Beenz: One of Greatest dotcom Disasters of all Time... | Nostalgia Nerd

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[intro sounds] [90s style music] Cast your mind back to 1998. No! Not that... Never that. These were the early days of the internet. It was the founding year of Google, and the main doorway to the internet was either through bespoke ISP interfaces, or the likes of Yahoo, Lycos and Ask Jeeves. If you wanted to do online shopping, your choices were far more limited than the likes of today, hell, Amazon.com was still essentially just a bookshop. So when it came to paying for things online, you were equally as limited. Most outlets, if they had a website, required you to phone up and make your credit card payment over the phone, rather than actually paying online, but online browsing and payment was becoming increasingly popular, if restricted somewhat. You couldn't just rock up with your bank's debit card, and things were even worse if you were trying to buy from abroad, with currency conversion and the like. This was a tentative internet, an internet which the world was trying desperately hard to catch up with, but also a world where various entrepreneurs were jumping onto the .com boom and surfing it. One of those was named Charles Cohen, a London based managing director of a web marketing agency. The type of business that was flourishing at the time, leading Charles to not only have some money to invest, but also some ideas of where else the web could take us. One of Charles' bug-bears was loyalty programs, and in particular their lack of proliferation. Sure, you could rack up points on your Safeway ABC card, or Boots Advantage card, but you could only spend the points in that particular outlet, meaning either a lot of spending, or a lot of time to reap any kind of reward. So, how about a scheme that was non-proprietary, interchangable between businesses, and really, more like a currency than a store scheme. As he worked on the idea, it became clear that this could not only be a micro-payment system, but an entire web-currency and customer management tool based around what he would coin "the butterfly model". Here was the principle; The company would sell "beenz" to web merchants for 1 cent each. Merchants would award "beenz" to consumers for activities such as registering on their website, checking out a deal or making a purchase. These activites were labelled "e-work". Once the consumer had racked up enough "beenz" from which ever vendors they choose, then they can spend them on products or services at web merchants in the scheme, who would then "retire" these "beenz" back to the company for half a cent. Completing the cycle and providing an alternative web currency, free of conversion rates, the hassles of card payment, or risk of online fraud. What's not to like? This concept, was branded as "The Web's Currency", and the goal was to actually challenge the world's major currencies. With this alluring idea in hand, and along with fellow Oxford University grad. and co-founder Neil Forrester (who incidentally was also in the fourth season of MTV's The Real World), [Heavy metallic music sounds] "My name is Neil, I'm from Oxford, and I'm currently dropping out of a Phd in Psychology" "and have this opportunity to pursue my true love, which is music" Charles set to work, raising capital from friends, family and other contacts. Initially $1.8 million was raised from these angel investors, enough to get the ball rolling. By December 1998, That ball had gained enough momentum to make Beenz a reality. [Ear delights] With Charles initially taking the place of Chief Technical Officer and Neil as head of development, alongside colleagues David King as Head of Sales, Philip Letts as CEO and John Hogg as Head of Marketing, Beenz was in motion. Looking to establish the company as a global internet business, one of those first literal moves was to relocate the head office from London to New York, whilst opening another in San Franciso in order to establish connections and make deals with vendors face to face. Conducting business over the internet wasn't really an option at this point, and so this initial funding was key to establish a strong footing to launch the "beenz currency". Progress in these areas brought further investment from Private Equity firm Gefinor USA, allowing Beenz to officially launch in the US and UK during March 1999. Initially this is what beenz.com looked like. Boldy displaying the headline "It's like money, but better", and with the claim that you can "earn them on-line anywhere, save them in your personal account; then spend them on-line anywhere"... Anywhere might have been a stretch, but vendors were lining up, with the very first merchant to offer "Beenz" being www.21store.com.... remember this place? CHECK OUT THAT PSION SERIES 5 WITH FREE POWER ADAPTOR for £329! Nice! By signing up here, I'd have got myself a cool 100 free Beenz, and then, I