Web Payments Site Flooz Eyes Merger

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

Levitan said that the merger discussions were at a very delicate point and that he would know more in a week or two. He would not say with whom Flooz.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 be interested in merging with Flooz), particularly now," said Crawford. "You cannot abruptly shut off operations, and expect to have any value come out the other end. In this case, it is equivalent to a bank no longer accepting cash."

Crawford suggested that with each passing day of Flooz's hiatus, it is more and more likely that the company's customer database will be the only asset left 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 and success. However, Crawford cannot picture the credit-card companies in merger discussions with Flooz.

"Credit-card companies have a much stronger play with stored value cards like Visa Bucks," said Crawford. "Even if there were a strong infrastructure component to Flooz, which there is not, Flooz just does not mesh with the approach taken by credit-card companies towards stored value transactions."

Signs of Trouble

On Monday, consumers still looking for answers and for ways 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 your transaction. We are working very hard to resume Flooz.com web site operations. Check back for further updates."

"Flooz's shutdown does not surprise me," said Crawford. "I never thought that they had a compelling value proposition as a payment mechanism. [Flooz currency is] essentially glorified loyalty points masquerading as cash, and there is no target for that."

Crawford mentioned that Flooz, and other alternative online currency providers like Beenz and RocketCash, point their marketing efforts at people who cannot pay by credit card, like young adults.

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

Web Payment Pitfalls

Flooz's abrupt suspension of operations may register as a setback for the entire alternative online currency space, according to Crawford.

"This will make e-tailers think twice before considering a partnership with any alternative currency provider," Crawford said.

Ashford.com, a Flooz partner of over a year, voiced concern about Flooz's injured credibility.

"We will not put Flooz back up on our site, until we feel they have a sustainable business model, because there is risk involved," Ashford.com vice president of marketing Kim Richard told the E-Commerce Times, having received the call from Flooz on Wednesday.