In November 1998 the website was launched and in November 2000 it was shutdown. Pets.com’s highly unprofitable pet food, especially with high shipping costs, killed the company.
In the early days of the dot-com boom, entrepreneur Greg McLemore saw an opportunity in accumulating sought-after domain names—Sports.com, Ask.com—to sell at a profit. In a few instances, he tried to build a business around the URL. The most famous was Pets.com, which McLemore started in 1998.
The fledgling pet-supply site got an early vote of confidence when Amazon.com agreed to buy a 50% stake in March 1999. As part of the arrangement, Pets.com was featured prominently on Amazon’s site. The online pet-products retailer brought on CEO Julie Wainwright, who had previously led Reel.com, an online video seller that was a competitor to Amazon.
Pets.com said a subsequent funding round from Amazon and other investors would allow it to invest heavily in marketing and brand building. And that’s exactly what it did.
The company hired the agency that created Taco Bell’s Chihuahua character to come up with its own catchy ad campaign. The result was the Sock Puppet, a sassy singing dog voiced by comedian Michael Ian Black that the Journal wrote was “hailed as one of the most memorable campaigns of 1999.” The mascot was turned into a 36-foot-tall balloon in the 1999 Macy’s Thanksgiving Day Parade, appeared on “Live With Regis and Kathie Lee” and “Good Morning America,” was interviewed by Time magazine and starred in a 2000 Super Bowl commercial. Hoping to capitalize on the general enthusiasm for the first wave of internet retailers, Pets.com went public in February 2000.
Three years after Pets.com’s downfall, the Journal wrote that it “will probably go down in history as the poster child for internet-bubble excesses.”
Shipping large, heavy bags of pet food is expensive, and Pets.com never made a profit on it. In fact, over its lifespan, the internet retailer spent $46 million buying products—which it sold for $31.5 million.
The market was also incredibly crowded. Pets.com was up against Petopia.com, PetStore.com, AllPets.com, Petco.com, PetWarehouse.com, PetPlanet.com and Petsmart.com.
But perhaps its biggest liability was the immense amount of money it spent on ads. In the fourth quarter of 1999, the company shelled out $30.7 million for marketing, almost six times its quarterly revenue. During the 2000 Super Bowl—dubbed the “Dot-Com Super Bowl” because of the number of commercials from internet companies including Pets.com—the average 30-second ad cost more than $2 million. And all that advertising might not have paid off exactly as Pets.com hoped: A month after the big game, executives at rival Petopia.com said that their company received 15 emails a day praising the Sock Puppet. On the day of Pets.com’s February 2000 stock-market debut, shares closed at the $11 offering price—and would never go any higher. By the following week, the stock was down 32%.
In June 2000, Pets.com purchased the assets of competitor Petstore.com for $13.7 million in stock. As part of the agreement, Pets.com received an infusion of $3 million from Discover Communications, Safeway and other Petstore.com investors.
That summer, Pets.com reached out to 50 companies for sale or merger discussions; fewer than eight were willing to meet. By November, Pets.com announced it was shutting down. Its share price had tumbled to 22 cents. The stock was delisted in January 2001.