can go really, wherever these links take me. Maybe after a few months, I could get some discount on that PSION SERIES 5, or even a Dreamcast, ohhhh yea, now we're talking! [casual music] At this point, the Beenz staff numbered less than 100 and were consumed mainly in making deals with other online merchants to trade in Beenz, which from a merchant's point of view, was actually a pretty compelling prospect. In these days, it was costing some businesses $20 per customer acquisition. That is to get a customer onto their website and to sign up, setting the scene for a potential purchase, or at the very least obtaining vital demographic and email data from the registee for future marketing purposes. The Beenz model could do the same, for less than $5, depending on how many Beenz the retailer offered the customer as an incentive. With this, many retailers were quick to actually abandon their own points or discount schemes and jump on the rapidly growing and cost effective Beenz wagon. Seemingly proving Charles's non-proprietary theory correct. Of course to get merchant interest, Beenz had to also get consumer interest. This was done by not only pushing a big marketing campaign in print, billboard and online advertising, but also using some somewhat unorthodox guerrilla methods under the leadership of Chief Marketing Office Nicolas de Santis. As well as adorning bank terminals with Beenz stickers, a Beenz Army was recruited to visit Cities, in an almost parade fashion, dressed as massive kidney beans, handing out lollies and even slipping flyers into the pockets of passers by without them noticing. It sounds almost like a crime, but this is what the late 90s demanded, and people sucked it up. All of this not only got Beenz noticed in the press, but also presented a fun and playful vibe, endearing customers to this new, fun brand, welcoming in this alluring digital age, whilst abandoning the old, rigid, established and institutionalised ways of yesteryear. Another hurdle was to convince the Financial Services Authority in London, along with each governing body in future regions, that they weren't launching an actual new currency, as it was illegal or heavily regulated in most countries. This was done by stipulating the rules that Beenz cannot be transferred from consumer to consumer and that Beenz can also not be bought directly; posing them as a marketing device... rather than currency. However, this didn't prevent their London offices from being raided on suspicion of operating an unlicensed bank. On closer inspection it was revealed that the "Bank of Beenz" link on their website was merely a marketing term which took users to their account statement area. However, this was link changed to "My Beenz" going forward to smooth matters out. In August 1999, with Beenz flying about left, right and centre, another hurdle was encountered, this time by a US retailer offering 100,000 beenz instead of 50 for a given transaction. It was a Beenz frenzy! Making each transaction work $1k! After 1.5 million Beenz had been collected a software fraud alarm sounded (a bit too late if you ask me). People flocked to the website to claim a crap load of free Beenz, only for Beenz.com to swipe them back hours later, declaring them illegitimate. This of course, caused anger among users, but also meant Beenz were swift to tighten controls on their software, especially for vendors who perhaps didn't know what they were doing. By September 1999, and in part thanks to encouraging words from people like Larry Ellison, CEO of Oracle - "Beenz.com is clearly an innovator by developing a true internet currency", Beenz.com had secured an additional $30million in investments, including $5 million from Larry himself, and were looking like the next hot thing to conquer the internet. Beenz logos were appearing on retailers sites far and wide, and the catalogue of participating businesses was growing day by day. If their online presence was looking promising, so was their office. In line with other .com locations at the time, Beenz headquarters was described as looking like something from a high tech play-room, fitted out with games machines and life sized talking Yoda's - SLIMEY - but the next year would be crucial in determining the fate of this so called e-currency. [Tentative electronic notes] Looking in, the Beenz scheme didn't seem to have any losers. Retailers gained sales, customers gained Beenz and Beenz.com gained income, however there were problems on the horizon, and one of them appeared in the form of Whoopi Goldberg. "...Your kid, and you don't know what to get them because YOU'RE OLD!" "OLD HONEY" "Give 'em Flooz online gift currency" "It's just like money. You send them by email, they spend it at some of the web's coolest stores" "and you come out hip... and smart" "It's graduation day..." Whoopi Goldberg was now the face of Flooz; a business with similar goals to Beenz, although implemented in a slighty