CNET’s ZDNET, Iran and Yahoo!? You know this would not end well.
I was very surprised to read that Yahoo! had handed over names of Iranians youth to the authorities. Turns out it was false. Interestingly enough if a blog would have written that, it would have gotten much less consideration… but at the same time, because a “well respected, traditional, new media source” such as ZDNet reported it, it’s a big deal.
In November 2007, we published a piece called Online Video Distribution: The Race for #3 is On…
Hulu wasn’t even around, so #1 was YouTube and #2 was MySpace TV. Then came the usual suspects: Metacafe, DailyMotion, Break and Veoh.
Since then, Hulu has launched, gone from Clown Co. to media darling, to being called just another big bad media thug… but in the process, it has become a major player thanks to its stash of super premium content.
We define premium content as any made-for-web content that is professionally produced, such as our own content at WatchMojo.com.
We then define super premium content as television and theatrical content that is repurposed or published online. Despite their resistance, super premium content owners such as Disney and Sony are seeing no choice but partnering with YouTube.
Having taken notice, CBS, who initially refused to join Hulu, bought CNET for $1.8B, obtained the TV.com URL and has now set its sights on clashing with Hulu for super premium video supremacy. As a side note: wesupply videos to TV.com, Hulu and YouTube.
Meanwhile, YouTube continues to forge ahead, though rumor has it, its costs are spiraling out of control and turning it into a profitable business is becoming more challenging as every day goes by. YouTube is in a thankless position:
- consumers want free videos
- it has to take on “Big Bad Media” when they file a lawsuit (how dare they, right, it’s their content!)
- oh, we also want someone else to foot the hosting bill for increasingly better quality video.
How do we thank them? By calling them a monopolist. Evil. Or worse, heartless. The last one came from us, but it was actually meant as a compliment. Sort of.
What About the Rest?
Anyway, in the past 18 months since I wrote that first piece, more has changed:
YouTube, Hulu, TV.com have all made life for Break Media, Metacafe, DailyMotion and Veoh tougher and tougher. They made things nearly impossible by launching their own sites, however, and not acquiring them. You see how with content, you can launch a new site (Hulu, Tv.com) and scale quickly if you have the resources. By launching these sites and shooting up in the traffic rankings, they removed a lot of leverage these companies would have had in any M&A talk.
I should mention, we have partnerships with all of these companies as well, and to borrow an analogy from Fred Wilson, like any book/newspaper/magazine publisher wants to see bookstores or newspaper stands do well, we genuinely want these companies to grow in traffic and in revenue, but the truth is, you don’t need a gazillion aggregators, either.
YouTube’s success comes partially from the fact that it stayed one step ahead of the copyright issue and managed to literally aggregate all of the videos in the world (or close to it). Hulu and TV.com will leverage their pedigrees to remain relevant and grow.
But there will be a shakedown amongst Veoh, Break, Metacafe and DailyMotion, unless they shift strategies or get some kind of differentiator.
Some would argue the shakedown has begun:
- Last week, sadly Veoh laid off more people. It will now focus on its toolbar, called Compass. Here is a piece by Tech Crunch talking - and describing - Compass much better than one my one-line “it’s a toolbar” description.
- Break Media, in trying to avoid such a fate, seems to have taken a different strategy: producing, investing and acquiring content libraries… which I personally think makes sense. They just bought HBO’s Runaway Box.
Few of these companies will ever really become profitable businesses, I think, though one or two might cash out and exit, making some money for investors. The challenge they face lies in demand and supply: too many similar offerings.
But by making a play for content, I do think that Break Media differentiates itself from the others enough to have some kind of premium or leverage in potential M&A talks, because a buyer would be getting everything else the others offer (traffic, technology, advertisers and content they not only have rights to, but actually own).
Please note, as a content producer, I am biased. Readers of this blog know this all too well. But the fact is, Break Media does get an edge here, ironic or fitting, since they are partially owned by Lions Gate, who owns a right to buy the whole piece.
Since Lions Gate owns the right to buy the whole company, then logic would suggest that Veoh, Daily Motion and / or Metacafe will also make a bid to own content libraries as a differentiator, as well, since they are actually sellable and “in play”. I am not saying they are thinking of doing so, or will for sure, because the VCs that backed these aggregators were adverse to content to begin with… but the fact remains, in their quest for relevancy, it sure would be a hedge against obsolescence.
