"I beg to differ. A legit business model would include a base of customers who wanted to buy the products from the company -- something Pets never had luck with."

Based on that, the entirety of Web 2.0 should be an automatic bubble.

"That was one of their failures, but not their biggest. The biggest was not having demand, and being unable to create demand. It was easier for people to go to the grocery store once per month than to order online. Comparing Pets to Amazon isn't really valid, since Amazon meant to a seller of everything, and even when they were solely selling books, there was more value-add than Pets could ever achieve. You can shop for books on Amazon in more interesting ways than you can at a physical bookstore. That wasn't true for Pets.com."

Wow, you don't get it.

The "demand" wasn't there because the majority of people didn't have internet, weren't comfortable with ecommerce, and didn't want to give out credit cards. To survive in that sort of environment most companies relied on massive marketing push. Well, vulture funds gave them plenty of cash to burn, what were they going to do? Invest it in a CD?

They had as much of a legitimate business model as Amazon, their failure was the wanton spending and the inability to sustain their company. But the idea is sustainable, online pet supplies brings up 1.7 million entries on Google. Just because one company failed does not invalidate the market.

Amazon back then had a value add? What was that? Selling books for a loss?

And an economic bubble is defined as when assumed value is more so than intrinsic value. Read techcrunch for more than a month and you'll find plenty of investments or exits for extraordinarily pricing.

Amazon adds value compared to a physical bookstore because they have many times more titles, including many obscure books that aren't profitable to house in a retail bookstore (the long tail). Unless there are desirable, differentiated pet products that aren't profitable to stock in a store, then the internet model doesn't add value. Are there really a million different kinds of pet food that people could tell the difference between, let alone want to buy? That's the difference between Pets and Amazon.

"Based on that, the entirety of Web 2.0 should be an automatic bubble."

Pets.com was based on selling physical products. Most Web 2.0 companies aren't, but a lot of them are profitable or break-even.

"The "demand" wasn't there because the majority of people didn't have internet"

Maybe. But if your value proposition is "we sell pet food online" you have a larger problem.

"vulture funds gave them plenty of cash to burn, what were they going to do? Invest it in a CD?"

Perhaps spend it working on expanding their market base beyond pet products. Amazon did that, as an example. Alternately, don't take the money.

"Amazon back then had a value add? What was that? Selling books for a loss?"

Things like reader reviews and instantly available critical reviews, suggestions of other books, wish lists -- not to mention the ability to browse titles without having to leave my house. You can't (easily) do any of that in a physical bookstore. And it's why a lot of people started going there.

"And an economic bubble is defined as when assumed value is more so than intrinsic value. Read techcrunch for more than a month and you'll find plenty of investments or exits for extraordinarily pricing."

Defined by you, perhaps. I prefer the way Goladus described it: "Large, risky investments based primarily on the logic that values are surging and will keep surging fueled the inflated valuations."

Regardless of exact definition, a bubble that involves relatively small amounts of private money is not the same as a bubble made of large amounts of public money.

Be careful not to compare the Amazon of 2007 with the pets.com of 2000.

Amazon barely made it through those bleak years. There was a lot of luck involved in their survival. Their business model of "a store for everything" wasn't much better than pets.com that's for sure.