different way. With Flooz you could either gain promotional credits, or you could buy credits, which roughly translated were gift certificates you could use across a variety of stores. Flooz perhaps didn't have a model that was as sustainable as Beenz, but their marketing campaigns had drawn interest and perhaps eroded the uniqueness of the Beenz concept. Likewise this was the year that other schemes such as MyPoints, Netcentives, CyberGold, internetcash.com and even Paypal (known at the time as X.Com) had started up, with companies like eBay seeking a credible way forward for online payments. Combined with the likes of Microsoft, Compaq and IBM developing software to take the bite out of transaction costs on small credit card payments, Beenz had competition on their hands in this rapidly expanding world of digital currency. However Beenz soldiered on. As well as offering the ability for those under the age of 18 to make payments, with 13 to 18 year olds, making up 25% of their business..One of the key selling points for the company was the ease of integration. Retailers could enable Beenz payments on their websites, by inserting a few lines of code. The consumer could download a BeenzCounter which sat on their Windows toolbar, and would count their beenz in real-time, with website accruement and spending updated as you went. However, increasing competition put Beenz on a scheme of rapid expansion, keen to secure all global markets before anyone else. By June 2000, an extra $39.5 million capital had been secured by a variety of venture capital firms, and Beenz offices had been opened in Italy, France, Australia, Japan, South Korea, Singapore and even Greater China. The only problem was, some of these markets needed to be dealt with in different manners, and cracks began to show in the business model. For example, rather than selling Beenz directly to a vendor in Hong Kong, their local office which was run by New World CyberBase Limited, following an exclusivity agreement, would purchase Beenz directly from the New York office at a discounted rate, and then trade with Vendors. These Vendors would then retire the Beenz back to New York at the original half cent rate... therefore eroding revenues. A similar setup was implemented for Italy through Gruppo L’Espresso, and in fact these groups helped inject funding into Beenz.com itself. As well as providing funding, these steps were seen as a necessary to get the contacts and make progress in foreign markets, but it meant that direct sales - perhaps the biggest benefit of this internet model - couldn't be realised. This added complexity and cost into a model that Charles described as; "We are really running an economy, not just managing a business" This was becoming even more evident with a project which allowed customers to accrue their points to a Mondex MasterCard, crossing the bridge between a currency only useful on the internet and the real world. This "rewardzcard" was launched in North America in August 2000, and was credited Beenz automatically by the POS terminal. In fact, the partnership had developed the ability to even earn and spend beenz via. wireless devices such as DigitalTV and WAP-enabled Smart phones, over a decade ahead of what we use today, with contactless integrations. Beenz.com, which had been valued at $100 million at the start of the year, was now valued at $450 million. It had 260 employees, with 75 in sales, 33 in marketing and 88 in operations and new product development, not including subsidiaries, and it was still growing. At this time a total of 2.3 billion beenz were in circulation, with 4 million registered users, with the site getting around 2 million hits per month. Some 500 merchants were compensating customers in beenz, with around a third of that accepting payment in them as well. Income wise, with each compensating merchant ordering around $40,000 dollars worth per month on average, income was good. But this was the peak of the dot com bubble, and this model depended on a lot of variables, many of which were teetering on the edge. [Peaceful, but telling notes] By 2001, Beenz was looking into developing a range of applications and propriety software, that would help retailers gain further insights and analytics from their engagement, but this was a business model built around breakage and float. Breakage referring to units of value (i.e. Beenz) that were issued but never redeemed, and float being the positive cash flow received from vendors during between issue and redemption. But the start of 2001, was perhaps when the internet bubble was just about to pop. Venture capital had been poured into startup after startup, each at the mere suggestion of a good idea. It was now that investors were starting to realise that many of these ideas in reality, just weren't... well, good. Between 1995 and 2000, the Nasdaq Composite Stock Market index rose 400%, resulting in lavish spending at many a company. It had