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

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


[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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