You are also going to see this with ad networks, as well. AdConion bought Red Lever, I do expect over time for others to follow suite.
When CBS hired Quincy Smith to head up its online efforts, the former Netscape dealmaker and Allen & Co. investment banker joked that CBS’ efforts at building a video destination called Innertube might have been called CBS.com/NoOneComesHere.
Lacking much presence online (as in, it was not in the Top 10 properties) it then embroached a “distribution over destination strategy”, launching the CBS Interactive Network. Indeed, with online video it is possible to build distribution on third party sites (as we’ve done quite well) but near impossible to build a destination without considerable investment.
Then, of course, it bought CNET for $1.8B - something that we called a couple of months before the deal was announced.
While the meltdown in media stocks (and all assets, in fact) might make that deal seem foolish in the present - even CEO head honcho Les Moonves said he might not pull the trigger on that deal if he knew how much equity prices would tumble and ad market would slow down - long term it will prove to be a decent buy, as it catapulted the Tiffany network into the Top 10 rankings of largest Web properties (Last.fm, the other $100M+ deal it did also helped, of course). Another reason why it was a savvy deal was the portfolio of URLs that over time should prove accretive, too.
With the Web 2.0 era firmly a bust, you will see the merits of a 1.0 notion - the portal - return. As such, with the large Web audience under its wings, today we get confirmation that CBS will toss its hat in the ring by relaunching TV.com and take on (though the corporate spin might very well be that they’re not competitors, etc.) Hulu, Joost, Sling.com, etc… while success in these endeavors is anything but certain, if CBS can leverage its content to build something of value and hatch a successful destination at TV.com, then it might make everything else it got in the CNET deal the cherry on the sundae. After all, it has been reported that Hulu.com might generate more revenue in 2009 than Google’s $1.65B pet project YouTube will…
TV.com’s success is anything but guaranteed, but this does seem to prove a nice lesson: with the right content, you can always catch up on distribution and build a destination yourself… but without the right content, you’re dead on arrival. Of course, it helps to make one key acquisition, regardless of its form.
Disclaimer: Joost, YouTube, Hulu, Sling are all WatchMojo.com’s distribution partners.
The Grinch Who Stole Q1
Tech Crunch has been making the rounds and the projections for Q1 2009 online advertising are bleak:
Display advertising revenue is going to fall of a cliff in January according to a number of content sites I’ve spoken with who rely on advertising for revenue. “Sales through December were mostly strong as advertisers used up their marketing budgets,” said one sales exec. But, he added, “there are few buyers for this next fiscal quarter, and those few that are buying are looking for steep discounts.”
Just how bad will it be? I’ve heard estimates of 30%-80% revenue drops over the next three months from companies that serve a variety of content (games sites, tech news, celebrity news, political news, etc.). The median pessimism point is around 50%. The people I’ve spoken with work at large public companies and small one-person blog shops. Absolutely no one I spoke with said they expect an up quarter.
Negativity Begets Negativity
At some point (and we’ve passed that point, folks), the bad news becomes a multiplier effect for more bad news:
- a media buyer sees this kind of article, uses it to lowball a publisher,
- the publisher sees little bright news, so they give in,
- the rates fall downwards, the bookings become rarer and rarer,
- next thing you know, indeed, we’re in a down quarter.
D stands for Deflation…
The web economy and online advertising sectors represent tiny pieces of the bigger picture. The buzz word in 2009 will go from subprime to deflation… so if we operate in a climate (or think that we do) of falling prices, then I wonder why we’re shocked to realize that ad rates and overall ad revenue might fall. I think at the macro level (all marketing) this might - and will - happen. From AdAge, via MediaMemo:
… and Display Advertising!
But as we outlined in our 2009: The Year in Online Advertising, yes, display will be weak, but I think publishers are buying into the glass-is-half-empty outlook because of bearish reporting. The truth is, my gut says things will go down a bit differently:
- marketers will push for video ads (and rich media ads in general) in display advertising real estate,
- the definition for video advertising will move away from purely instream ads (pre-rolls or overlays, for example) to include in-banner video ads,
and by mid-year, the actual display advertising figures will be fine (when you include the video / rich media units).
I do agree that traditional display ads will be weak… mainly due to a horrible Q1.
