|Headquarters||San Francisco, California, U.S.|
Pets.com was a former dot-com enterprise that sold pet supplies to retail customers. It began operations in August 1998 and closed in November 2000. A high-profile marketing campaign gave it a widely recognized public presence, including an appearance in the 1999 Macy's Thanksgiving Day Parade and an advertisement in the 2000 Super Bowl. Its popular sock puppet advertising mascot was interviewed by People magazine and appeared on Good Morning America.
Although sales rose dramatically due to the attention, the company was weak on fundamentals and actually lost money on most of its sales. Its high public profile during its brief existence made it one of the more noteworthy failures of the dot-com bubble of the early 2000s. US$300 million of investment capital vanished with the company's failure. The company was headquartered in San Francisco.
Pets.com was a short-lived online business that sold pet accessories and supplies direct to consumers over the World Wide Web. It launched in August 1998 and went from an IPO on a major stock exchange (the Nasdaq) to liquidation in 268 days. Other similar business-to-consumer companies from the same period include Webvan (groceries) and Boo.com (branded fashion apparel).
After its start by Greg McLemore, the site and domain was purchased in early 1999 by leading venture capital firm Hummer Winblad and executive Julie Wainwright. Amazon.com was involved in pets.com's first round of venture funding, purchasing a majority 54% stake in the company. The CEO of Pets.com said of Amazon's investment, "This is a marriage made in heaven". Pets.com bought out one online competitor, Petstore.com, in summer 2000.
The company rolled out a regional advertising campaign using a variety of media (TV, print, radio and eventually a Pets.com magazine). It started with a five-city advertising campaign rollout and then expanded the campaign to 10 cities by Christmas, 1999. The company succeeded wildly in making its mascot, the Pets.com sock puppet, well known. The Pets.com site design was extremely well received, garnering several advertising awards. In January 2000, the company aired its first national commercial as a Super Bowl ad which cost the company $1.2 million and introduced the country to their answer as to why customers should shop at an online pet store: "Because Pets Can't Drive!" That ad was ranked #1 by USA Today's Ad Meter and had the highest recall of any ad that ran during the Super Bowl. The company went public in February 2000; the former Nasdaq stock symbol was IPET.
Pets.com made significant investments in infrastructure such as their warehousing. Pets.com management maintained that the company needed to get to a revenue run rate that supported this infrastructure buildout. They believed that the revenue target was close to $300 million to hit the break even point and that it would take a minimum of four to five years to hit that run rate. This time period was based on growth of Internet shopping and the percentage of pet owners that shopped on the Internet.
Despite its success in building brand recognition, it was uncertain whether a substantial market niche existed for Pets.com. No independent market research preceded the launch of Pets.com. During its first fiscal year (February to September 1999) Pets.com earned revenues of $619,000, yet spent $11.8 million on advertising. Pets.com lacked a workable business plan and lost money on nearly every sale because, even before the cost of advertising, it was selling merchandise for approximately one-third the price it paid to obtain the products. Pets.com tried to build a customer base by offering discounts and free shipping, but it was impossible to turn a profit while absorbing the costs of shipping for heavy bags of cat litter and cans of pet food within a business field whose conventional profit margins are only two to four percent. The company hoped to shift customers into higher margin purchases, but customer purchasing patterns failed to change and during its second fiscal year the company continued to sell merchandise for approximately 27% less than cost, so the dramatic rise in sales during Pets.com's second fiscal year only hastened the firm's demise.
By the fall of 2000, and in light of the venture capital situation after the bursting of the dot-com bubble, the Pets.com management and board realized that they would not be able to raise further capital. They aggressively undertook actions to sell the company. PetSmart offered less than the net cash value of the company, and Pets.com's board turned down that offer. The company announced they were closing their doors on the afternoon of November 6, 2000, mere hours before the 2000 United States presidential election. Pets.com stock had fallen from its IPO price of $11 per share in February 2000 to $0.19 the day of its liquidation announcement. At its peak, the company had 320 employees, of which 250 were employed in the warehouses across the U.S. While the offer from PetSmart was declined, some assets, including its domain, were sold to PetSmart.
