Pets.com

One of the great symbols of the fall of Web 1.0 was a company called Pets.com. They had a great URL, no doubt about that. And they had a pretty big market: people who owned pets. Have you seen what people are willing to spend on their pets? The company launched in February 1999 and lasted exactly 268 days before declaring bankruptcy in the fall of 2000. The company had revenues of a bit more than $600,000 and spent almost $12 million on advertising, including Super Bowl ads. It also paid a lot for its sock puppet mascot, which ended up being its only tangible asset in its liquidation sale.

Pets.com's masterful strategy was to sell basically anything you would normally buy at a brick-and-mortar store, like 20 lbs bags of cat foot. The problem was not many people would pay to have 20 lbs of cat food shipped to them, so Pets.com offered free shipping. Yes, even on 20 lbs bags of cat food.

Between their huge advertising budget and their willingness to ship nearly anything for free, they quickly burned through their IPO cash.

Lesson to be learned: Price your shipping and handling correctly.

Amazon.com

Okay, technically there's nothing disastrous about Amazon.com but there is an odd phenomenon in their used book area: lots of people are selling books for a single penny. Where's the profit in that? There isn't. But there is profit in the shipping and handling fees Amazon.com charges purchasers and then remits to sellers. There's a small different (roughly twenty five cents) between what the US postal system charges to mail a book and what Amazon.com remits to the seller. Lots of people are happy to unload what might otherwise be clutter and pocket a quarter.

Lesson to be learned: If you can't make it in popcorn, sometimes you can make it in peanuts.

Boo.com

Boo.com was a flashy British e-commerce company selling clothing and shoes. There was nothing wrong in their marketing strategy but technically they spent too much money on flash. The company spent £80 million on development before launching their site. The site was quite lovely but it assumed everyone using it had a fast broadband connection. That's a given today but in 2000 in the UK few had such a connection. For those on old style dial up modems, few could get past the fancy splash page. The company launched in August 1999 and went offline in May 2000.

Lesson to be learned: Optimize! If there was ever a poster child for usability, Boo.com is it.

Buy.com

This one scared traditional retailers when it first launched. Buy.com's plan was to sell electronics at cost. They would make their money on banner ad revenue and extended warranties. Brick-and-mortar retailers wondered how they would ever compete with a web store that reduced profit margins to zero. Buy.com sold over $100 million in its first year of operations. Alas, the good times didn't last. When you're selling at cost and living off of banner ads, it's hard to support a crackerjack customer service and support center. Buy.com suffered from a paucity of returning customers and word of mouth over the Internet made new customers hesitant to buy from Buy.com.

Lesson to be learned: Consider the whole cost of selling and supporting a product or service. Bad news travels faster than good news and that goes triple for bad news on the Internet.