Let’s be honest: CPA and CPC are for suckers
While many are using the downturn to suggest that performance-based advertising units will see a boom, I’d like to point out a truth that most publishers fear admitting: CPA and CPC ads don’t really work for publishers, so even in horrible CPM times, I don’t think you will see a boom in performance priced ads in a downturn. For more on the entire CPC, CPA and CPM and other online ad terms, click here.
CPA and CPC revenue does not pay the bills, and quality publishers generally reject giving up prime real estate to CPC and CPA inventory.
But don’t take this from me, just follow the market: why else do you think Doubleclick, Blue Lithium, aQuantive and Right Media all got bought out (they all pay out largely in CPM terms even if on the back end they arbitrage inventory on a performance basis) whereas Valueclick remains standing, with no one to partner up with. At its peak, Valueclick was worth $3B with talks that it could fetch more. Even before the market meltdown, it was trading at $1B. Today, in the post media meltdown market, it is trading at $562M in market cap, with an enterprise value of $460M. The point being: in my experience dealing with of all the ad networks, from the publisher’s perspective, Valueclick was the most exposed to CPC and CPA and thus, most expendable.
Now this is all just my gut, but my gut has been right before: here’s one example of CBS buying CNET.
All Things Are Relative: At Least We’re Not in Radio, TV or Print!
If online advertising sentiment is this bad, even if the outcome is half as bad, then imagine what the radio, TV or print outlook is right now. Can you really imagine a media buyer paying $1M - let alone $50M, as Dell balked at - to be in print? What about radio or TV, which represent a black box in advertising where you don’t get to even track or target anything?
Newspapers like NYT and Tribune are - or are at risk to - defaulting right and left. TV companies like CBS are seeing declines in revenues. Radio companies are not faring better.
The point I am making is: there is a bull market somewhere at all times - even these times - and that market is online. It’s time to balance the reporting, too. I find it appalling (alright, strong word) that a site like Tech Crunch inflated the bubble on the way up, and is now ringing the bells of doom in the downturn… but that is publishing… and Tech Crunch does it well.
Who does the doomsday scenario thing best? Henry Blodget. Reading his Alley Insider, you’d think he and his talented staff of writers were typing on a ledge somewhere, choosing between the Publish button and jumping out of the window. For a great piece on his comeback, read this Wired piece. Mind you, in all honesty, I am technically guilty of this as well, the title of this piece should be “Will Online Ads Fall by 50%”, and not “What Happens if Online Ad Revenue Falls by 50% in Q1?” - but when I started writing it, I was thinking more of the impact on print… but then I started to ask myself, can this even really happen?
Well, maybe. At the end of the day, we just saw a major evaporation of wealth throughout 2008 in the housing, financial and automotive sector, to think that online advertising will go on unscathed is foolish, but to alternatively expect a 50% decline in what is the only bright spot in all of marketing is equally foolish.
Search and video advertising are very different: the former captures intent, the latter captures interest.
This plays out very differently with the kind of advertising that each one draws.
Search: Direct Marketing
Search is perfect for performance based campaigns that need a positive ROI in the mid to long term (don’t kid yourself, all campaigns are ROI-negative in the short term). The problem with search marketing is the volume, generally speaking, all factors being equal, you eventually run out of leads and search queries you can advertise alongside, so you have to trade off quantity with quality… meaning that in the long, long run, it becomes less ROI positive… to the brink of becoming a losing proposition again.
Video: Branding
Video [online] is all about branding. On TV you buy airtime to run an infomercial looking for sales… on the Web, you run video ads because you are promoting a car or trying to get the word out on sales. Yes, you want cars being driven off the lot or butts in the theater seats… but you know video is a very different proposition.
It’s interesting to see TV.com try to mesh TV and Web… again. Will it work? Who knows. I had my own plans for TV.com, frankly… but that is pretty moot now.
Great Expectations
When it comes to what I find most different about video and search advertising, really, are the expectations.
Back in 1999, websites began to throw in the towel on search as a business.
AltaVista became a portal.
Yahoo! outsourced its search strategy to Google.
Google took advantage of the perfect storm to build a business valued at $200B (now $100B). Part of this had to do with the utter lack of expectations for search to become big. With video, it’s the opposite. With TV being a $65B advertising market, and with offline dollars flowing online faster than ever, people simply presume that eventually video will become huge, too.