The Pets.com management stayed during the liquidation and CEO Julie Wainwright received $235,000 in severance on top of a $225,000 "retention payment" while overseeing the closure. In June 2008, CNET named Pets.com as one of the greatest dot-com disasters in history.
Pets.com hired the San Francisco office of TBWA\Chiat\Day to design its advertising campaign. The firm had recently created the popular Taco Bell chihuahua. For Pets.com they designed a doglike sock puppet that carried a microphone in its paw. The puppet, performed by Michael Ian Black (an alumnus of MTV's surrealist comedy sketch show The State), was a simple sock puppet with button eyes, flailing arms and a stick microphone emblazoned with "pets.com".
As the puppet's fame grew through 1999 and 2000, it gained almost cult status and widespread popularity. The puppet made an appearance on ABC's Good Morning America, Nightline, Live with Regis and Kathie Lee, and even had a balloon made in its image for the 1999 Macy's Thanksgiving Day Parade. In addition to the media appearances the Pets.com puppet made, merchandising was also done for the company including clothing, other trinkets, and a retail version of the sock puppet that delivered some of the puppet's famous lines.
The sock puppet toy was the last item available for order on the Pets.com site at the time of its shutdown in 2000.
As Pets.com's recognition began to grow, it attracted the attention of the creator of Triumph the Insult Comic Dog. Representatives from Robert Smigel sent letters, including a cease and desist demand, to Pets.com claiming that the puppet was based on Triumph. Pets.com responded by suing Smigel in California.
The publicity surrounding the Pets.com puppet, combined with the company's collapse, made it such a symbol of dot-com folly that E-Trade referred to it in an advertisement during the 2001 Super Bowl. The commercial, which parodies the famous Crying Indian public service advertisement from 1971, shows a chimpanzee riding on horseback through a ruined dot-com landscape. The chimpanzee comes across a company named "eSocks.com" that is being demolished and weeps when a discarded sock puppet lands at his feet.
After the company folded, Hakan and Associates and Bar None, Inc. purchased the rights to the puppet under a joint venture called Sock Puppet LLC for $125,000. Bar None, Inc., an American automotive loan firm, rebranded the microphone to say 1-800-BAR-NONE and gave the puppet a new slogan: "Everybody deserves a second chance." Bar None shot multiple commercials with the sock puppet.
- Pets.com S-1 Registration Statement filed with the SEC in connection with its IPO.
- "Amazon.com Announces Investment in Pets.com". Amazon.com. March 29, 1999. Retrieved February 14, 2014.
- A Startup's Best Friend? Failure
- Kirk Cheyfitz (2003). Thinking Inside the Box: The 12 Timeless Rules for Managing a Successful Business. Simon & Schuster. pp. 30–32. ISBN 978-0-7432-3575-4. Retrieved 2009-04-22.
- Matt Haig (2005). Brand failures: The Truth about the 100 Biggest Branding Mistakes of All Time. Kogan Page Publishers. pp. 188–191. ISBN 978-0-7494-4433-4. Retrieved 2009-04-22.
- Pets.com raises $82.5 million in IPO
- "The greatest defunct Web sites and dotcom disasters". CNET. 2008-06-05. Archived from the original on 2008-06-07. Retrieved 2008-06-05.
- Information on Smigel's lawsuit at The Smoking Gun
- E-Trade Chimp on a Horse commercial, aired during the 2001 Super Bowl
- "Sock Puppet On Board With Bar None!" (Press release). BarNone. 2002-05-09. Retrieved 2009-02-24. "Bar None and Hakan Enterprises, Inc., joined forces to secure the rights for the Sock Puppet – and they are excited to be able to give him a “second chance” in the advertising world."
- See the BarNone SockPuppet in Our Television Ads. Bar None. Accessed 2009-03-11.
- Pets.com (domain now owned by PetSmart)
- www.barnone.com—website which currently owns the puppet's rights
- "Pets.com, Sock Puppet's Home, Will Close" New York Times article
- "Investors put Pets.com to sleep; Garden.com wilts"—Internet Retailer
- "Pets.com is extraordinary!"—Epinions
- "Pets.com to finalize liquidation plans"—InfoWorld via the Wayback Machine