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 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 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’s legitimate $95 million in financing
in the months preceding.

It turned out’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.

Any questions or comments, love letters or hate mail? As always, feel free
to forward them to [email protected].

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