RealTime IT News

Give a Dog a Bone

There's a shakeout in the cyber-petstore patch that's shown signs of fleas for some time. That's no secret. But apparently PetPlanet.com is trying to keep its latest hiring of Ryan, Beck & Co. hush-hush. Official word is that the investment bank plans to hammer out a new and improved business model for the struggling start-up.

Someone's either delusional or bending the truth. Obviously the latter, but probably both. Make no mistake, PetPlanet is tagged and ready for sale. But this is one player who won't likely see a white knight on the horizon. In a crowded pool of online pet shops, PetPlanet is hands down the participant who doesn't even show up on the radar screen.

Its recent quarterly sales are barely worth mentioning, at a forgettable $38,000 on losses of $2.2 million. The Web site never was cut out for e-commerce and less so as a publicly-traded company. With a cash-burn rate of roughly three quarters of a million dollars each month, and at last count, the company boasted less than half a million bucks under its mattress at the start of February; we know PetPlanet is flat broke. Put a fork in this one. It's done.

And misery loves company. Last week, privately-held Petstore.com passed out pink slips to half its 200 employees. I saw warning signs coming from this newcomer late last year, when the company issued a suspect press release claiming it had secured a whopping $97 million in financing from Discovery Communications, home of the Discovery Channel.

A cursory examination of the PR revealed the claim was hogwash. It was a calculated publicity stunt to attract additional investors who might be awed at such a lucrative score, combined with some good old-fashioned chest thumping. The company's supposed infusion not-so-coincidentally edged out Pets.com's legitimate $95 million in financing in the months preceding.

It turned out Petstore.com's numbers were pure hyperbola based on equity swapping for advertising on Discovery's cable network and Web site. And though the actual cash amount remains a carefully guarded secret, it's clear from this latest round of layoffs, it didn't amount to a hill of beans.

Some industry analysts are quick to speculate that this latest upheaval in the online pet space marks the beginning of rampant consolidation. I disagree. The quality plays may get thrown a bone, but the weak links will need to turn the lights off on their way out. The hard reality is that most don't boast much to speak of that would prove attractive to any prospective bargain hunter. Few eyeballs, paltry revenue, and hemorrhaging books.

The online pet stores that are in a position to make such a land-grab are more inclined to wait this latest market twister out. Investors can think of the current situation like a leaky raft. More established companies are safe on deck, and sinking start-ups want permission to come aboard. But there's little room for dead weight, and those that are on dry land are thinking self preservation, not aggressive expansion.

With most pet shops scared stiff over this latest B2C witch-hunt, that leaves this latest round of stragglers left to fend for themselves.

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