Pets.com: Branding Goes to the Dogs
By Dan Janal 

The recent demise of Pets.com offers important points about building a brand on the Internet for businesses of all sizes. 

Let's recap their story. 

Pet.com entered a crowded playing field of startups that wanted to sell pet food, supplies and toys to price-conscious pet owners. The field also included bricks and mortar stores, like Petsmart. 

Pets.com needed to stand out from the crowd. They did an admirable job by creating a lovable character, the sock puppet and a catchy slogan to answer the question of why shop at an online pet store: "Because pets can't drive." 

They spun a good PR story about the creation of the sock puppet. They said their marketing team created a six-page bio of the character that included gender, age, personality and other traits. 

They spent a fortune on TV ads that featured the sock puppet, whose sassy style did a great job in differentiating the company from others. 

That's good branding. 

As a result, pets.com was: 

-The leader in the online pet category 
-An award winning site, as rated by Gomez.com 
-Highest number of unique visitors in the category according to Media Metrix, Nielsen/Net Ratings and PC Data Online 
-Counted 570,000 people as customers 

Yet, as the company noted in its press release "we are unable to continue operations." 

But it obviously wasn't enough. 

What went wrong? 

You can't build a brand on a bad business plan. Sure, a lot of people own pets and they want to spend less money on pet food. But can any market support dozens of companies with the same business plan? The story of Pets.com tells us a resounding, "no!"

Pets.com lost because they failed to learn an important rule: 

In a product area where the retailer adds no extra value, Pets.com was doomed to disaster the day the first wave of competitors came along. 

That's because if you plan to build a company by offering discounts, you will lose to the next company that comes along and offers a bigger discount. If the field is crowded, go elsewhere! Your chances of winning are slim. 

The cost per customer acquisition by companies like Pets.com is about $80. There's no way you make that back when you sell a product with a paper-thin margin - and have 10 other competitors doing the same. 

It's no wonder why Wall Street has punished dot-com look-alikes this year. 

Pets.com teaches us that strong brand assets can help a company gain visibility and awareness in a crowded field. But Pets.com also teaches us that if you build a brand on a shaky foundation (i.e. business plan), you are doomed. That's why I predict that some toy company will buy the sock puppet assets and turn him into a major cartoon character. Move over Barney! 

The real lesson: You can only win if you add real value that customers can't get anywhere else. 

That's the essence of building a good brand on the Internet. The clever logo, the sassy character, the cute slogan are merely brand assets that help to build the brand. But so are the business plan, the competition and the realities of the marketplace. 

Daniel Janal is an internationally-recognized speaker, Internet  marketer and best-selling author of "Branding on the Internet."