Web Payments Site Flooz Eyes Merger

Just two days after shutting down operations, online currency provider Flooz.com told itspartners Friday that it plans to resume business, possibly by way of a merger.

“We have been in discussions with several companies about merging to create a strongerentity to operate in this challenging environment,” Flooz.com chief executive officer Robert Levitan told the E-Commerce Times. “There are many companies thatvalue the transaction platform that we have created.”

Levitan said that the merger discussions were at avery delicate point and that he would know more in aweek or two. He would not say with whomFlooz.com is conducting the merger discussions.

“These are difficult economic times for most companies,” added Levitan. “So it is especially challenging to arrive at deals that work for everyone.”

Taking Names

Forrester analyst James Crawford told the E-Commerce Times that he sees no online or offline companies that stand out as potential Flooz partners, or saviors.

“I cannot think of any company (that would beinterested in merging with Flooz), particularly now,”said Crawford. “You cannot abruptly shut offoperations, and expect to have any value come out theother end. In this case, it is equivalent to a bank nolonger accepting cash.”

Crawford suggested that with each passing day ofFlooz’s hiatus, it is more and more likely that thecompany’s customer database will be the only assetleft of any value.

Blame It on Credit Cards

Traditional online payment methods offered by credit card companies have often been fingered as the main competitive force impeding Flooz’s path to growth andsuccess. However, Crawford cannot picture the credit-cardcompanies in merger discussions with Flooz.

“Credit-card companies have a much stronger play withstored value cards like Visa Bucks,” said Crawford.”Even if there were a strong infrastructure componentto Flooz, which there is not, Flooz just does not meshwith the approach taken by credit-card companiestowards stored value transactions.”

Signs of Trouble

On Monday, consumers still looking for answers and forways to spend their outstanding Flooz currency faced the same static message that has been on Flooz.com since Wednesday: “We are currently unable to process yourtransaction. We are working very hard to resumeFlooz.com web site operations. Check back for furtherupdates.”

“Flooz’s shutdown does not surprise me,” saidCrawford. “I never thought that they had a compellingvalue proposition as a payment mechanism. [Flooz currency is] essentially glorified loyalty pointsmasquerading as cash, and there is no target forthat.”

Crawford mentioned that Flooz, and other alternativeonline currency providers like Beenz and RocketCash, pointtheir marketing efforts at people who cannot pay bycredit card, like young adults.

But only one in six of the young people who have heard ofFlooz actually use it, said Crawford, citing theresults of a recent Forrester study on young consumers’ behavior.

Web Payment Pitfalls

Flooz’s abrupt suspension of operations may register as asetback for the entire alternative online currencyspace, according to Crawford.

“This will make e-tailers think twicebefore considering a partnership with any alternativecurrency provider,” Crawford said.

Ashford.com, a Flooz partner of over a year, voicedconcern about Flooz’s injured credibility.

“We will not put Flooz back up on our site, until wefeel they have a sustainable business model, becausethere is risk involved,” Ashford.com vice president ofmarketing Kim Richard told the E-Commerce Times,having received the call from Flooz on Wednesday.