Tuesday, September 06, 2005

Got the "O"?

The Motley Fool’s Jeff Hwang wrote an interesting take on Overstock.com and its profitability. He points out that if Overstock ceases to spend on advertisements, then the company will be profitable. He assumes that by cutting on advertisements, OSTK will continue to grow at a zero percent rate.

There are some things to consider. He also assumes that the past customers will continue to return to overstock.com and spend the same amount. There are a lot of “ifs” to Hwang’s version of “worst-case scenario”. The real worst-case scenario would be OSTK ceases to advertise, customers do not return, and OSTK’s revenue falls.

I personally do not wish the worst for OSTK. I’m simply pointing out the immense hurdles that the company must overcome to survive. I don’t think it’s wise or realistic to completely stop spending on advertisements. Perhaps a change of its marketing to that of something more effective would be in OSTK’s best interests.


At 6:14 PM, Anonymous QUALITY STOCKS UNDER 5 DOLLARS said...

Another great post thanks a million.


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