This has spawned hundreds of startups to vie for the dollars… but right now the market is made up of pennies. I think the long term difference between search and video is there won’t be one company with the kind of market share and revenue stranglehold that Google commands in search. Look at video. Sure, YouTube does 50% market share with regards to streams, but it’s yet to crack the revenue enigma. Over time, I see a bunch of players each doing 1-15% revenue… with hundreds more doing 0-1% of the revenue in the space. At the other end of the spectrum, look at Hulu, everyone’s darling this year. We love Hulu too (as much as we love YouTube - they’re both distribution partners of ours), but Hulu will run out of content sooner or later. I know it sounds impossible but trust me on this one.
Era of Lowered Expectations
What this means for investors is simple: even before the market meltdown of 2008, chances were that the implied valuations being placed on some of these startups would never pan out… now with the market meltdown of 2008 ushering the era of lowered expectations I think this reality will only set in more and more in 2009 and beyond.
“Our goal is we want to remain less than 10 people…it has become a great constraint that forces us to do smart stuff.”
Shelby Bonnie, former CEO, CNET, on his new company New Whiskey, found via PC.
The full-time team that has built the company is about 12 people now. Including all of the freelancers etc., we’re much more, granted… but I agree that being small has helped our company do smart things, avoid stupidity and remain agile. It’s a sickness to think you need to grow so fast - don’t get me wrong - I’ve been drunk with that thought many times… but every time I come close to “releasing the hounds” and adding to headcount at a faster clip than necessary, I remember that it’s best to “hire slow, fire fast“. Not a big fan of firing, so I avoid hiring loosely, either.
According to eMarketer, the size of online advertising revenue is $1.35B in 2008.
Since launching WatchMojo.com in 2006, I’ve had some questions about that figure… so here goes:
Definition of Online Advertising Revenue is Unclear
I’d be interested to know what falls into the category: if it’s only video pre-rolls, post-rolls or mid-rolls, then we leave out companion display ads… which on a site like YouTube account for the vast majority of revenue. Moreover, accounting departments need to standardize this definition. Conclusion on this item, we need transparency and clarity in Accounting definitions and guidelines, I’d be curious to see if an eMarketer spokesperson can address this.
Rich Media vs. Video Ads
When I was running sales for a mid-sized publisher, I recall that rich media ads (Unicast, Eyeblaster, Eyewonder, etc.) were bundled in with video ads because many rich media ads contained video… is this still true? I am not sure. Why?
Because…
In-banner vs. In-stream
Video ads can be in-stream or in-banner. In the latter case, it would be a video ad in a 300×250 that is rich media, YHOO has loads of these; then there are in-stream video ads, which go before, during or after video content. MSNBC has oodles of these. This is a very important nuance.
Double counting for partnerships?
Say FOX Sports has a partnership with MSN, who books that revenue? This kind of stuff is fairly standard, think of all ad repping firms who collect and remit ad revenue… but in MSN’s case, for example, it also has a partnership with NBC Universal on MSNBC.com. It’s somewhat useful to know how that is all booked. Is it case by case or is there an accounting rule that is actually respected industry-wide?
Ad Networks
Say an ad network such as Tremor Media, Brightroll, Video Egg, Broadband Enterprises etc. place some of these ads, they need to be accounted somewhere. The questions is: where are they accounted? My take is that like it was with display ads’ networks, video networks will touch 15% of the video pie.
Here’s our breakdown:
Using the figure from eMarketer for total US online video advertising revenues at $1.35B, up from $750M in 2007, as a benchmark.
- Yahoo.com = $200M
Yahoo did over $7B in total sales… with over $5B coming from ad revenues. Yahoo! has a lot of video content along with plenty of rich media on its site. As the world’s largest property, I could easily see Yahoo! doing even $250M in video-derived ad revenue, but when you consider that video accounts for less than 5% of the online video advertising pie, then we will assign a 4% share to online video for Yahoo! total ad revenues.
- Viacom = $125M
I think Viacom generates a larger than normal share of its online advertising revenues from online video ads. Last year I noticed MTV.com running a good dosage of video ads when my wife was watching The Hills on their site (I swear she was watching it). I also think that between Nick.com, MTV.com, NeoPets.com, iFilm/Spike, Atom.com and Comedy Central.com, one reason why Viacom is making a big deal about piracy on YouTube is that it sees just how good the online video advertising business can be.