peaked on March 10th 2000 at 5,048.62. On March 13th Japan had notified it was in a recession, that would significantly affect technology stocks, a string of events then followed, leading to much investment in .com industries to be cut off, leading to slashed marketing budgets and revealing the problems that lay within. This collapse would continue through to 2004, but led to many fallen online businesses and retailers. This of course, was a problem for Beenz. Even if their model was sound under a growing market. Under one where their main customers (the merchants) were packing up shop, it was disastrous. Customers concerned they would lose their beenz quickly cashed them in, stressing the breakage and float model. At the same time and with their own growth costs still mounting, merchant revenues began falling rapidly. These factors combined with internet confidence eroding meant both consumers and merchants would be quick to abandon the Beenz model and tighten their strings. This, of course, lead to the inevitable collapse of what looked like such a promising e-currency just months prior, with the announcement that all Beenz would be invalid from the 26th August 2001, just one week after Flooz had suspended operations itself, after unknowingly becoming embroiled in money laundering, through it's own business model. [Dramatic, tense, low, musical] By 4th October 2001, Charles Cohen's dream of a Beenz economy was all but over, and the business and it's underlying technology was bought up by Carlson Marketing Group, mainly for their customer relationship management tools. The acquisition was stated as opening a new frontier for consumer packaged goods companies, allowing them to identify their end customers and build better relationships. Beenz may have been dead, but the technology built up over those years, lived on. This included their transaction engine, allowing consumers to earn and spend beenz in real time, their RewardzCode division which allowed businesses to reward customers digitally via. codes on printed packaging, much like QR-Codes... ...and the brand. The old methods of payment, credit cards, debit cards and the like had adapted, and remained triumphant. Thanks to companies, including Amazon developing easier online payment methods, the old world had caught up with the new and these so-called internet currencies were as dead as Lycos.com. Of course, the concept wouldn't die, with businesses like Nectar popping up, providing a points system for multiple retailers in the UK, which still survives to this day, and that's because, at it's core, it's not a bad concept. Beenz would get a lot of grief, even appearing in several lists of the "Greatest Dotcom Disasters", but honestly, I don't think they deserve it. Commentators like Kirsten Andersen at Political USA, wrote about how stupid Beenz were for coming up with a concept which gave points out, but didn't make money, but like a lot of people, she just didn't understand the business model. Maybe if beenz had started up after the .com bubble burst, they would still be here to this day. I don't think they would have ever have rivalled real world currencies or even created a beenz economy, but maybe, just maybe, they might have hung on, and I'd be spending 10,000 beenz right now on the latest PS4 game. Butttt. Someone apparently must have thought the same, because in 2012, the site, and brand, under the company name of Beenz Europe BV, seemed to make a bit of a come-back. I say come back, but it was clearly a very tentative appearance, because the site was restored with a crossed Z instead of b this time aound... Although why they held what appears to be a design competition for THIS. I DO NOT KNOW. Especially after they explicitly specified they don't want copies of, and I quote, "OLD, SIMILAR LOGOS". I MEAN HOW SIMILAR CAN YOU GET. People just don't know what they want, do they? ....Anyway, "Coming soon" messages appeared, hell, even a video appeared, talking of a mobile app and all sorts, but information on what happened is thin on the ground, other than it seemed to be Italian based, and ended on 30th September 2015. Which is shame, maybe it'll come back again some day, but until then.... ....that's all for this story, thanks for watching and have a great evening. [Beenz.com rendition of The Wild Wild West] [No, seriously] [I can't believe it either] [It carries on for well over a minute] [I'm going to cut it before then, don't worry] [Actually I'm quite enjoying it] and there we have the real reason Beenz.com failed They covered, the Wild Wild West. God help us all.
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Channel: Nostalgia Nerd
Views: 1,639,961
Rating: undefined out of 5
Keywords: dotcom, dot com, dotcom bubble, digital currency, 90s internet, 00s internet
Id: 5o9HEjuXsc0
Channel Id: undefined
Length: 21min 46sec (1306 seconds)
Published: Tue Sep 03 2019
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