CBS must sell marketers on CNET
EmptySAN FRANCISCO -- It might not have the sex appeal of YouTube, MySpace or Facebook, but CBS Corp. CEO Leslie Moonves and his team are working hard to make a return on their $1.8 billion acquisition of CNET, which was announced in May. In fact, they're pushing CNET to the front of the primetime season: Fans of the CBS series "Survivor" didn't have to wait for Thursday's broadcast premiere to get a glimpse of the new season as the opening 31⁄2 minutes were available on CNET.com in HD.
It's hard to miss CNET -- and its sister sites, including food-centric Chow, video game haunt GameSpot and boob tube fan hub TV.com -- these days on the Eye network, which has promoted the new properties during the political conventions and the U.S. Open as well as the primetime drama "Swingtown" and Showtime comedy "Weeds."
Cross-promotion like this is becoming commonplace at CBS Interactive, which was created midyear when Moonves stunned Wall Street by plunking down $1.8 billion to add CNET's collection of high-traffic sites to CBS' existing sites. That was slightly more than the $1.65 billion Google paid for YouTube in 2006 and about three times what News Corp. paid for MySpace in 2005. It was one of the biggest acquisitions of the year in the media world, though it hasn't met the same level of hype.
Indeed, CNET is no YouTube -- in more than one sense. On the downside, its brand has mostly been associated with its tech info and review site of the same name that is a favorite among gadget geeks but hardly has anywhere near the mainstream recognition of YouTube.
However, CNET and its sister sites have attracted hundreds of millions of ad dollars -- an achievement that so far has eluded YouTube.
Meanwhile, CBS management has predicted it can grow its newly created CBS Interactive unit's revenue from more than $650 million this year to $1 billion-plus within three years, a target many on Wall Street see as aggressive.
"Despite CBS' optimistic targets, we are somewhat skeptical on the longer-term prospects," Standard & Poor's analyst Tuna Amobi says.
Concerns emanate not only from the Street but also from Madison Avenue. While management is counting on CNET to increase ad revenue and CPMs at CBS Interactive, few believe the CBS sales division will get enough major advertisers interested in CNET's bundle of niche brands.
"Vogue magazine does great in fashion, beauty and jewelry but probably not so well in auto," says Jordan Bitterman, senior vp media at digital agency Digitas. "The same is true for CNET sites. It's like a bull's-eye. These sites tend to do best in the middle ring and maybe do some business in the next two with brands that want to associate themselves with them or their audience."
But if execs at CBS or CNET are sweating the bad reviews, no one is showing it. Certainly not Neil Ashe, CNET's former CEO and now president of CBS Interactive.
"I've looked at the reaction with surprise and detached wonder," he said this summer at his firm's headquarters in San Francisco's South of Market district.
"CNET was mis-sold to the market," Moonves said this month at an investor conference. "Most assumed it was just the old tech site. CNET was so much more than that."
What CNET could deliver to CBS is a new growth engine at a time when many analysts expect no real financial growth in CBS' core TV and radio businesses. The company also gives CBS significantly more aggregate Web traffic to call its own, a bulking up one former CBS Interactive executive likened to "a baby snake swallowing an elephant."
CBS is selling CNET as a suite of lifestyle brands in key categories. To be able to offer marketers targeted audiences, both sides are pooling their brands into five verticals: news, technology, business, sports and entertainment.
CBS Interactive CEO Quincy Smith says he has been holding meetings with big advertisers that have spent money on CBS, hoping to lure them to CBS Interactive's client list with the promise of reaching audiences across the CBS universe. Only three of the top 20 advertisers on the former CNET and CBS online destinations overlapped.
Various big CBS marketers already have started to add former CNET sites to their buys, Moonves says. "When we sell football on the network, marketers also want to buy online, so this goes to CBS Sports (and CBSSports.com). But we are now also selling technology because CNET is the same demo of young men 18-49. That's important because everybody on Madison Avenue wants to buy new media."
Ad insiders have doubts that non-endemic advertisers like GM will be willing to pay premium ad dollars for a presence on, say, TV.com. Ad networks can accomplish the same reach for less money, they argue.
But Smith and his team bet that online ad spending will increasingly be driven by audience engagement and branding, where CBS Interactive believes it can boost its share of ad dollars.
"We don't do this in a vacuum," he says. "We do it because we know where the market is going. It's moving that way sooner rather than later."
CBS CFO Fred Reynolds also predicted recently that CNET's lower online ad CPMs in the $10-$15 range will start to move in line with CBS' online CPMs in the $25-$30 range.
Giving CNET as much exposure on CBS' air is key to the strategy.
Doug Weaver, founder and CEO of digital sales consultancy Upstream Group, says shout-outs can only work longer-term if you also provide what people want online. "It is a good weapon to use on-air talent to spike traffic at your Web sites," he said. "But creating Web experiences that truly hold audiences and advertisers longer-term costs time and energy."
CBS Interactive has started that process with recent revamps of CNET, TV.com and a few other key sites. More brands could be added to the verticals via acquisitions or launches, Moonves has said. On an early watchlist of possible new product and vertical launches are auto and local offerings.
Meanwhile, investors have been hoping to get some early indications of the deal's success when CBS breaks out CBS Interactive figures for the first time in its third-quarter earnings report Oct. 30.
However, Moonves recently signaled that evidence of success mainly will come in the final quarter of the year. "One plus one -- I know it's a cliche -- does equal three," he said. "In selling and marketing we are already seeing that happening right away. You will see results in the fourth quarter that will impress you in terms of monetization."