Pets.com

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Pets.com, Inc.
Fate Self-liquidated
Founded February 1999; 19 years ago (1999-02)
Defunct November 9, 2000 (2000-11-09)
Headquarters 435 Brannan Street, San Francisco, California, U.S.[1]
Number of employees
320
Website www.Pets.com at the Wayback Machine (archived March 1, 2000)

Pets.com, Inc.[2] was a dot-com enterprise headquartered in San Francisco that sold pet supplies to retail customers. It began operations in February 1999 and liquidated 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 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.

History[edit]

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 February 1999 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).

On November 21, 1994, the Pets.com domain name was registered by Entrepreneur Greg McLemore.[3][4] After McLemore sold his company Toys.com to EToys, the domain name was put under the ownership of Webmagic, another company McLemore ran, in Late 1998.[5][6] In February 1999, Pets.com was incorporated and Its online pet store was launched the same month.[7] 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.[8] Amazon, along with Winblad Venture Partners and Bowman Capital Management invested $10.5 million into Pets.com in March 1999.[9] The CEO of Pets.com said of Amazon's investment, "This is a marriage made in heaven".[8] By October 2000, Amazon had a 30% stake in the company.[10] Pets.com spent most of the venture funding on large warehouses and other shipment infrastructures, as well as purchasing their biggest online competitor at the time, Petstore.com in June 2000 for $10.6 million.[11][12]

A regional advertising campaign using a variety of media (TV, print, radio and eventually a Pets.com magazine)[13] began. It started with a five-city advertising campaign 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[14] 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 #5 by USA Today's Ad Meter.[15] The company went public on the NASDAQ stock exchange in February 2000 and raised $82.5 million; the former Nasdaq stock symbol was IPET.[16][17]

Despite its success in building brand recognition, it was uncertain whether a substantial market niche existed for Pets.com.[18] No independent market research preceded the launch of Pets.com.[18] During its first fiscal year (February to September 1999) Pets.com earned revenues of $619,000, yet spent $11.8 million on advertising.[18] 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.[18] 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.[18][19] 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.[18]

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 (PetSmart would later buy a more successful version of Pets.com in 2017 called Chewy). The company announced on November 7, 2000[20] that they would cease taking orders on November 9, 2000 at 11am PST and laid off 255 of their 320 employees.[21][22] Pets.com had around 570,000 customers before its shutdown.[23] Pets.com stock had fallen from its IPO price of $11 per share in February 2000[24] to $0.19 the day of its liquidation announcement. At its peak, the company had 320 employees,[25] 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.[26] As of August 2018, the Pets.com domain redirects to PetSmart.com.[27]

The Pets.com management stayed during the liquidation, which was finalized during a meeting on January 16, 2001 and CEO Julie Wainwright received $235,000 in severance on top of a $225,000 "retention payment" while overseeing the closure.[28] In June 2008, CNET named Pets.com as one of the greatest dot-com disasters in history.[29]

Charity[edit]

During the company's existence, Pets.com partnered with Best Friends Animal Sanctuary to start a charity called "Pets.commitment", which provided funding and support for animal shelters, animal therapy, service dog programs, pet care and wellness organizations. The charity's motto was "people helping animals, animals helping people."[30]

Sock puppet[edit]

The Pets.com sock puppet

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.[18] 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, a watch for a collar, and a stick microphone emblazoned with "pets.com".[18][31] The sock puppet first appeared in Pets.com's advertising in August 1999.[32]

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 and Nightline, WABC-TV-produced Live with Regis and Kathie Lee, was interviewed in People Magazine and even had a 36 foot tall balloon made in its image for the 1999 Macy's Thanksgiving Day Parade.[33][34][35][36] 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.[37] The Pets.com sock puppet toy was available until the website's shutdown.[38] The Pets.com sock puppet also had an autobiography of himself titled "Me by Me", which was released in 2000.[39][40]

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. The chimpanzee sheds a tear and walks away on his horse. The commercial then cuts to text that says "Invest Wisely", the E-Trade logo fades in and the commercial cuts to black.[41][42][43]

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 in 2002.[18][44][45] Bar None, Inc., an American automotive loan firm, rebranded the microphone to say 1-800-BAR-NONE and gave the puppet a new slogan: "Everyone deserves a second chance." Bar None shot multiple commercials with the sock puppet.[46] The sock puppet can be seen on Bar None's website.[47]

Lawsuit[edit]

As Pets.com's recognition began to grow, it attracted the attention of the creators of Triumph, the Insult Comic Dog and Ed the Sock. 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 the U.S. District Court in San Francisco on April 12, 2000, demanding $20 million in damages for defamation and trade libel. But in revenge, on an episode of Saturday Night Live, Triumph humped the Pets.com dog in a bathroom.[48][49][50][51] The lawsuit was dismissed on February 16, 2001 by Judge Charles R. Breyer.[52]

References[edit]

