Zzap.Net Offers Snake Oil
By George Mannes
Staff Reporter
10/15/98 3:21 PM ET
With any new technology, first come the pioneers, then the gamblers and the starry-eyed hopefuls looking for a quick buck. Then come the snake-oil salesmen.
Most Internet investors probably thought the snake-oil vendor was Zapata (ZAP:NYSE) -- a fish protein company which earlier this year made a much-ridiculed offer for Excite (XCIT:Nasdaq). Today, Zapata officially abandoned its plans to launch a Web empire.
But now comes Zzap.Net (ZZNT:OTC BB), a Daytona Beach, Fla., infomercial and telemarketing company that makes the fish-oil-selling Zapata look respectable.
Zzap.Net does bear a slight resemblance to Zapata, which has a Web site at www.zap.com and plans a spinoff called Zap. Zzap.Net even copied Zapata's strategy of placing newspaper ads to do business deals. In USA Today last month, somewhere among the half-inch classifieds promising $20,000 a month for stuffing envelopes and "BIG BUCK$$" selling substitute Viagra, you could have spotted "ZZAPNET, a public co., wants to buy your Web site."
When the history of the Internet stock bubble is written, Zzap.Net may very well star as the cream of the dregs. Born of a Florida infomercial company and a British Columbia stock promoter, Zzap.Net, with its roster of dubious products and worrisome participants, is almost a parody of an Internet company. But real money is at stake.
Zzap.Net was created by merging a shell company with the assets of Marketers World International, a 12-person operation founded by infomercial entrepreneur Brad Richdale. It has since acquired a handful of direct-marketing companies, about half of which Richdale already controlled. Zzap.Net's products include PCs packaged with a video email system, an online yellow pages listing and WebTV boxes that offer coupons for shopping at Zzap.Net's Virtual Reality Mall. Other offerings include golf vacations, Brad Richdale motivational tapes and the "Internet Business Development Package," or kit for launching a site on the Internet.
"We're on target to meet our goal to become the largest supplier of Internet access and related products, services and information in the world!" crowed Richdale in a Marketers World International press release earlier this year.
The strategy, explains Zzap.Net president Michael Cimino, is to sell a wide variety of products to its 1.1 million core customers. "The future of direct marketing," he says, "isn't getting 10% of the 100% -- it's 100% of the 10%." That means selling the same people everything from pillows to self-help tapes.
But the products seem really aimed at Zzap.Net's network of 25,000 "consultants" -- probably the same people who, after seeing a Richdale infomercial, set up a home-based business to sell Zzap.Net products.
Going to the company's Web site is like entering a parallel-universe Internet -- a Bizarro Internet, to borrow the reference from Superman and Seinfeld -- where everything is like the real Internet, only cheesier. Clicking through the company's Virtual Reality Mall, for example, is about as fun as walking down a dark hallway; it's no match for shopping at Amazon.com (AMZN:Nasdaq) or Wal-Mart Online.
Elsewhere, Zzap.Net's Marketers World site charges would-be entrepreneurs $495 a year for the privilege of giving away free Web sites, along with a booklet and some audio and video tapes. The idea is that entrepreneurs will be able to sell various products to people who have taken them up on their free Web sites.
But numerous high-profile companies such as GeoCities (GCTY:Nasdaq) and Lycos (LCOS:Nasdaq) offer Web sites for free. With competition like that, spending $495 to affiliate with Marketers World seems like throwing money away.
It's relevant to note that entrepreneurs haven't always prospered buying Richdale products in the past. The Florida Attorney General's office has a file of 90 complaints from people who bought products linked to Richdale's "Secrets of Making Money Now" infomercial starring former quarterback Fran Tarkenton. "We still have an open, ongoing investigation against the company," says assistant attorney general Jacqueline Dowd, who labels Zzap.Net's online yellow pages "just a bunch of junk." Dowd and fellow assistant attorney general Lisa Young say Richdale's organization misrepresented its products -- everything from its home-based business kits to multiday seminars.
Zzap.Net's Cimino says most complaints centered around the company's refund policy, which it has since loosened. "If somebody asks for a refund, I say, 'Give them the refund,'" he says.
The Florida officials say their office has supplied information to a Federal Trade Commission investigation of Richdale's operations, as well as to the FBI . Staffers at the FTC and FBI declined comment on the subject, as did Cimino.
Behind Richdale and Cimino is British Columbia stock promoter Rene Hamouth. The British Columbia Securities Commission says it has a "substantial" file on Hamouth. "Regulators have been aware of him for a significant period of time," a spokesman says, without elaborating further. In 1993, Hamouth was acquitted in Toronto of manipulating the stock price of a mining company, Penway Explorers.
Along with his holdings in Zzap.Net, which he would only describe as "significant," Hamouth is the onetime president of Corsaire Snowboard (SNBD BB), a company that has a lot to do with litigation and little to do with snowboards. The company put "snowboard" in its name in anticipation of an acquisition that never took place. Subsequently, it announced acquisitions of three different companies -- an herbal supplement company, a barter exchange and an Italian industrial mineral company -- but apparently completed none of them. Earlier this year, it sued several companies and people over its inability to complete the Italian acquisition.
Both Hamouth and Cimino say Zzap.Net's strength will be its ability to integrate its Internet activities with its other sales operations -- not just the infomercials, but also telemarketing and direct mail. "We're not banking on the Internet," Cimino says. "We're using it as an additional tool, not the sole tool."
But Zzap.Net recently acquired Richdale's 18% personal stake in Summus Technologies, a privately held company based in Fort Lauderdale, Fla., that's actually recognized as a leader in a certain type of image compression. (The price was undisclosed.) Zzap.Net, which is selling Summus' software for selling short videos via email, insists it has discovered something big, not just another asset owned by Richdale. Buying into Summus, Cimino said before the deal was announced, "probably will be the biggest story to hit the Internet ... since the beginning of the Internet."
We'll see about that. Lee J. Nelson, an independent consultant in McLean, Va., says that Summus is one of the two leaders in wavelet-based image compression, as the company's specialty is known. But he doubts that video email will be a runaway success. "In email, I want to transmit a message as quickly and cleanly as possible, with no bells, no whistles, no adornment," he says. "Do I want to get a video image stream on my email? I don't think so."
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