
John Moore, Getty Images

It was like a Weekly World News cover come to life. On October 15, 2009, most of the major network and cable broadcasters interrupted their daytime programming to cover what appeared to be a silver flying saucer streaking through the air. Out of context, it was as though the world was getting its first sight of a genuine UFO.

Reading the scroll at the bottom, or listening to the somewhat frantic newscasters, provided an explanation: It was not alien craft but a homemade balloon that had inadvertently taken off from the backyard of a family home in Fort Collins, Colorado. That, of course, was not inherently newsworthy. What made this story must-see television was the fact that authorities believed a 6-year-old boy was somehow trapped inside.

As the helium-filled balloon careened through the air and toward Denver International Airport, millions of people watched and wondered if its passenger could survive the perilous trip. When the craft finally touched down after floating for some 60 miles, responders surrounded it, expecting the worst. The boy was nowhere to be seen. Had he already fallen out?

The brief saga that became known as the Balloon Boy incident was one of the biggest indictments of the burgeoning worlds of reality television and breathless 24/7 news coverage. It seemed to check off every box that observers associated with societal decline. There was the morbidity of a child speeding through the air without control; the unwavering gaze of news networks who cut away from reports on world affairs and even ignored their commercial breaks to obtain footage of an aircraft that measure around 20 feet wide and 5 feet high and resembled a bag of Jiffy Pop.

 

The boy in question was Falcon Heene, one of Richard and Mayumi Heene's three children. The couple had met in California and bonded over their mutual desire to get into the entertainment business. Richard dreamed of becoming a comedian; Mayumi played guitar. The couple married in 1997 and eventually relocated to Colorado; they got their first taste of Hollywood in 2008, when they made their first of two appearances on the reality series Wife Swap.

But Richard Heene wanted more. The avid tinkerer envisioned a show that followed his family around, while at the same time working on his new inventions—one of which was sitting in his backyard. It was essentially a Mylar balloon staked to the ground, which he would later describe as a very early prototype for a low-altitude commuter vehicle.

 sheriff's deputies seach a field for Falcon Heene before learning he had been found October 15, 2009 southeast of Ft. Collins, Colorado
Sheriff's deputies search a Colorado field for Falcon Heene before learning he had been found safe at home.
John Moore, Getty Images

It was this balloon, Bradford Heene told police in 2009, that his brother Falcon had climbed into just before it had taken flight. Earlier, Richard said, Falcon had been playing near the contraption and was scolded for potentially creating a dangerous situation. Now, Falcon was gone, the balloon was in the air, and Falcon's parents feared the worst. Mayumi called the authorities.

“My other son said that Falcon was at the bottom of the flying saucer,” Mayumi told the 911 dispatcher. “I can’t find him anywhere!”

As news cameras watched and the National Guard and U.S. Forest Service followed, the balloon reached an altitude of 7000 feet. Police made a painstaking search of the Heene household, looking for any sign of Falcon. After three passes, they determined it was possible he was inside the balloon.

Approximately one hour later, the balloon seemed to deflate. Authorities cleared the air space near Denver International Airport and greeted the craft as it landed, tethering it to the ground so no air current could hoist it back up and out of reach.

No one was inside the small cabin under the balloon, which left three possibilities: Falcon was hiding somewhere, he had run away ... or he had fallen out.

 

Not long after the craft had landed, a police officer at the Heene house decided to investigate an attic space above the garage. It had gone ignored because it didn’t seem possible Falcon could have reached the entrance on his own.

Yet there he was, hiding.

Elated, authorities explained to the media that they thought Falcon had untethered the balloon by accident and then hid because he knew his father would be upset with him.

Jim Alderden, the sheriff of Colorado's Larimer County, assured reporters that the Heenes had not done anything suspect. They demonstrated all the concern for their missing child that one would expect. Alderden stuck to that even after the Heenes were interviewed on CNN and Falcon appeared to slip up. When asked by Wolf Blitzer if he had heard his parents calling for him, the boy admitted that he had but was ignoring them “for a show.”

Though the Heenes seemed to scramble to cover up for their son's gaffe, Blitzer didn’t appear to register the comment at first. He came back around to it, though, insisting on clarification. Richard would later state that Falcon was referring to the news cameras who wanted to see where he had been hiding. That was the "show" he meant.

