FC: eToys pays for bullying etoy? Fat chance

[Declan McCullagh <declan () well com>]

The attached article claims that etoys' (plural) stock dip this month was
caused by "bullying" etoy (singular).

It is an interesting theory, and it might be nice if it were true. But it is
not. Here's what happened this month that's actually relevant:

* JP Morgan started coverage of etoys with a mere "market perform" rating,
saying it won't be the next amazon. JP Morgan analyst Tom Wyman set a price
target of $50 in one year, essentially forecasting no increase.
* etoys insiders said they were selling off a million shares
* Media Metrix reported toysrus.com has surpassed etoys in weekly visitors
* toysrus.com grew 355 percent from last year as opposed to etoys' 52 percent
increase
* toytime.com was the largest ecommerce gainer in any category, according to
Media Metrix
* Only one of 11 analysts following etoys stock rated it a "buy"

In fact, etoys' successful assault on etoy.com could have prevented shares
from
slipping lower. Investors might well have been encouraged by even a
preliminary
legal victory by etoys.  Second, even if you buy the theory that investors
reacted to the news, why would they wait until 2 December to price in a report
that came out on 1 December? It sure doesn't take 24 hours for the market to
react.

There is room for optimism in Internet activism. But extraordinary claims,
such
as the one below, require extraordinary proof. Correlation does not equal
causation, and wishful thinking does not make it so.

-Declan


> <http://www.tbtf.com/blog/#5>
>
> Friday, December 10, 1999
> 12/10/99 12:18:51 PM 
>
> eToys pays in market cap for bullying etoy. By now you know that
> online toy retailer eToys, an Idealab company, has taken a group of
> European artists to court and stripped them of the domain name
> etoy.com, which the artists' collective owned years before eToys
> even existed. Here's the first press account of the fiasco.[1] This
> in-depth report by "Claire Barliant" was published in the Village
> Voice on 1 December.[2] (A nearly identical story by "Claire
> Adamsick" appeared the same day in the TwinCities City Pages.) See
> here for a seemingly complete and up-to-date list of media coverage
> on eToys/etoy.[3] 
>
> This David-and-Goliath story has found resonance among that part of
> the public that invests in Internet stocks. Here is a comparison
> over the last three months of eToys' (NASD: ETYS) stock performance
> compared to an index of Internet stocks. Until very recent days the
> price behavior of eToys visibly followed the same trends as the
> rest of the Net stocks. Until 2 December. See this close-up of the
> last 10 days.[4] 
>     
> TBTF Irregular Ted Byfield, whose research provided the first three
> links above, has these thoughts on the mechanics of eToys' recent
> poor showing in the market. 
>     
>     Not for one moment do I doubt that there's a nearly
>     mechanical cause-and-effect relationship here. Organizing
>     boycotts used to be a desperate uphill battle; think, for
>     example, of the grape boycotts, the difficulty of stopping
>     shoppers in a supermarket parking lot and explaining why not
>     buying brand X or commodity Y would somehow vaguely and
>     indirectly be a good thing. No more: it takes no energy not
>     to type "www.etoys.com" into a URL field, and one can just
>     as easily -- say, five clicks -- find their competition in
>     Yahoo. And, perhaps most important, I suspect that a lot of
>     people get a complex charge out of "taking their money
>     elsewhere." When you've been bludgeoned into the shape of a
>     robot "consumer" whose only freedom and power is to vote
>     with your wallet, it's just as the ads say: you will. 
>     
> TBTF Irregular Gary Stock adds: 
>     
>     There is a sense that "everybody" is getting in on the
>     e-market. I think not. NASDAQ and IPO activity is most
>     influenced by folks who've been in technology for a while.
>     That is, e-markets are most affected by feelings /
>     expectations of the slightly-to-extremely geeky. They're the
>     folks with discernment, first-hand tech-knowledgey -- and
>     they get those "friends and family" IPO buy-in offers. That
>     crowd is most likely to be upset by eToys' approach. So,
>     they (and the folks they frisbee golf, ski, or i-game with)
>     are voting with their feet. 
>     
> [1] <http://www.villagevoice.com/issues/9948/barliant.shtml>
> [2] <http://www.citypages.com/databank/20/991/article8260.asp>
> [3] <http://dmoz.org/Society/Activism/Media_Activism/Culture_Jamming/>    
etoy/Media_Coverage/>
> [4] <http://tbtf.com/pics/etys-iix-3mo.gif>




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