- AOL Time Warner = $120M
Time Warner’s sources of revenue from online video includes AOL.com, TMZ.com, CNN.com, Time.com and many other prominent places. In fact, while TW does have the cable assets, if AOL TWX had more video assets, I think it could generate $200M per year from video, easily.
- News Corp./Fox Interactive Media = $100M
This is seemingly bullish, but note a few things:
Fox Interactive Media did $900M in total revenues… with MySpace.com doing $750M alone. Of that, it’s worth noting that MySpace is #2 behind YouTube, with MySpace TV making a push to get lots of premium content… leveraging News Corp.’s sales team, to boot.
Moreover, between AmericanIdol.com and IGN Entertainment (which includes IGN.com, GameSpy.com, RottenTomatoes and my old stomping grounds AskMen.com), this is actually quite feasible.
(disclosure: WatchMojo.com is a content partner to MySpace TV)
- NBC Universal = $100M
When it is not hosting the Olympics, literally, I think NBC Universal does about $75M from online video, when you consider that NBC’s online portfolio includes its namesake assets including NBC.com, MSNBC.com and the recently launched NBCSports.com. However, bear in mind, NBC also owns iVillage and Healthology, both sites that use a decent amount of video, and thus, generate online video ads. I think one reason why eMarketer pumped up its estimate to $1.35B is precisely because of the Summer Games in Beijing, which should generate loads of revenues for NBC and parent GE, I would put the 2008 take to $100M.
- MSN.com = $100M
Depending on the accounting, MSN.com can be making anywhere from $100-250M… but seeing how NBC and Microsoft remain 50-50 partners in MSNBC.com, but Microsoft has reduced its stake in the television network to 18%, I suspect most of the accounting revenue falls to NBC, who then remits a cut to Microsoft’s MSN unit (I could be wrong on this). Anyway, between MSN.com and MSN’s video assets, I think MSN does $100M in annual revenues from video advertising.
- Disney = $100M.
Disney consists of ESPN.com, Disney.com and ABC.com. That is a lot of video inventory.
Moreover, Disney is actually quite the king of online media. Well, at least it was, before News Corp. and CBS spent $2B in 2 years to accelerate their efforts. But the bulk of Disney’s $1B+ digital sales come from ticket sales at its themed parks, as well as merchandising… however, you know online advertising figures prominently, and video advertising growing quickly.
I had done an analysis previously, with Disney’s range coming in at a monthly low of $1M to a high of $7M.
Is it right? Who knows… Do I look like Nostradamus? Unless you have a better idea, let’s assume the math makes sense… however, given a few factors, I now put Disney on the higher range, and give them an annual revenue from video advertising of $100M.
- Hulu = $75M
Using AlleyInsider’s range of $45-90M in revenues, we’ll peg Hulu’s revenues at $75M this year in revenues. Hulu is now a top 10 video site, according to both Nielsen and comScore.
Disclosure: Hulu is a distribution partner of WatchMojo.com, as well.
- Google/YouTube = $65M
The bulk of that $200M comes from display banners. The only part I would attribute to “video advertising” is the sum of revenues from promotional/commercial videos that YouTube runs off its main page. At an run rate of $65M per annum, that is $175,000 per day, times 365 days. It comes from Forbes’ analysis. I should state, all the way back in 2006, one month before Google bought YouTube, I said “YouTube should be making $15M per month, or $180M per annum”. No comment. Disclosure: WatchMojo.com is a content partner to YouTube.
- CBS = $60M
CBS made $24M from March Madness… mainly from banners etc., but some videos, too. And CBS has been growing very rapidly, of late, launching its syndication network. I am not sure if CBS was doing much more than $5M per month on video ads because its reach was largely on third party sites that consisted of the Syndication Network, and let’s face it, once you embed ads, no one embeds your content on third party sites…
So if CBS was doing more than $60M in online video advertising in 2008, then more props to Quincy Smith and his team.
CBS only recently cracked the Top 10 list of largest web properties, thanks to its acquisition of CNET, which takes us to:
- CNET = $40M
CNET probably does $40M in video advertising, which out of a revenue of $400M is 10% of its total. Considering that on your average site online video accounts for less than 5% but CNET was an early mover here, I think that sounds about right… and yes, I am guessing here.
