BabyUniverse, an internet retailer of baby products, became a public company (stock symbol: BUN) in August, 2005. Consumers, competitors, suppliers, and investors all have an interest in understanding what approach this major internet retailer intends to take as it pursues its objective of becoming “the leader in the online baby marketplace.” Very quickly announcing its acquisition of Dreamtime Baby, a former internet competitor, Baby Universe confirmed its intentions of seeking growth through acquisitions. The question for consumers is how will Baby Universe use the marketing clout that they will clearly gain as the result of this and future acquisitions.

Internet retailers attract visitors through a variety of means, one of which is pay-per-click advertising on the major search engines. Because the content of such advertising is under the control of the advertiser (as compared to regular search engine listings), it is possible to discern the intent of an internet retailer by examining this advertising. I reviewed a sampling of the pay-per-click advertising being run by Baby Universe and its affiliated companies in December, 2005 in an effort to understand their marketing strategy. The message seems to be: “Consumer beware!”.

Take Kidsline crib bedding for example. Kidsline is a well-known brand of crib bedding sold by most major internet retailers of crib bedding. What does Baby Universe’s pay-per-click advertising in this product group say about their marketing strategy:

· A search for “Kidsline” at Yahoo brought up a Baby Universe advertisement stating: “Limited time offer. Get free shipping an all kidsline baby bedding orders over $99. Act now offer ends soon-exclusively at babyuniverse.” The fact is that Baby Universe has been offering free shipping on bedding orders over $99 for well over a year, as do most major internet retailers. It is highly unlikely that Baby Universe has any real intent of ending this offer any time soon, calling into question their claims of “limited time offer” and “offer ends soon.” Furthermore, their claim of “exclusively at babyuniverse” is contradicted by the fact that numerous other websites, including Dreamtimebaby which they own, have been offering the same promotion for well over a year.

· A search for Kidsline at Google brought up a Baby Universe advertisement stating: “Free Shipping on orders over $99 Act Now – Offer Ends Soon!” Their statement that the “Offer Ends Soon!” seems unlikely given the circumstances.

· A search for “Kidsline” at Yahoo also brought up a Dreamtimebaby advertisement announcing “free shipping.” It seems impossible for Baby Universe to be unaware that their offer is not an exclusive if their wholly owned subsidiary is advertising the same promotion.

· A search for “Kidsline” at Yahoo also brought up a Cozybaby advertisement for Kidsline bedding. It is unclear who Cozybaby is, but they are clearly associated with Baby Universe seeing as their address and fax number are exactly the same as Baby Universe. Clicking on their ad brought me to a page displaying a competing brand of crib bedding,

Take Brandee Danielle crib bedding as another example. Brandee Danielle is another well-known brand of crib bedding. What does Baby Universe’s pay-per-click advertising in this product group say about their marketing strategy? A search on Yahoo for “Brandee Danielle” brought up ads by Dreamtimebaby, Baby Universe, and Cozybaby in the first three positions, an apparent effort to monopolize the paid listings and reduce consumer choice. Even more interesting was the order in which the ads were displayed, something that was under the total control of Baby Universe:

· First was Dreamtimebaby, promoting “Brandee Danielle baby crib bedding on sale now.” But note that Dreamtimebaby’s “on sale” prices for the Brandee Danielle crib bedding were generally $10-20 higher than at Baby Universe.

· Second was Baby Universe, offering free shipping. While they own Dreamtimebaby and thereby control their pricing, they clearly chose to price the identical products lower by $10-20.

· Third was Cozybaby. Interestingly, they sell only the crib bedding sets at the same prices as Baby Universe, but none of the numerous coordinating accessories.

Babyuniverse’s strategy here seems clear. Manipulate shoppers to their higher priced store first – who knows; maybe she won’t shop around and Babyuniverse will get the higher price at Dreamtimebaby. For those shoppers who choose to click a second ad, send them to the lower-priced store where the comparison with the first store will make their prices look that much better. For thorough comparison shoppers, on their third try, send them to another store (assuming that Cozybaby is an affiliate of Baby Universe) with prices equal to Babyuniverse but offering significantly lesser selection of products – thereby confirming in the consumer’s mind the “good” prices at Baby Universe and frustrating the consumer from looking any further because of the lesser selection.

If these apparent advertising strategies on the part of Baby Universe and its affiliates are any indication, consumer choice in the baby products group is likely to deteriorate with each new Baby Universe acquisition as they attempt to monopolize the search engine advertising listings. While search engines have made great strides in preventing advertisers from monopolizing listings for any given keyword phrase, they do not seem up to the task when an advertiser uses multiple websites. Furthermore, the above Kidsline examples suggest that Baby Universe is not shy about making claims in their advertising that are difficult to back up.

Conclusion: Consumer beware!

The author, Robert Meier, is President of Baby Supermall, an internet retailer of crib bedding including: Kidsline bedding and Brandee Danielle bedding.

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