Alderden reiterated that he didn’t think the boy could remain still and quiet for five hours in an attic if he had been instructed to. But he admitted the CNN interview raised questions. After initially clearing the family of any wrongdoing, Alderden said he would sit down and speak to them again.

Within the week, Alderden was holding a press conference with an entirely different mood. He solemnly explained that the Heenes had perpetuated a hoax and speculated that they could be charged with up to three felonies, including conspiracy and contributing to the delinquency of a minor. Outlets had already tracked down an associate of Richard’s who detailed his reality series idea, with one episode devoted to the balloon.

 

Richard and Mayumi voluntarily turned themselves into authorities. They each pled guilty: Richard for attempting to influence a public servant and Mayumi for making a false report. In addition to paying $36,016 in restitution, Richard wound up with a 90-day jail sentence, 60 days of which was served on supervised work release. Mayumi got 20 days. Though they pled guilty, Richard maintained that he and his family had not perpetuated any kind of a hoax. In a 2010 video posted to YouTube, Richard said he only pled guilty because authorities were threatening to deport his wife.

Mayumi, meanwhile, reportedly told police it had all been an act (though critics of the prosecution argued that Mayumi's imperfect English made that confession open to interpretation). Mayumi later stated she had no firm understanding of the word "hoax."

Richard Heene and his wife, Mayumi Heene (R) are flanked by members of the media after they both plead guilty to charges related to the alleged hoax of the couple claiming that their son, Falcon Heene was last month onboard a helium balloon, at the Larime
Richard and Mayumi Heene surrounded by the media after they both plead guilty to charges related to the "Balloon Boy Hoax" on November 13, 2009.
Matt McClain, Getty Images

In addition to the fine and jail sentences, the judge also mandated that the family not seek to profit from the incident for a period of four years, which meant any potential for Richard to grab a reality show opportunity would be put on hold until long after the public had lost interest in the "Balloon Boy."

The Heenes moved to Florida in 2010, and soon after their three boys formed a heavy metal band—reputed to be the world’s youngest—dubbed the Heene Boyz. They’ve self-released several albums, and in 2014 even released a song called "Balloon Boy No Hoax."

Richard also peddles some of his inventions, including a wall-mounted back scratcher that allows users to alleviate itching by rubbing up against it. It’s called the Bear Scratch.

While discussing the Heenes' misguided flight, one Cleveland outlet recalled that Falcon wasn't the first "Balloon Boy." In 1931, 4-year-old Bill Crawford's father strapped him to a seat attached to a helium-filled balloon and allowed the child to float up to 50 feet in the air, much to the amazement of onlookers. For willfully endangering his son, the elder Crawford was cheered by crowds desperate for any sort of amusement during the Great Depression.

Hollywood's Brief Love Affair With Young Einstein Star Yahoo Serious

Warner Bros.
Warner Bros.

The theater owners and exhibitors attending the ShoWest convention in February 1989 had a lot to look forward to. In an attempt to stir their interest in upcoming studio releases, major distributors were showing off stars and footage: Paramount led with Indiana Jones and the Last Crusade, and Columbia had Ghostbusters II. But it was Warner Bros. that caused the biggest stir.

In addition to Lethal Weapon 2, the studio had Tim Burton’s Batman, a straight-faced adaptation of the comic, and Michael Keaton—who slipped into a screening of some early footage—was no longer being derided as a poor casting choice. Then, in the midst of all this star power, the studio brought out a 35-year-old actor-writer-director with a shock of orange hair and an Australian accent.

The man had never appeared in a feature film before, much less starred in one, but Warner was gambling that his forthcoming comedy about a Tasmanian Albert Einstein who invents rock music and runs into Thomas Edison would be a hit. It had already become the sixth highest-grossing film in Australia's history, besting both E.T. and Rambo: First Blood Part II.

The man’s real name was Greg Pead, but Warner Bros. introduced him as Yahoo Serious, Hollywood’s next big comedy attraction.

