The Toy War Escalates

RTMark invites you for a multi-user Internet game whose goal is to damage (or possibly even destroy) the eToys company.

After winning the first round of the toy war, Etoys.com now seems to be on the defensive. On November 29, 1999 a L.A. judge, apparently impressed by eToys's clever mix of accusations -- ranging from child abuse, to communication indecency and securities fraud -- issued a preliminary injunction against etoy which mandated, among others, that etoy shut down immediately its contested etoy.com domain.

The reaction on the net has been furious. Almost overnight, anti-eToys sites have sprung up, with the "offical" toywar.com as the central hub. eToys' board is being flooded with hundreds of protest emails, and calls to boycott eToys.com are circulating broadly on the Internet. These protests denounce what is perceived as foul play by the retail giant and support the artists in their legal and very public fight.

Now, it seems, the goals of the self-declared toywars.COMMUNITY have been raised considerably. RTMark, one of the groups behind the toywar site, has released a new weapon in the info war: "a multi-user Internet game whose goal is to damage (or possibly even destroy) the [eToys] company" (RTMark press release, 12.12.1999).

The game takes the form of a RTMark "mutual fund," or list of sabotage projects, and is managed by Mark Pauline, from the San Fransisco-based art's collective Survival Research Laboratories. The various projects which make up the "etoy Fund", aim to lower the eToys stock market value as much as possible. One of the projects is a "virtual sit-in" which hopes to coordinate efforts of thousands of individual internet users to bring down eToys' servers by overloading them with thousands of simultaneous page request. This tactic was successfully used by a group called "electro hippies" against the WTO server during the protests in Seattle. RTMark's goal is "to cripple the eToys servers during the ten days leading to Christmas" (RTMark press release, 12.12.1999).

According to the toy warriors the campaign, which has received major coverage in the US media, has been extremely successful. To bolster their claims, they point at the fact that since the campaign started eToys' stock price has come down dramatically, from $67 per share to $45 per share, nearly 33%. Referring to the ease of simply shopping at the competition, which makes boycotts quasi effortless of the consumers, analyst Ted Byfield writes:

"Not for one moment do I doubt that there's a nearly mechanical cause-and-effect relationship here", i.e. between the anti-eToys campaign and the price drop.

However, despite the exhuberant claims of the toy warriors, it is less than clear how much of this fall is indeed related to their campaign. Share prices reflect the totality of information available about a company's current and future performance and it is usually difficult to isolate any single influence. Particularly since the toy war was not the only recent bad news for eToys.com. According to the Internet rating company Media Metrix, eToys has been surpassed, in the number of visitors, by its direct competitor: toysrus.com, which has grown 355 percent from last year as opposed to eToys' 52 percent. Furthermore, as Wired News' Declan McCullagh reported, eToys insiders have stated that they were selling off a million of their shares. Consequently, only one of 12 NASDAQ analysts evaluating eToys stock rates it a "strong buy".

The market for Internet stock is, though bullish, hyper sensitive and extremely volatile. The current drop is not unprecedented for eToys shares which went from $84 to $51 between October, 11 and November, 16. Futhermore, popular wisdom about the "new economy" suggests that Internet retailing is a winner-takes-all market, where only one giant can survive. This is thought to be the case because the dynamics of economies of scale tend to be self reinforcing, or as Kevin Kelly put it in his 12 Rules For A New Economy, "[t]hem that's got shall get." This adds to the volatility, since all speculators try to anticipate small differences that will turn into the big differences, or so they hope. And the Media Metrix data may be perceived as the point where the curve tips.

No matter what the relationship between the wider stock market reasoning and the toywar campaign is, additional negative publicity is the last thing eToys needs in such a unstable situation. Worse than that only, of course, would be an effective "virtual sit-in" just before Christmas. If that happens, we are likely to see a more direct relationship between online-protest and stock market preformance. And even more certainly, a new law suit, this time against RTMark.

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