Pets.com

» see pets.com as it lived, on the wayback machine

~ the obit ~

pets.com launched in november 1998 in san francisco. the pitch was simple. you ordered cat food or a chew toy on the website and a box arrived at your door. amazon liked the model enough to take a 54 percent stake in march 1999 for 10.5 million dollars. julie wainwright became ceo. by the end of 1999 the company had a sock puppet mascot voiced by michael ian black and a plan to ipo in early 2000. the advertising budget already dwarfed the revenue.

the sock puppet did the talk show circuit. it floated as a 36-foot balloon in the macy's thanksgiving day parade. in january 2000 pets.com paid 1.2 million dollars for a super bowl spot, in which the puppet sang and held a microphone. the slogan was "because pets can't drive." everybody quoted it. nobody bought enough cat food to cover the shipping. the company was losing money on every order, because a forty-pound bag of dog food costs more to ship than to sell at retail margin.

pets.com never reached turkey. nothing like it did, until trendyol started selling pet supplies online here a decade later. i learned the pets.com story years after the fact, the way most non-american readers did, from articles about the dot-com bust where the sock puppet showed up as the visual punchline. by the time i understood what the company had been, it was already a museum piece in business school case studies.

~ the rap sheet ~

~ the shutdown ~

the ipo went out on 9 february 2000 at 11 dollars a share. the timing was the worst possible. the nasdaq peaked five weeks later on 10 march 2000 and started its long collapse. pets.com stock followed the broader move down, but the underlying business problem was structural and not market-driven. the company was spending roughly 12 million a quarter on marketing against a few million in revenue. shipping costs ate everything that was left. there was no path to profitability at any volume the company could plausibly hit.

on 7 november 2000 julie wainwright announced the company would shut down. operations ceased two days later. 255 of 320 employees were laid off. the stock fell to 19 cents. liquidation completed on 18 january 2001. amazon's stake, which had been worth more than 80 million on paper at the ipo, was wiped out.

~ what survived ~

the sock puppet outlived the company. it appeared in a bar's roundup ad campaign in 2002. it kept showing up ive lists as the visual shorthand for the dot-com bust. you could buy a plush version on ebay for years afterward. when business writers needed an image for a story about overhyped startups burning capital, they reached for the sock puppet.

the lesson about unit economics. every business school in the early 2000s used pets.com as the cautionary tale about ignoring the cost-per-order math. the company had been told before the ipo that the shipping costs made the model unviable. they raised money anyway. they spent the money on the super bowl ad anyway. the lesson got absorbed slowly. by 2010 chewy.com was selling pet supplies online profitably. shipping rates had dropped and the company stayed private longer than pets.com had.

the dot-com bust as a category. for a few years between 2000 and 2003, "remember pets.com?" was a complete sentence. it meant: do not trust this kind of company. it meant: vc-funded growth without revenue is a trap. the cohort of failures from that era (webvan and boo.com among them) was led visually by the sock puppet, even though pets.com burned less money than some of the others. the puppet was the recognizable face. the puppet did the work of remembering.

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