The Indicator from Planet Money - The Lessons Of Pets.com

The tech bubble of the 90s was a time when companies with weak business models and flashy advertising secured massive investments. This is the story of perhaps the most infamous case study: Pets.com.

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Hey mon, is Cardiff this indicator from Planet Money? And today? I am joined by Julia Furlan the host of the Gopher Broke podcast from Fox. This is a serious all about the late 90s Tech bubble, Julia. Hello? Hi card. If this story is All About the rise and fall of cats. Com, which is the company everybody thinks of when they remember the.com bubble because it was humongous and then it was over. I remember it happened so fast and what I think I remember about pets.com was it it made like no money. It was all hype it cost money to get money from investors not because they were actually profitable but because they were flashy it was a time when people could basically like put.com at the end of any noun and suddenly they were supposed to be a company profits didn't matter of functional business model was just like an afterthought. It was all about marketing and growing really big and it

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Herbs to have a famous sock puppet. That was the lesson of the nineties Juliet. We are going to run a condensed excerpt of go-for-broke, which is your great new podcasts to today on the show wild story of pets.com and how it relates to the tech companies of today. That's right after a quick break.

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If there's one thing that was true in 1999 and is still true today people love their pets. We're talking iguana food and Cat birthday cards and hamster obstacle courses the US market for the pet industry was 23 billion dollars in 1999. This was also the point when it started being more common for people to have a computer at home given the mass of the Pet Market and the potential for people to change the way they shopped. Why wouldn't you get in on the ground floor? So pets.com wasn't alone what everyone understood at the pet store, office was that the company needed to be a category killer the one brand that dominates the market and this kid's is how the sock puppet came to life pets went for the big guns at a firm called tbwa chiat day in 1999. Rob Smiley was one of their creative directors. We started to create a world where we showed the pets.com understood that pets have lives. They

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They love that things that make them sad Rob and his colleagues were banking on a simple but revolutionary idea that went against the instincts of basically all of pet advertising that came before it gets for going to let the sock puppet be this in perfect individual with wants and needs a homemade puppet with a wrist watch for a dog collar with a button for an eye with a goofy microphone made out of cardboard down with a pep talk, logos stuck on the side slap Dash.

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Their whole plan for getting customers to visit their website instead of Petopia. Com or the local supermarket was a comedian riding around in a van doing loose improv with a sock puppet the first TV ads with a sock puppet hit the airwaves in September 1999 and they quickly get some Buzz the ads are funny and memorably weird but there's a catch here the whole motivation behind this ad campaign was not simply to get people to log on and buy their dog a new collar. It was to demolish the competition and by the time the first ad aired the field of competitors was getting bigger. So what is the number one place you go if you want to be flashy and cool and advertising like what is one of the few moments of every year where people actually talk about at

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Super Bowl 34

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So on January 30th 2018 8.5 million people are glued to their TVs and in between watching Kurt Warner lead the Rams to victory that massive audience sees this commercial openings of the dog looking really sad while its owner drives away. Okay. Do you know I got to go to a lot of stores that it would you like a spot light comes on and the pets.com sock puppet appears singing If You Leave Me Now by the band Chicago one of the folks we spoke to from shiet. They told us that the band had never given permission for the song to be used in a commercial before but their lead singer Peter Cetera. Just love that damn puppet.

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Please don't go there's a crying turtle and angry looking cat a parakeet and a goldfish. Just want you to

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The sock puppet is everywhere people love that little buddy so much that they're dying to get their hands on a sock puppet of their own after you on with an assistant marketing manager at pets. Com. / the customer service was Fielding inquiries all the time for people. Can I get a puppet? Can I get a puppet? What is my pin code on sale at honestly, they couldn't keep them in stock. They were so popular, but lots of people were just buying the puppet and nothing else question. Are we know moving stuff away from work or business should be number check pet store, at this point had spent $20 on the marketing campaign that created the sock puppet, but the problem is they weren't making enough money Omar Murillo is a professor of marketing at Imperial College London, and he did a case study on the marketing strategy used by pets.com and other pet retail companies in 1999 and 2000.

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To create something like the sock puppet and in Gray knitted the head of every single American that cost a lot of money then eventually the customer acquisition cost was about $400 per customer say takes you four hundred bucks to get your customer in look if you're selling helicopters, or yacht $400 to get your customer in the door is worth it. You'll make that back on your first sale. But when were talking about Christmas hats for your iguana, it means that the company is spending a ton of money on you in the hopes that you'll spend even more over the Long Haul.

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I got to say those numbers don't really add up especially because pets.com wasn't necessarily connecting with customers. So one thing you should be noticed to be a way to have customers are aware of your brand that is familiar. And now that you're sexually to connect in a meaningful life. And in the way you do that is first by building a value proposition that is Meaningful and then advertising, comes late that's reinforce. What you've done this case the other was it that was really a rush to grow very quickly turned out pets was fighting to be the number one pet website, but people were still buying pet supplies the same way that they always had at the store. And this was one of the many big problems that pets could never solve they spent a lot of money making people aware of the company, but they couldn't convince them to buy enough stuff to be profitable in 1999 there just weren't enough people buying things online Maybe.

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Stockholm could have figured out their business model eventually, but they ran out of money and they ran out of time.

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Okay, it's hard to forget everybody and I'm back here with Julia. What is story Julia? And also I want to close with a kind of intriguingly positive spin on these tech companies in the 90s that you have these companies that did not make any money and crafts spectacular. I don't know if it's positive vibes in like the long-term but I can say one thing for sure. A lot of the.com companies were actually great ideas that were just way ahead of their time. So like there was a grocery company called Web van.com that deliver groceries to your house like fresh direct us today and kozmo.com had a lot of similarities to instacart and good old pets.com part of was pets.com today. I'm thinking it's exactly and she we just had an IPO that value of the company at 8.7 billion dollars. So here we are again, I guess this is fascinating because it suggests that even though these companies were kind of a joke in hindsight life.

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Flamed out. So amazingly a lot of them actually had pretty good ideas for where the economy would end up heading eventually and technology and infrastructure had to grow around it. So now is a much better time than then. Thank you so much and tell her listeners, please where they can hear you tell more of these wild Tales from the.com. That is absolutely it's an epic Studios and you can buy it wherever free podcasts are sold. It's actually free Patty Hearst and the indicator is the production of NPR.
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