NordVPN Promotion

Home / Blogs

Thoughts on the Toys “R” Us Acquisition of Toys.com

Protect your privacy:  Get NordVPN  [ Deal: 73% off 2-year plans + 3 extra months ]
10 facts about NordVPN that aren't commonly known
  • Meshnet Feature for Personal Encrypted Networks: NordVPN offers a unique feature called Meshnet, which allows users to connect their devices directly and securely over the internet. This means you can create your own private, encrypted network for activities like gaming, file sharing, or remote access to your home devices from anywhere in the world.
  • RAM-Only Servers for Enhanced Security: Unlike many VPN providers, NordVPN uses RAM-only (diskless) servers. Since these servers run entirely on volatile memory, all data is wiped with every reboot. This ensures that no user data is stored long-term, significantly reducing the risk of data breaches and enhancing overall security.
  • Servers in a Former Military Bunker: Some of NordVPN's servers are housed in a former military bunker located deep underground. This unique location provides an extra layer of physical security against natural disasters and unauthorized access, ensuring that the servers are protected in all circumstances.
  • NordLynx Protocol with Double NAT Technology: NordVPN developed its own VPN protocol called NordLynx, built around the ultra-fast WireGuard protocol. What sets NordLynx apart is its implementation of a double Network Address Translation (NAT) system, which enhances user privacy without sacrificing speed. This innovative approach solves the potential privacy issues inherent in the standard WireGuard protocol.
  • Dark Web Monitor Feature: NordVPN includes a feature known as Dark Web Monitor. This tool actively scans dark web sites and forums for credentials associated with your email address. If it detects that your information has been compromised or appears in any data breaches, it promptly alerts you so you can take necessary actions to protect your accounts.

Using the purchase by Toys “R” Us of Toys.com as an example, I outline the problems that come with using the popular ascending auction design and point out some of the potential strategic uses and signals of the domain name acquisition.

Toys “R” Us paid $5.1 million in February 2009 for Toys.com. It outbid five others, including National A-1 Advertising and Frank Schilling. The auction was closely watched by the industry, though a number of popular blogs (click here and here) focused on how the deal would affect search engine optimization (SEO), which is, at best, of tertiary importance to shareholder value creation when compared with visitors’ experience management.

Was the auction design optimal for the seller? What is the company signaling about its future strategy? The blogs missed out on these key issues.

Auction Mechanism Design

Could the owner (and the auction house) have made more money using a different auction mechanism?

The ascending (often called “English”) auction popularized by eBay is not always best. An alternative is a sealed-bid (or “Dutch”) auction. And under certain conditions, the smartest choice is a combination of the two, the Anglo-Dutch auction.

An Anglo-Dutch auction begins with would-be buyers bidding up the price until two contenders are left, at which point each makes a sealed-bid offer no lower than the current asking price. The process is similar to the way houses are often sold.

In a pure ascending auction, an 800-pound gorilla—a would-be buyer known to be both very determined and very rich—can scare off other contenders before a bid gets made. Toys “R” Us was such a competitor due to its market size and its recent acquisition of eToys.com. The hybrid model, with the uncertainty of outcome made possible by its sealed-bid showdown, might have emboldened more contenders to take part.

Even before hitting its second, or Dutch, stage, an Anglo-Dutch auction will sometimes generate higher bids than a purely ascending auction. Bidders compete to reach the second stage, and the uncertainty of the arrangement makes collusion less likely.

Best Use

It is not clear what Toys “R” Us is planning to do with the domain name. The company has in the past relied on a short-tail strategy of selling popular items. Other online competitors have followed a long-tail strategy. Thus, Toys “R” Us has the option of using the domain name to follow either of these strategies or a combination. Moreover, Toys “R” Us could be sending mixed signals to keep its competitors from guessing about its future strategy, thus increasing their costs. However, more analysis is needed to determine the best use of the domain name, which would also shed some light on whether the other bidders and potential bidders missed an acquisition opportunity.

Concluding Remarks

When analyzing, say, the auctioning of single-character domain names or new TLDs, it is important to have an auction mechanism that is most appropriate for the item being sold. We should not use a convenient one-fits-all design.

Although SEO should not be ignored, a company’s first priority is to put the acquired domain to its best use and design its Web site with a focus on the visitors’ experience so as to increase the visit-to-sales conversion rate and customer satisfaction for repeat purchases.

By Alex Tajirian, CEO at DomainMart

Filed Under

Comments

Comment Title:

  Notify me of follow-up comments

We encourage you to post comments and engage in discussions that advance this post through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can report it using the link at the end of each comment. Views expressed in the comments do not represent those of CircleID. For more information on our comment policy, see Codes of Conduct.

CircleID Newsletter The Weekly Wrap

More and more professionals are choosing to publish critical posts on CircleID from all corners of the Internet industry. If you find it hard to keep up daily, consider subscribing to our weekly digest. We will provide you a convenient summary report once a week sent directly to your inbox. It's a quick and easy read.

I make a point of reading CircleID. There is no getting around the utility of knowing what thoughtful people are thinking and saying about our industry.

VINTON CERF
Co-designer of the TCP/IP Protocols & the Architecture of the Internet

Related

Topics

IPv4 Markets

Sponsored byIPv4.Global

DNS

Sponsored byDNIB.com

Cybersecurity

Sponsored byVerisign

Brand Protection

Sponsored byCSC

Domain Names

Sponsored byVerisign

Threat Intelligence

Sponsored byWhoisXML API

New TLDs

Sponsored byRadix

NordVPN Promotion