July 26, 2000 5:00 AM PDT

Pets.com's puppeteer on strike against ad industry

Just as online pet store Pets.com starts to cash in on its wildly popular mascot, the actor behind the goofy sock puppet is playing dead.

Michael Black, the comedian who plays the Kermit the Frog-like spokesdog and sings "Spinning Wheel" in one of the online pet store's near cult-status commercials, is one of about 135,000 actors on strike against the advertising industry.

The old-economy tactic comes as an unexpected bite in the new economy, which has not faced serious labor issues and strikes.

Pets.com, which was slow at first to capitalize on the popular puppet, started selling the mascot last month. The $20 puppet quickly became the fastest-selling product on the site, with more than 10,000 sold in the first week.

Since June, Pets.com has sold more than 35,000 puppets, according to the company's chief executive, Julie Wainwright. Starting this month, the company will sell the puppet and related knickknacks, such as doggie bowls and T-shirts, in stores across the United States, including Macy's and Spencer Gifts.

The sock puppet's success has other dot-coms drooling for the same type of recognition. John Grotting, the executive creative director for Web services company MarchFirst, said many clients ask for their own surefire icon like the Pets.com dog.

It has been a "vehicle to transcend the Web," Wainwright said this week at a conference in San Jose, Calif.

The dog puppet has grown so popular that imitators have started to spoof the mascot in various cartoons sent to Pets.com, Wainwright said.

And although the human behind the sock is on strike with the Screen Actors Guild and the American Federation of Television and Radio Artists, Pets.com says it is not too worried.

"We have a lot of footage in the can from the previous ads we've done, so we could easily refresh the ads we've done," a company representative said.

The new brick-and-mortar sales may give Pets.com some much-needed return on its expensive advertising, which reportedly cost $27 million in 1999.

Although Pets.com has shown increasing sales revenue, costly marketing has helped drive its stock far below its initial trading price earlier this year.

The San Francisco-based company, which reported earnings yesterday, lost $10.5 million on $8.8 million in revenue for the second quarter; it beat analyst estimates by 20 cents. This improves on losses of $12.5 million in the first quarter of 2000 on revenue of $7.7 million.

Pets.com went public in February.

Gross margin loss Dot-commercialsfor the second quarter totaled $1.7 million, compared with $4.9 million in the first quarter. Wainwright attributed the improvement to a reduction in its cost of goods sold and improved operating expenses.

One of the ways the company is improving on expenses is to move some of its customer service staff from San Francisco to Indianapolis, where Pets.com has a distribution center. Wainwright said because the cost of living is much less in Indianapolis, the company can cut salaries.

Pets.com, which is backed by Amazon.com and Disney's Go.com, acquired several Petstore.com assets last month, including partnerships with Discovery.com and Safeway.

Reuters contributed to this report.


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