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iBaby Out With the Bathwater

Retail investors have been treated to a dizzying number of flavors of the month since Internet mania initially took hold of the market a couple of years ago. With each new trend comes a tsunami of me-too competitors, but after the music dies down, the other shoe falls. It's like watching a stampeding herd stumble after one another without so much as a glance toward the impending cliff.

IVillage is a veritable graybeard of dot-com fads - in vogue today, a fashion faux pas tomorrow. Falling somewhere between the feverish investing that surrounded online auctioneers and e-incubators, iVillage landed on Wall Street when women-centric portals were all the rage. Armed with a staggering war chest and blue chip backers, the start-up struck while the iron was hot; and investors greeted the newcomer with reckless abandon.

After soaring to an intra-day high of nearly $130 early last year, iVillage has crumbled to within a stone's throw of its all-time low of $6. Many investors are still smarting from the company's dramatic fall from grace, but for those still paying attention, iVillage has been forced to tighten the belt and circle the wagon.

This week, iVillage finally gave its iBaby e-commerce venture up for adoption. The latest move points to signs of a struggling parent coming to grips with a failed e-commerce initiative. As it stands now, iVillage makes roughly three quarters of its cash from sponsorships and banner ads. When money grew on trees, the company could easily afford to aggressively expand into new revenue streams. But during lean times, the iBaby endeavor became just another mouth to feed.

As of Thursday, New York-based Babygear.com is the proud parent of iBaby. Little cash changed hands under the terms of the deal. Instead, iVillage took an equity stake in the suitor, and Babygear agreed to - you guessed it - a five year sponsorship package with the women's portal.

Although the juicy details of the hand-off weren't disclosed, it's an obvious win-win for both companies. IVillage unloads a cash drain that was fast becoming more trouble than it was worth, while actually getting something of substance in return. And Babygear gets a respectable brand that should boost its overall baby merchandise superstore.

Babystore.com's CEO Preston Bealle opined, "The primary key to this partnership, apart from placing Babygear.com even further in front as a category owner, is that it allows both companies to focus on what they do best, while still maintaining and strengthening their unique core brands."

Couldn't have said it better myself.

Any questions or comments, love letters or hate mail? As always, feel free to forward them to kblack@internet.com.

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