The story of eToys is yet another cautionary tale of the dangers of poor financial management and unchecked ambition. The company was founded in 1997 with a goal of dominating the online toy market. It looked for a moment like it was going to work — sales were through the roof in its first holiday season, and a big IPO followed in 1999. But eToys couldn't keep up with massive demand during the 1999 holidays, and things went downhill after that. The company lost $74.5 million just in the fourth quarter of 2000, and by the time eToys filed for bankruptcy in 2001 it was $247 million in debt [source: Gentile].
Executives at eToys made a slew of unwise decisions, but bad timing was also partially to blame. By 2000, many formerly gung-ho venture capitalists had been burned one too many times by flashy startups that quickly went down the tubes, so they were definitely tightening the purse strings and starting to become more hesitant about investing. Retail markets also took a turn for the worse, which might not have been so devastating for eToys if its higher-ups had adjusted for it.
Of course, you can still buy toys on the Internet today — from eToys and any one of its many competitors. It's nowhere close to the market dominator it briefly was, but the company has been owned by Toys R Us since 2009.