- The clones (Metacafe, DailyMotion, Veoh, Break.com, Joost, etc.): $50M
I use the term clone affectionately, but I suspect that combining all of the players looking at becoming #3 in the online video distribution space would give you a figure north of $25M but less than $50M. Why? Too much UGC content holds them back…
To really avoid double counting, I am omitting all video networks, such as Brightroll, Yume, Tremor, Broadband, etc.
- Rest of Web: $220M
Doing the math means that the rest of the Web is fighting for just under a quarter of a billion dollars.
What do you think? Does this breakdown make sense? Who are we missing?
Everyone is freaking out over the fact that YouTube is trying to monetize but 4% of its massive inventory.
Truth is, I thought that number was lower. But whatever the number, it’s a good thing.
YouTube is much bigger than its competitors. I do not think it’s easy for an outsider to realize just how much bigger YouTube is than Veoh, Daily Motion, Revver, Metacafe, etc.
We syndicate clips to a lot of places, and trust me, relative to its peers, YouTube is eons larger. We also syndicate clips to MySpace TV. MySpace is unique, in that MySpace.com is gargantuan, so if and when a clip gets a push off MySpace TV, it can spike your traffic.
Anyway, we love all of our partners… but the point I am making is that YouTube has so much inventory that even if it could sell ads across 100% of its inventory, all that would do in the short term is pummel ad rates because supply for video ads would shoot up but demand won’t change.
The problem is that the TV companies are generating the bulk of online video ad revenues, but they control their content, so you are seeing a bottleneck of video advertising revenue on a few major sites, such as the portals and the traditional media companies (and judging from the list below, the lines blur due to partnerships and joint ventures):
- Yahoo!
- MSFT and NBC’s MSNBC.com,
- Disney’s ESPN.com, ABC.com and Disney.com
- Viacom’s MTV.com, Atom.com, Spike.com, etc.
- News Corp.’s FOX.com, and MySpace TV (despite what the denigrators say, the much vilified MySpace did do $750M of Fox Interactive Media’s $900M in revenue, people)
- Time Warner’s AOL.com, CNN.com and related properties also probably generate meaningful revenues…
- CBS - who until its recent $1.8B acquisition of CNET was out of the Top 10 properties - has embraced a more open distribution strategy, but I suspect that will tilt to a more closed (or balanced) as it owns a larger web audience where it can keep 100% of revenues (this is why, I think, you will see CNET and CBS start to get more serious about web video, something that, well, both companies should be stronger in).
Then, of course, there is market darling Hulu, who reasonably and fairly can do no wrong. Hulu - whom many miss the point about its raison d’etre - can generate revenues off 100% of its inventory, but its inventory will always be relatively small compared to Veoh et al., let alone YouTube.
The problem is these high quality sites already charge an arm and a leg in ad rates for traditional placement (banners, etc.). Then for video, they want you to take out a second mortgage. Technically, new players like YouTube, Veoh, etc., would be ideal places for more cost effective video ads… but with these, the problem is UGC. In this case, UGC stands for User Generated Crap, or User Generated Crime (as in piracy). So net-net, advertisers balk and the entire inventory (or in YouTube’s case, 96%) becomes untouchable.
But here’s the thing, in YouTube’s case, this is a Godsend, anyway:
YouTube commands a 75% market share… maybe more. So even if it can generate revenues off only 4%, well 4% x 75% is still a meaningful chunk of the ad dollars up for grabs. Trust me, Google might refer to the 4% as a problem to get Wall Street off its back, but any self-respecting ad sales man will tell, it’s the inventory, stupid.
I am not saying that ceteris paribus (did we just break out the latin?), YouTube would not prefer more sellable inventory… of course it will… but that is over the mid and long term, when advertisers come on board and embrace online video.
Right now, they just ain’t.
It’s way too premature… but if CBS/CNET take TV.com (one of the many URLs CBS inherits by way of its $1.8B acquisition of CNET) and delivers on 25% of its promise, considering all of these assets, then I think TV.com can become the next great online video property. This is extremely premature and assumes that traditional media (CBS) and big, new media (CNET) don’t drop the ball, make synergies happen, integrate wisely, blah-blah-blah… but again, at 25% of its potential… I do not see how TV.com cannot become something worth talking about… Just look at all of this, from the official press release:
Technology: CNET.com is the number one Web site in the computer and consumer electronics category, reaching more than 18 million people every month with daily premium content offerings. From the latest product reviews to breaking news from the digital world, as well as video and program downloads, CNET.com has become the leading destination for people looking to navigate today’s digital world.
