Fool.com: eToys Isn't Playing Around (News) August 12, 1999

eToys Isn't Playing Around

By Dave Marino-Nachison (TMF Braden)
August 12, 1999

Online toy emporium eToys (Nasdaq: ETYS) made a pretty logical move last night, announcing that it is considering "strategic alternatives" for its Consumer Health Interactive (CHI) division.

CHI became part of the eToys family as part of its acquisition of BabyCenter -- a Web site providing content, community, and e-commerce for parents and parents-to-be -- which closed July 1 after eToys sent over 16 million shares of its stock, at the time worth about $64 million.

What's CHI? If today was the first you'd heard of it, don't be alarmed. The division wasn't mentioned in eToys' press release discussing the BabyCenter acquisition; more importantly, it wasn't mentioned in eToys' press release yesterday discussing its new three-year, $18 million advertising agreement with America Online (NYSE: AOL) giving it, among other things, "anchor tenant" status in the toys, educational toys, kid and baby gear, collectibles, and electronic games categories of the online services giant's Shop@AOL online shopping area.

Anchor space on AOL is prized by retailers -- especially kiddie ones -- because of the large contingent of youth that uses the service.

That's probably because CHI, an online resource for resource for health plans that want to attract members over the Internet doesn't really seem to fit into the company's grand plan of being a family's one-stop info and shopping source from bassinet to Bar Mitzvah. Its customers currently include Blue Shield of California, Oxford Health Plans, and Sharp Healthcare, and it yesterday launched a new site in connection with Blue Cross and Blue Shield of Massachusetts.

So while CHI might be a dandy business, it's good to see eToys making sure that it's sticking to its core proficiency as, like it says, "BabyCenter continues to focus on its core baby-related content and commerce businesses." (The press release, for the record, says it's considering "a strategic transaction with another participant in the health-care industry, a spin-off of the division, the further development of CHI as a division of BabyCenter, or other alternatives.")

eToys can, with work, sharpen its focus even as it broadens it offerings -- as it did last month, launching not only a children's bookstore with 80,000 titles but also a back-to-school store with more than 1,300 supplies from pencils to lunch pails.

And with companies like Amazon.com (Nasdaq: AMZN) and troubled traditional toy merchant Toys "R" Us (NYSE: TOY) looking to parlay their size, customer base, and brand recognition into toy power, eToys will need a wrinkle that works. (Now seems a dandy time to plug this week's Foolish Duel, which features eToys.)

How far ahead is eToys thinking? When you get a spare moment, head over to the WhoIs domain name search page and see who owns "www.ekids.com." That's not a bad piece of real estate.

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