• by Ken Liebeskind , May 29, 2001

The casualty list of Internet toy sites continues to grow. Everyone knows about etoys.com, the largest failure. Among the other casualties are Toytime.com, Toysmart.com, backed by Disney, and Red Rocket, backed by Nickelodeon, which failed last year. Gamefever.com also folded, then sold its name to Wiredlounge.com, a new video game site.

Most recently, Zanybrainy.com, the biggest ad spender among all online toy outlets last year - $2.5 million according to CMR - filed for Chapter 11 bankruptcy. It filed last month, then reported that it reached a financing agreement that will allow it to stay in business.

With the failure of the online toy industry comes a major drop in online toy advertising. Of course the folded sites have stopped, but even the major players report a drop in spending. After a big fourth quarter last year, Toysrus.com reportedly cut spending dramatically. "We don't spend a lot online," says Jeanne Meyer, a company spokeswoman. She says the company advertises mostly on portals, where vendors go to sell their toys. But the company has even cut back there, pulling out of Yahoo while remaining on AOL and MSN.

There are occasional targeted flights on other sites, but they are mostly limited one-time buys, she says.

The big news for Toys R Us is its partnership with Amazon.com, which began last August. Type in Toysrus.com and you're taken to the Amazon site, where Toys R Us has a major presence. Amazon sends opt-in email to its own lists to promote Toys R Us, while Toys R Us does its own advertising, although most of it is offline advertising for the company's stores that tag information about the Web site. "We piggyback on the marketing vehicles of the parent company, including TV and newspaper inserts," Meyer says.

All major retailers advertise their websites that way, which is another reason online toy advertising is suffering.

Media spoke with a few other toy sites that have also reported drops in advertising. Games2learn.com, a five-year-old site based in Cosa Mesa, CA that sells learning aid games for children six and up, advertised heavily during the dot.com boom. "Two years ago we spent on everything to get the name out," says marketing manager Michelle Williams. "But they didn't get the appropriate return so we're cautious. We try not to drive traffic but to make sales." The company's main ad vehicle now is targeted email. It buys demographic lists of mothers of a certain age and income level from Target Email Direct and Edirect, two Florida list brokers. It also buys sponsorship on an environmental site, Care2.com, "which has the perfect demographics for us," Williams says. It also advertises on Care2.com's email newsletter. The company also operates its own internal email list it markets to.

Toywiz.com, which sells collectibles at one retail store in Nanuet, NY as well as online, is shying away from online advertising because "the cost per sale for online advertising is very high," according to Iris Shamus, who owns the business with her husband. The company tried banners that didn't work too well, then bought cost per click advertising from Goto.com. "It worked well for awhile and then it wasn't working," Shamus says, so the ads were pulled recently. It has basically stopped advertising online, although it maintains a database of 10,000 names it sends email to.

Web portals remain the top place for online toy advertising, with MSN, AOL and Yahoo among the top 10 retail toy sites ranked by impressions, according to Jupiter Media Metrix. Each portal has a toy area, where vendors advertise and sell their wares. Among the new portal advertising opportunities is cross marketing across different channels. Stefanie Schlect, a marketing executive at MSN Sales, says advertising can now be placed on other areas of the site to direct viewers to toys. For instance, an ad can be placed next to a relevant article at Women's Central that directs mothers to the toy area. "We want to deliver the best opportunities for advertisers," Schlect says, indicating they requested advertising on different channels during client feedback meetings MSN held.

Among the toy advertisers on MSN are Toys R Us, Disney, the Discovery store, Lego and Smarterkids, she says.

While Toysrus.com and other major retailers continue to advertise online, so, too, do major toy manufacturers. Hasbro, which sells everything from Tiger electronics to Pokemon toys to traditional board games like Candyland, has a major online presence, especially in the fourth quarter to promote holiday sales.

Beyond Interactive, the online affiliate of Grey Advertising, has created a number of campaigns for Hasbro. Many are directed at sites that appeal to moms with kids. A variety of banners and rich media have been used, according to Joanna Sammartino, account and media director at Beyond. She declined to name the sites for competitive reasons.

Beyond has also created a variety of highly creative campaigns aimed at teens, a powerful online audience because they're on so much. The advertising is anything but traditional because teens "don't want to be advertised to directly, they like to shape their online experience," Sammartino says. To advertise a Tiger electronics product called HitClips, a micro music system that stores and plays music clips, Beyond devised an online contest on Alloy.com, a top teen site, that asked teens what songs they want to hear on their Hit clips and how they would wear it. Hit clips and other prizes were awarded. "The response was overwhelming," Sammartino says.

Hasbro also sponsored the Blab poll at Nick.com to advertise the Get Mail toy. Users would see Get Mail logos when they answered Blab poll questions.

While Beyond has had lots of success with Hasbro advertising, Sammartino says the company is spending less this year. It is also trying to get free advertising through barter deals with portals. "They leverage off each other," Sammartino says. "Yahoo gives them placement on the site in exchange for products they can give away."

Sammartino says a barter deal was worked out for Hasbro late last year and the company is pursuing others now. "It may be the new trend," she says. "Advertisers are reluctant to spend dollars online and barter deals give them premiere placement of product." Barters are harmful to agencies like Beyond, which can't charge a commission for a moneyless deal.

It's another problem the industry will have to overcome to make toys a winning online ad category.