Pets.com launched in 1998 on the idea that people would buy pet food and supplies online the way they were starting to buy books. The model had a flaw built in: pet food is heavy, retail margins are thin, and Pets.com was selling goods well below cost to win customers, so more sales meant bigger losses. Amazon invested and lent credibility, and a Super Bowl ad made its sock-puppet mascot famous overnight.
The IPO raised $82.5 million in February 2000. By November the stock was at about 19 cents. The company had spent $11.8 million on advertising in a single year while earning $619,000. On 7 November 2000 — nine months after the float — management announced it would shut down and cut most of the staff. PetSmart bought the domain. Pets.com had operated for roughly two years, and its mascot became shorthand for dot-com excess.
Worth remembering
- Amazon was a major shareholder in Pets.com, which lent the startup credibility and helped it reach its IPO — but Amazon could not make the economics work either and did not step in to save it.
- The sock-puppet mascot, voiced by Michael Ian Black, appeared on national television and in a Super Bowl ad and became one of the best-known mascots of 2000; within months it was being sold off as a liquidated asset.
Sources
- Pets.com was founded in November 1998 and raised $82.5 million in its February 2000 IPO; it sold goods at roughly a third of what it paid for them, with shipping costs making profit structurally impossible. Wikipedia
- In its first year Pets.com earned $619,000 in revenue and spent $11.8 million on advertising alone; its sock-puppet mascot appeared as a giant balloon in the 1999 Macy's Thanksgiving Day Parade. Wikipedia
- Pets.com is a textbook dot-com bubble failure, undone by selling below cost to win market share while spending heavily on brand advertising before it had a viable model. Encyclopaedia Britannica
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