Entertainment: Representing the third largest online entertainment group on the web, the collective reach of CBS Interactive’s entertainment portfolio will now exceed 24 million users each month, and include many of the leading brands on the web today, including: TV.com, CBS.com, The CBS Audience Network, theInsider.com, GameSpot.com, Last.fm, and CHOW.com, among others. These are among the most visited entertainment destinations on the web today, each with their own identity and audience profile, and they continue to grow in users and time spent visiting. This past year, for instance, CBS.com market share grew a category-leading 41 percent. Combined with the power of America’s most watched network – CBS Television – CBS Interactive offers unparalleled consumer reach online and offline.
Sports: CBS Interactive is a leader in athletic coverage, from sites devoted to professional sports to the largest collection of collegiate brands. Among its top destinations are CBSSports.com, CBSCollegeSports.com, NCAA.com, and MaxPreps.com, representing one of the digital world’s largest sports footprints. Working with its leading broadcast and radio properties, CBS offers the unique opportunity to reach a wide group of people who are passionate about sports across the internet, television and radio.
News: Two of the strongest news sites in their own right, CBSNews.com, a leader in world news, and CNET News.com, the leader in technology news, combine to create the sixth largest property in the Current Events/Global News category. From breaking news and international reports to coverage of business, politics and technology, the combination of these two destinations gives users a global perspective they cannot find anywhere else.
Business: Eighteen million users each month have come to rely on CBS Interactive’s business properties, which include BNET.com, the cornerstone of the business category, and leading sites like ZDNet and TechRepublic. Collectively, these assets are among the fastest growing destinations in the expanding business category and offer users the latest and most insightful business coverage, with unique perspectives on management and technology.
And given the $1B valuation bestowed on Hulu (given the 10% equity sale for $100M) and $1.65B that YouTube fetched… I cannot understand how TV.com should be anything less than a $1B business in 2 years. Why 2 years?
- YouTube went from “domain registration” to “liquidity event” in 2 years.
- Hulu went from an idea on a napkin to a $1B valuation in 2 years…
It won’t be easy… and despite CBS’ offline TV mojo and all of the video efforts of CNET, there’s plenty of work to be done, but it surely can be done.
Will it? I don’t know… I don’t anyone knows. Well…
By and large, for traditional media companies to penetrate the Top 10 Rankings of Largest Media Properties, the cost of entry seems to be $2B, give or take a few hundred millions of dollars.
We already covered this for News Corp., who spent just under $2.5B to get to where Fox Interactive Media is now:
- MySpace parent Intermix: $580M
- IGN (my former employer): $650M
- Scout: $60M
- Strategic Data: $?M
- Photobucket: $250-300M (reported, but unofficial)
- Flektor: $15-20M (reported, but unofficial)
and by the looks of it, the tally is the same for CBS.
SAI has more on CBS’ rise to become a Top 10 media property, powered by the CNET $1.8B deal, as well as the $240M Last.fm deal. Any more up CBS’ sleeve? Time will tell. Interestingly both companies lack search - though I am not search if search is something traditional media wants to own. One other area where they could use some strengthening is online video… but I am biased there.
CBS is broken up into
- Technology
- Entertainment
- Sports
- News
- Business
Again, pardon my bias as a lifestyle publisher, but CBS also seems light in Lifestyle which is arguably bigger in terms of sheer client interest. Connecting the dots: when IGN bought my former company AskMen, it was to complete the 18-24 and 18-34 demographic amongst men, but it was mainly to complement its categories (IGN was strong in games, movies and technology but non-existent in lifestyle). I could be dreaming, but I am sure when IGN repackaged itself and sold to News Corp., it leveraged AskMen to convey its strength in lifestyle.
Interestingly, CNET has a few cooking and food properties and if my memory serves me right, they lured a former Maxim executive, so time will tell if they bolster that category as well.
Of course, this does not include the $5B News Corp. shelled out for Dow Jones, whose WSJ.com is indeed a crown jewel online and off.
PLAY
