DOT BOMBS

Today we take buying things over the Internet for granted. But the concept of e-commerce was brand new in the 1990s, as billions of dollars were invested in new Internet companies. And nearly all of them fizzled— some because they were ahead of their time, others simply because they were bad ideas. Here’s a look at some big Internet busts.

COMPANY: Flooz.com

PRODUCT: Internet currency

LOADING… Most Americans do at least some online shopping or bill paying today, but in 1998 consumers were skeptical about giving a credit card number over the Internet. So Flooz.com conceived a “safe” Internet currency. Consumers were supposed to go to Flooz.com, enter in their credit card number, and buy Internet money, or “Flooz,” which could then be used to pay for purchases at online merchants. Based on that concept, Flooz secured $34 million from investors and agreements with Tower Records, Barnes & Noble, Restoration Hardware, and other retailers to accept Flooz as legal tender on their websites.

…FILE NOT FOUND: A large percentage of Flooz’s budget went to TV commercials starring celebrity spokesperson Whoopi Goldberg. But the idea never quite caught on—as people became more comfortable with buying things over the Internet and as major retailers started securing credit card data with a new, nearly impenetrable data-disguising system called encryption, few thought it was necessary to buy special online money. Flooz flopped on August 26, 2001, after which all outstanding “flooz”—and $34 million in investors’ money—turned to dust.

COMPANY: Webvan.com

PRODUCT: Groceries

LOADING… The service offered by this Internet-based company was both old and new: Home delivery of groceries, which was once common but hadn’t been offered since the mid-20th century, when Americans started switching from local grocers to chain supermarkets. In Webvan’s business model, groceries would be ordered off the Internet and arrive at the customer’s home via a nearly fully auto- mated process (the vans still required people to drive them). It seemed like a great idea to a lot of people: Webvan raised and spent more than $1 billion, using the funds to expand outside of its San Francisco home area to eight more cities in just over a year. Most of the money went for computerized warehouse facilities where orders were automatically boxed, sorted, and loaded onto delivery trucks. By mid-2000, Webvan.com was valued at $1.2 billion and announced plans to expand into 18 more metropolitan areas.

…FILE NOT FOUND: E-commerce may have changed many elements of business, but it did not change the fact that a company needs a certain number of customers to turn a profit. Webvan looked good to investors, but it expanded too fast. Furthermore, grocery profit margins are very slim—not enough to cover $1 billion worth of state-of-the-art distribution centers. Webvan spoiled in July 2001, its share price having dropped from $30 to 6¢ in a matter of months. The brand name—not the company—resurfaced in 2009 as “a member of the Amazon family.”

COMPANY: MVP.com

PRODUCT: Sporting goods

LOADING… This company had a lot going for it at its 1999 launch: Its investors included beloved sports icons (and seasoned product endorsers) such as quarterback John Elway, basketball superstar Michael Jordan, and hockey icon Wayne Gretzky. That seemed like a big advantage for a company selling sporting goods online. Another advantage: MVP.com had a lucrative advertising deal—a four-year contract with CBS Television in which the online merchant got consistent ad time during the broadcast of CBS’s highly watched NFL games. In return, CBS got an equity stake in the company, with a guaranteed annual payout of $10 million.

…FILE NOT FOUND: But just a year later, MVP.com failed to pay CBS its $10 million…because it didn’t have the $10 million to pay. In fact, the company never turned a profit. (Marketing experts say the advertising deal was ill-conceived—sports spectators are not necessarily sports participants.) When they didn’t receive their cut, CBS voided the contract…and canceled all of MVP.com’s future advertising. MVP.com was KO’d at the end of 2000. Its address (www.mvp.com) was taken over by SportsLine, a new sports news service managed by…CBS.

Made guys: 27 actors from the movie Goodfellas also appeared on The Sopranos.