 

To understand Warner’s appetite for an unproven commodity like Yahoo Serious, it helps to recall the peculiar preoccupation American popular culture had with Australians in the 1980s. Energizer had created a hit ad campaign with Mark “Jacko” Jackson, a pro football player who aggressively promoted their batteries in a series of ads; meanwhile, Paul Hogan parlayed his fish-out-of-water comedy, Crocodile Dundee, into the second highest-grossing film of 1986. (Serious would later bristle at comparisons to Hogan, whom he referred to as a “marketing guy” who sold cigarettes on Australian television.)

Born in Cardiff, Australia on July 27, 1953, Serious grew up in rural bush country and mounted car tires at a garage in order to pay his way through the National Art School. When he was expelled for illustrating the school's facade with satirical jokes that the faculty didn’t find particularly funny, Serious moved on to direct Coaltown, a documentary about the coal mining industry, and pursued painting.

Serious would later recall that the desire for a larger audience led him away from art and into feature filmmaking. ''It hit me like a ton of bricks one day,” Serious told The New York Times in 1989. “I remember having a cup of coffee and I went, 'Well, look, there is a giant canvas in every little town everywhere around the world. And on this giant canvas there are 24 frames of image on that screen every second and it's the most wonderful living art form.'” It was around this same time, in 1980, that Serious changed his name.

To get a feel for the language of film, Serious sat through repeated viewings of Stanley Kubrick's Dr. Strangelove; he aspired to have the kind of total autonomy over his movies that directors like Woody Allen and Charlie Chaplin enjoyed.

In 1983, Serious was traveling along the Amazon River when he spotted someone wearing a T-shirt depicting Albert Einstein sticking his tongue out. The image is now pervasive, appearing on posters and other merchandise, but it seemed unique to the performer, who was struck by the idea that Einstein was once young and never took himself too seriously. And the concept for Young Einstein was born.

 

Serious's idea, which transplanted Einstein to Tasmania and imagined encounters with Sigmund Freud, Thomas Edison, and the atomic bomb, took years to assemble. He borrowed camera equipment and sold his car to help finance the film; he shot an eight-minute trailer that convinced investors he was capable of making a feature. His mother even cooked meals for the crew on set.

In order to maintain creative control, Serious gave up profit participation in Young Einstein, which he starred in, co-produced, co-wrote, and directed. When the film was released in Australia in 1988, it made an impressive $1.6 million at the box office and drew the attention of Warner Bros., which likely had visions of a Crocodile Dundee-esque hit. American press had a field day with Serious, who appeared on the cover of TIME and was given airtime on MTV.

Critics and audiences weren’t quite as enamored. The Orlando Sentinel suggested that "Tedious Oddball" would be a more appropriate name for the film's creator. In his one-star review, Roger Ebert wrote that, "Young Einstein is a one-joke movie, and I didn't laugh much the first time." In the U.S., Young Einstein grossed just over $11 million, a fairly weak showing for a summer comedy. It was bested in its opening weekend by both Ron Howard’s Parenthood and the Sylvester Stallone action-grunter Lock Up.

 

Although American distributors quickly cooled on Serious, Australia's enthusiasm for the filmmaker didn’t dampen. When Serious released 1993’s Reckless Kelly, a fictionalized account of outlaw Ned Kelly, it made $5.4 million in Australia—three times as much as Young Einstein. Serious took a seven-year sabbatical, then returned with 2000’s Mr. Accident, a slapstick comedy about an injury-prone man who tries to thwart a scheme to inject nicotine into eggs. Meeting a tepid critical and financial reception, it would be his third and (likely) final film.

At roughly the same time Mr. Accident was released, Serious took issue with upstart search engine Yahoo!, alleging the site was piggybacking on his popularity. He filed a lawsuit, which was quickly dropped when he failed to prove the URL had damaged him in any way.

Yahoo Serious attends an event
Paul McConnell, Getty Images

The amused headlines stemming from that incident were the last examples of Serious capturing attention in America. Having completed just three films, no other projects have come to fruition; Serious launched a website detailing some of his background and to air some of his Yahoo!-related grievances.

Now 65, Serious currently serves as founding director of the Kokoda Track Foundation, an Australian aid organization dedicated to improving the living conditions of Papua New Guineans. The board’s website lists him as Yahoo Serious, which is the name he claims that all of his family and friends have called him since he changed it in 1980.

“You can choose every aspect of your life,” Serious once said. “Why not your name?”

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