Internet PR: Pets.com downfall is dot-com case study - With what some call one of the best brand campaigns in dot-com history, Pets.com's failure came as a surprise. Julia Hood discovers what went wrong

As Pets.com shut down last week, selling off everything from kitty litter to that famous Sock Puppet mascot, it shocked many observers in the PR world who had been confident that sites with the strongest profile would survive. Dot-com deaths may seem like an old story, but Pets.com was one of the first publicly traded companies to close. Others include MotherNature.com, which sold vitamins and herbal products, and Mortgage.com, an online lending site.

As Pets.com shut down last week, selling off everything from kitty litter to that famous Sock Puppet mascot, it shocked many observers in the PR world who had been confident that sites with the strongest profile would survive. Dot-com deaths may seem like an old story, but Pets.com was one of the first publicly traded companies to close. Others include MotherNature.com, which sold vitamins and herbal products, and Mortgage.com, an online lending site.

As Pets.com shut down last week, selling off everything from kitty litter to that famous Sock Puppet mascot, it shocked many observers in the PR world who had been confident that sites with the strongest profile would survive. Dot-com deaths may seem like an old story, but Pets.com was one of the first publicly traded companies to close. Others include MotherNature.com, which sold vitamins and herbal products, and Mortgage.com, an online lending site.

The closure of Pets.com is more than just another dead dot-com. The site became something of a poster child for dot-coms launched on the back of a heavy promotional investment, making it one of the most recognized names in the Internet world.

An enormous dollars 25 million was spent on advertising, a huge chunk of which funded commercials shown during this year's Super Bowl. The site also became one of the first in the sector to properly embrace the integrated marketing idea. The star of its ads - the Sock Puppet 'spokesdog' - became a mini-celebrity. The appeal of the puppet was so great that it made appearances on Good Morning America (flirting with host Diane Sawyer) and on Live with Regis and Kathie Lee. And as a promotional stunt, an original version of the puppet was sold to a businessman for dollars 20,100 on Amazon.com. Sock Puppet was also one of the featured floats in the 1999 Macy's Thanksgiving Day Parade; and he popped up at dog runs in New York and pet shows, passing out Frisbees to potential customers.

The puppet also stood at the center of a PR-driven attempt to salvage his own reputation. He held a press conference to announce he was suing a writer for Late Night with Conan O'Brien, who claimed the retailer had imitated his own puppet character when creating its spokesdog.

The spokesdog was so popular the company planned to launch a merchandising scheme to license Sock Puppet's image for novelty items that could be retailed in department and speciality stores.

Pets.com also donated dollars 1 million to the American Veterinary Medical Foundation and founded a group called Pets.commitment, providing funding to animal shelters, therapy programs that use animal assistance and service dog programs.

Clearly, the company lavished great time and attention on promotion but, in the end, was unable to turn a profit. All of which begs the question: did a disproportionate focus on promotion actually lead to the demise of Pets.com?

The Super Bowl alone cost dollars 3 million for a single 30-second spot (PRWeek, January 24, 2000), a price that many companies were willing to pay, including Internet companies like Monster.com and Netpliance. Some dollars 40 million was spent just by Internet companies during the pre-show and the game.

But not all Internet companies with big promotional budgets are doomed to fail. Monster.com also spent huge sums to run its ads during the Super Bowl, and has in the last year put in place an increasingly prominent PR strategy, in conjunction with its agency the Weber Group. Bold PR plays and expensive advertising have clearly not had a negative impact on the company, which posted a third quarter profit of dollars 18.9 million in commissions, and dollars 97.1 million in fees.

(In March, Monster.com scored its most successful PR campaign to date when its CEO, Jeff Taylor, agreed to challenge the blimp water-skiing record of Virgin CEO Richard Branson. Not only did Taylor top Branson's record, but the company excited enormous press interest. The plan was initiated, in part, to maximize expense of advertising on the blimp, an approach that the company believes will pay off exponentially. 'Our PR agency had doubts about whether it would work,' said Melanie Downey, Monster.com's director of PR. 'It's one of those things when you take a big risk and afterwards you give a big sigh of relief.')

But Pets.com's own brand of promotion, successful though it was, did not prove popular with everyone, particularly those working to boost the profile of Internet companies. 'I really hated that little puppet,' said Richard Laermer, CEO of RLM Public Relations. 'I thought it was obnoxious and pandering, it really annoyed me.'

He believed that the puppet's style overwhelmed the message. 'Even though it was only a sock puppet, there was still this cult of personality thing going on there,' Laermer said. 'We can't do that anymore, whether it's a CEO or a sock puppet.'

Cute has no place in contemporary Internet marketing, adds Laermer, where factual information is the key to educating consumers and differentiating a brand. Teaching consumers what they can achieve through the Internet must continue to be the focus.

'The press really wants facts, and if they're not going to get the facts, that's the end of it,' Laermer said. Consumers want to know why buying supplies at Pets.com would improve their lives, and Laermer said that message was simply not reaching the public. The only thing people knew about the company was it had a gift for creating an appealing mascot.

PR still plays a crucial role, even when the goal is to communicate the serious benefits of a given Internet company, rather than its hip, gimmicky image. 'The only way to make it work in terms of the press is to be very realistic and very honest about what you've done that hasn't worked, and what you are doing that works,' Laermer said.

Educating the consumer is particularly important for start-up Internet companies, and PR proves the most cost-effective tool for building a knowledge base about the capabilities of a start-up. Another important function of PR is to help companies position their executives as experts in their fields, something that Monster.com has spent a lot of time doing.

But apart from a debate over the efficacy of its promotional strategy, it must be said that Pets.com incurred serious problems in the internal management of its operations. The company was criticized for its large work force, another common trap that the first wave of high profile dot-coms have fallen into.

Pets.com was also unfortunate in that its IPO came just two months before tech stocks took a dive, and it found itself working in a market that had turned hostile to business-to-consumer operations. 'The capital markets moved away from b-to-c. We were the first to really get hit by all that,' said John Cummings, Pets.com's director of IR.

Cummings maintains that the amount Pets.com spent on promoting its brand was not too much, when compared to the size of the brand it created. He said they have had a lot of interest in purchasing the Sock Puppet brand, primarily from toy and media companies. 'We built an enduring brand that has value,' he added.

So, the question becomes not whether Pets.com wasted its money on PR or advertising, but whether it employed the right communication tools to bolster its core business. Eschewing promotional techniques would not have saved the company. Positioning executives as industry experts, educating consumers and media about the company's capabilities, and developing integrated campaigns to maximize promotional investment could all have helped keep Sock Puppet off the auction block.

At the end of the day, however, Pets.com evidently did not have a good enough business model and product proposition to attract sufficient Web traffic and above all, revenue. Pets.com was not just up against traditional pet stores; it was competing with at least 15 online pet stores. No matter how good your brand, or your PR, that's a game for dummies.



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