Around this time last year, Pets.com's wildly popular sock puppet debuted in Macy's Thanksgiving Day parade, a high-flying testament to Internet marketing. This holiday season the e-tailer's mascot is no less symbolic—now of a deflated industry whose lofty branding ambitions turned out to be a lot of hot air.
Because of the sock puppet's visibility, critics lost little time in holding up Pets.com as emblematic of dot-com companies that burned through market capital only to be extinguished by the Nasdaq's fall in April. But unlike many flaky Web clients that approached ad agencies in the past couple of years, Pets.com was a better bet. For one thing, the online pet-supply retailer enlisted John Hommeyer, a former hot-shot marketing director of baby care at Procter & Gamble. TBWA\Chiat\Day, with its track record of attention-grabbing creative and rapport with entrepreneurial clients, was also brought on board. Pets.com's prospects looked so good that companies like Amazon.com and Disney became backers. Outsiders became fans as well. The site received rave reviews from Consumer Reports Online.
Pets.com outspent its competitors—spending close to $20 million on advertising last year, according to Competitive Media Reporting—and seemed to get its money's worth. During Super Bowl XXXIV in January, for instance, Pets.com's spot scored the No. 1 recall ranking for the lowest media investment during the game, according to Active Research. Then there was all the free media: Not long after the February 1999 launch, the sock puppet became a celebrity, complete with gushing coverage on Nightline and Access Hollywood and profiles in magazines such as Entertainment Weekly, Time and People. Under a licensing agreement, the pup's image has been smacked on everything from plush toys to T-shirts and place mats—with royalties split between the Web retailer and TBWA\C\D.
The mascot worked so well that recent media reports about the company dwelled as much on the sock puppet—one of the company's remaining assets being shopped around—as they did on the cause of Pets.com's demise. All of which is bittersweet for TBWA\C\D. In the perennially optimistic world of Madison Avenue, few agencies want to be reminded of their limitations. Yes, advertising can be creative and effective, but brand visibility doesn't necessarily translate into purchase intent. Awareness isn't able to compensate for the vagaries of flawed operating strategies.
"Business models, market conditions, the Nasdaq, VCs—they're not in my control. This has nothing to do with the success of the advertising," says Carisa Bianchi, president of TBWA\C\D in San Francisco. "Ad agencies are hired to create brands, and we did that in spades. Pets.com is one of the few that achieved that in cyberspace. In the Internet space, a lot of business models just needed more time."
Marketing chief Hommeyer, who left the company in May and was not replaced, and top executives at Pets.com declined interview requests.
It's easy to see why the site's senior management feel embattled: Wall Street quickly lost favor with the category, while Pets.com's stock slid from a high of $14 in February 1999 to just 22 cents earlier this month. Even though Pets.com attracted 570,000 customers, it never figured out how to make money in a low-margin business with high shipping costs. On paper, the founding strategy made sense: Get devoted pet owners to become regular customers for staples like food and kitty litter with the expectation they'd splurge on pricier pet accessories and toys. That didn't happen. The bulk of Pets.com's sales was heavy bags of dog food. From the onset of advertising in the fourth quarter of 1999 through the first half of this year, Pets.com spent more than three times in marketing than the $22 million it took in as revenue, according to Competitive Media Reporting. As sales started to slip, the company embarked on heavy couponing promotions through Amazon.com, which significantly deflated the level of the average order, which had been around $30-40.
Still, as Pets.com unveiled new sock puppet advertising this fall, traffic continued to build on the site. In October, for instance, Pets.com was the category's most popular destination, attracting 1.8 million visitors, nearly double that of its nearest rival, Petsmart.com (which recently bought the pets.com URL).
Petsmart.com has spent much less on advertising, playing off the association with its storefront retailer parent. While Hommeyer didn't have the built-in advantage of a physical presence, he still approached offline marketing for the Web as he would at a brick-and-mortar entity.
At P&G, Hommeyer was known for his sharp relationship marketing skills, and at Pets.com he talked about the sock puppet's success in terms of "share of heart" as well as "share of pocket." In developing an early marketing strategy for the pet retailer, he made sure thorough research was conducted in homes and dog parks to discern the likes and dislikes of pet owners.
TBWA\C\D initially offered ideas involving a pet psychic and a scenario linked to Doctor Dolittle. But when the sock puppet was presented, Hommeyer immediately embraced a concept inspired by the tradition of great spokesicons like Tony the Tiger, the Marlboro man and the Pillsbury doughboy. Accompanied by the line, "Because pets can't drive," the sock puppet was deliberately left without a name so consumers would always have to say 'Pets.com' when referring to it. In his view, people knew the character Spuds McKenzie but didn't necessarily relate him to Budweiser. A better example was a character like the Energizer Bunny, also from TBWA\C\D for client Eveready. While memorable, many consumers are still not sure which battery company keeps him on the payroll.
That may have also been a problem with the sock puppet, stuck in a competitive frenzy of similar sounding URLs.
"The advertising was great; it featured the brand and connected well with people. But I'm not sure if consumers could say whether the sock puppet was for Pets.com, Petstore.com or Petopia," says Barry Parr, e-commerce research director at IDC, a Mountain View, Calif.-based market-research firm. (That problem may soon be a moot point as Petstore.com closed in June and Petopia.com is struggling to stay afloat.)
From the perspective of corporate identity, Pets.com also had its work cut out. In the early days of the Web, such a URL would have been an asset, serving as an easy-to-find intuitive choice for consumers browsing the Internet. But as people have become more sophisticated in their Web searches, the URL might have become a liability.
"Pets.com faced a real challenge in their generic name," says Parr. "While it seemed like a good idea in '96, it quickly became clear that it's really hard to build a brand off a generic name." Around the same time Pets.com shut down, sites such as Furniture.com and Mortgage.com also ceased to exist.
True to its Chiat/Day roots—the agency is arguably better at entertaining consumers than selling down to them.
"Good creative advertising is effective advertising," says one senior TBWA\C\D executive. "But there's no advertising good enough to survive a bad business model."