  1. ^ "FORM S-1/A" (PDF). 
  2. ^ Merlo, Omar. Pets.com Inc.: The Rise and Decline of a Pet Supply Retailer. 
  3. ^ "Pets.com WHOIS, DNS, & Domain Info - DomainTools". whois.domaintools.com. Retrieved 2018-06-18. 
  4. ^ Merlo, Omar. Pets.com Inc.: The Rise and Decline of a Pet Supply Retailer. 
  5. ^ "Yahoo! News - WebMagic". WebMagic. 1998-11-04. Retrieved 2018-06-18. 
  6. ^ Merlo, Omar. Pets.com Inc.: The Rise and Decline of a Pet Supply Retailer. 
  7. ^ Merlo, Omar. Pets.com Inc.: The Rise and Decline of a Pet Supply Retailer. 
  8. ^ a b "Amazon.com Announces Investment in Pets.com". Amazon.com. March 29, 1999. Retrieved February 14, 2014. 
  9. ^ Tarsala, Mike. "Pets.com killed by sock puppet". MarketWatch. Retrieved 2018-06-22. 
  10. ^ Abelson, Reed. "TECHNOLOGY; Pets.com, Sock Puppet's Home, Will Close". Retrieved 2018-06-12. 
  11. ^ "Pets.com to buy assets of rival Petstore.com". CNET. 2000-06-13. Retrieved 2018-06-06. 
  12. ^ K. Ryan, Peter. How Venture Capital Works. 
  13. ^ "Wayback Machine". 2000-03-06. Retrieved 2018-06-10. 
  14. ^ A Startup's Best Friend? Failure
  15. ^ "Watch 5 of the best Super Bowl commercials from 2000". Ad Meter. 2015-01-21. Retrieved 2018-07-21. 
  16. ^ "Pets.com raises $82.5 million in IPO". CNET. 2000-02-10. Retrieved 2018-06-07. 
  17. ^ K. Ryan, Peter. How Venture Capital Works. 
  18. ^ a b c d e f g h i 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. 
  19. ^ 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. 
  20. ^ "Pets.com goes out of business - Nov. 7, 2000". money.cnn.com. Retrieved 2018-07-26. 
  21. ^ "The Pets.com Phenomenon". NBC News. Retrieved 2018-05-21. 
  22. ^ Journal, Pui-Wing Tam and Mylene MangalindanStaff Reporters of The Wall Street. "Pets.com Will Shut Down, Citing Insufficient Funding". WSJ. Retrieved 2018-07-26.  line feed character in |title= at position 25 (help)
  23. ^ Tarsala, Mike. "Pets.com killed by sock puppet". MarketWatch. Retrieved 2018-06-06. 
  24. ^ Pets.com raises $82.5 million in IPO
  25. ^ "The Pets.com Phenomenon". NBC News. Retrieved 2018-06-27. 
  26. ^ "Petsmart.com snaps up rival domain name". CNET. 2000-12-04. Retrieved 2018-06-18. 
  27. ^ "Pet Supplies, Accessories and Products Online | PetSmart". www.pets.com. Retrieved 2018-08-01. 
  28. ^ Mearian, Lucas. "Pets.com to finalize liquidation plans". Computerworld. Retrieved 2018-07-18. 
  29. ^ "The greatest defunct Web sites and dotcom disasters". CNET. 2008-06-05. Archived from the original on 2008-06-07. Retrieved 2008-06-05. 
  30. ^ "Pets.commitment: Pets.com is partnering with Best Friends Animal Sanctuary". 2000-05-29. Retrieved 2018-07-26. 
  31. ^ "Oak Leaf 27 January 2000 — California Digital Newspaper Collection". cdnc.ucr.edu. Retrieved 2018-06-12. 
  32. ^ "Pets.com goes out of business - Nov. 7, 2000". money.cnn.com. Retrieved 2018-06-22. 
  33. ^ Abelson, Reed. "TECHNOLOGY; Pets.com, Sock Puppet's Home, Will Close". Retrieved 2018-06-12. 
  34. ^ Kaufman, Leslie. "Media; The Sock Puppet That Roared: Internet Synergy or a Conflict of Interest?". Retrieved 2018-06-15. 
  35. ^ Eaton, Leslie. "And Now, a Balloon From Our Sponsor". Retrieved 2018-06-24. 
  36. ^ G. Weinzimmer, Laurence. The Wisdom of Failure: How to Learn the Tough Leadership Lessons Without. 
  37. ^ "Pets.com goes out of business - Nov. 7, 2000". money.cnn.com. Retrieved 2018-06-03. 
  38. ^ "Pets.com goes out of business - Nov. 7, 2000". money.cnn.com. Retrieved 2018-06-03. 
  39. ^ "Pets.com Sock Puppet". Business Insider. Retrieved 2018-06-28. 
  40. ^ Asen, Ben (2000). Me by me : the pets.com sock puppet book. New York, NY : Ibooks : Distributed by Simon & Schuster. ISBN 1588243702. 
  41. ^ E-Trade Chimp on a Horse commercial, aired during the 2001 Super Bowl
  42. ^ Neuman, Jay. The Complete Internet Marketer. 
  43. ^ "2HRS2GO: E*Trade wins ad Super Bowl". CNET. 2001-02-22. Retrieved 2018-07-21. 
  44. ^ "Sock Puppet On Board With Bar None!" (Press release). BarNone. 2002-05-09. Archived from the original on June 2, 2002. 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. 
  45. ^ WATERCUTTER, ANGELA (2002-06-24). "Sock Puppet Finds a New Home". Los Angeles Times. ISSN 0458-3035. Retrieved 2018-06-18. 
  46. ^ "See the BarNone SockPuppet in Our Television Ads". Bar None. Archived from the original on 2009-08-19. Retrieved 2009-03-11. 
  47. ^ "10 big dot.com flops - Pets.com (1) - CNNMoney.com". money.cnn.com. Retrieved 2018-06-12. 
  48. ^ Information on Smigel's lawsuit at The Smoking Gun
  49. ^ "Daily Kent Stater 27 April 2000 — Kent State University". dks.library.kent.edu. Retrieved 2018-06-12. 
  50. ^ BROWNFIELD, PAUL (2000-05-04). "This Legal Dogfight Is No Joke". Los Angeles Times. ISSN 0458-3035. Retrieved 2018-07-26. 
  51. ^ "PETS.COM POOP$ ON CONAN'S 'PUP'PET". New York Post. 2000-04-26. Retrieved 2018-08-11. 
  52. ^ "Case docket: Pets.com Inc v. Smigel". ia802307.us.archive.org. Retrieved 2018-08-10. 

External links[edit]