Saturday, July 24, 2010

A Sock Puppet and Business Basics

Remember this sock puppet?

Wally Bock looks at what happened to Pets.com.

2 Comments:

At 9:51 AM, Anonymous Dan Richwine said...

As I recall (not googling) Pets.com wrote the loss off as "advertising." This allowed them to put the real cost under the gross profit line, which implied to casual investors that once their brand was established and they were able to grow the revenues enough, they would attain profitability.

It kind of made sense, until people realized that advertising was linked to revenue, and thus was properly treated as a product cost.

The lesson, as always, read the footnotes. If you don't understand them, don't invest!

 
At 8:05 PM, Blogger Michael Wade said...

Dan,

I think investment wizard Peter Lynch shares your view.

Michael

 

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