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What B2B can learn from a B2C branding disaster – the Dotcom Bubble: 10 years on

“A market is never saturated with a good product, but it is very quickly saturated with a bad one.”

Henry Ford.

Launched in 2000, the American online pet supplies business Pets.com was one of the earlier start-ups to recognise the potential of the internet as a means of dominating a consumer niche.  To my mind, it also epitomises the period of folly and hubris that was to become known as the Dotcom Bubble.     

Although Pets.com was an exclusively online business, its marketing and branding was based very firmly offline (presumably they knew of no other way). The Pets.com Sock Puppet starred in endless TV ads, including a Superbowl ad, and in the process became a household name. In fact Sock Puppet became so well known that that the company began selling Sock Puppet toys.  But despite all of these efforts, Pets.com turned out to be a disastrous flop: in their first year of trading they turned over just $600,000 in revenue – and yet over the same period they’d spent a whopping $11 million on advertising. So what went wrong? 

Pets.com had become a victim of being in the right place, but at the wrong time: they were stuck in a kind of mini-dark-age between old and new media; between conventional interruptive marketing and the search engine revolution. While the world figured out how to make the internet work (and also whether or not to trust it as a place to make purchases), poor old pets.com perished.      

And they certainly weren’t alone. 2000 was the absolute historic peak of the old-media advertising era, not least because businesses, including small start-ups, invested vast sums of money on outbound advertising (TV, print, billboards) with the aim of driving traffic to their online trading portals.

The logic was that the more you spent on offline marketing, the faster your online business would grow and the quicker it would gain an unassailable market share.  It became a feeding frenzy. Investors threw money at internet businesses in a mad scramble to get to the top of the pile. In hindsight, of course, this turned out to be a completely false assumption.

The whole project bombed, the Dotcom Bubble burst and a gigantic stock market crash followed (surpassed only by the recent credit crunch) together with the loss of thousands of jobs in the start-up and internet industries. Many commentators at the time even wrote off the internet as a medium for doing business. Ten years on, of course, it’s hard to believe that anyone could have made such a misguided prediction. But at the time it seemed perfectly reasonable to assume that, as a commercial medium at least, the internet had had its day.

So what’s the moral of the tale in a B2B context?

To my mind, it’s obvious: never jump in with both feet until you’ve tested the water.  By all means throw big money at a project, but not until you’ve done your homework. And this means learning how to do business modelling on a micro scale before you roll it out as a serious proposition.  Had Pets.com tested their strategy at a low level they might have averted ruin, but instead they placed all their eggs in the one proverbial basket.

As it happens, we started our own e-marketing business – eMarket2 – in 1999 – a full year before Pets.com jumped into the fray. 

However, unlike Pets.com, we didn’t have $11 million dollars to blow on marketing – which in hindsight was probably a very good thing. Why? Because it forced us from the outset to be lean and mean! It was in those frugal early years that we developed the smart split-testing marketing systems and list segmentation models that continue to serve our B2B clients so well today. We felt like pioneers charting a new frontier – which indeed we were. And to this day we remain at the cutting edge of harnessing the possibilities of new technologies to drive business for our clients. But while times may change, and technologies come and go, the values governing effective marketing remain constant. Never forget it. We don’t.

That’s it for now. Thanks for reading. As ever, your comments and ideas are very welcome. 

And always to a higher response!

Norman

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