Cnet: A Home For Techies And Newbies Alike?
At CNET Inc., this summer should have been a season for high fives and strawberry smoothies. The six-year-Internet startup that focuses on tech news and services had pocketed $32 million from NBC in June for stakes in CNET and its portal, Snap!, a costly online service that had tied up scarce company resources for more than a year. CNET's stock, after languishing since the beginning of the year, was finally headed skyward. More important, the San Francisco company had joined the rarefied ranks of profitable Net ventures.
But instead of rejoicing, CNET has been regrouping. Finally freed from the distractions of Snap!, company executives have been giving CNET itself the once-over. It's not that CNET's network of Web sites and cable television programs devoted to technology and computing was in trouble. But CEO Halsey M. Minor figured they could be if something dramatic wasn't done to trump the army of Web competitors suddenly swarming into its space.
LITTLE CHALLENGE. In CNET's earliest days, few rivals seriously challenged it for precious advertising dollars or for the cybernauts who surfed the Web for technology news and information. But now, CNET must do battle with the likes of portal Yahoo!, tech publisher Ziff-Davis, and even Dell Computer--all of which have beefed up their online tech offerings. "The days of CNET just throwing anything up on the Web and people going to it because there is nothing else are over," says Julie Bauer, president and CEO of Saatchi & Saatchi San Francisco, CNET's ad agency. "CNET has to be smarter and brighter in how it positions itself to be successful."
That's why the company is eyeball-deep in CNET 2000--a top-to-bottom redo of its eight Web properties. The goal: to make CNET's sites appeal as much to tech novices as they do to gearheads. Indeed, the new CNET, which will be unveiled in stages over the next three months, will look more like a Snap! for all types of tech seekers. Want to build a corporate Web site? Come to CNET. Interested in sending family snapshots over the Net? CNET will tell you how. In search of a new laptop? CNET's recently launched shopping channel can help. CNET will feature a refashioned, easy-to-use front door, complete with simple-to-navigate area headings, such as hardware and the Internet. And, on Oct. 13, CNET began offering free E-mail.
ALL THE RAGE. This one-subject-with-loads-of-goodies approach is now all the rage on the Web as companies try to remake themselves into so-called specialty portals. The notion is that by offering some of the same features and services as the megaportals, single-focus sites can grab more traffic and advertising dollars.
To do this, Minor is even willing to ditch CNET's obsession with original content, widely considered the company's greatest strength. Minor says his Web baby will for the first time offer sources of news and information beyond its own. Like Snap! or Yahoo!, CNET already is trolling the Internet for other sites' jewels--such as computer product reviews--in an effort to build a service so deep and wide that it will feed virtually every one of its users' tech habits.
Think of CNET as the Tool Time show for the Web--a cozy hub for all tech needs. And when CNET can't fill an order, it will guide users to another place on the Web that can. "The one great use of the Web that we've been missing is being utterly, singularly complete about one topic," says Minor. "On the Web, you know what people want and you can respond."
TEPID REACTION. CNET's response has been to unleash its top dogs over the last 10 weeks to survey employees and advertisers, discuss site redesigns, and meld CNET's sites into a seamless service. They also have compiled a 13-page list of more than 200 new product ideas, including better technologies for measuring the effectiveness of ads and a stand-alone database of computer-product reviews that can be continually updated. Even News.com, CNET's popular tech-news service, will launch a more comprehensive version of itself in late October that will include coverage of technology as it relates to business in general. "We have to change because the market is changing," says Tom Melcher, senior vice-president for strategy and development.
To do that, Minor has had to convince his roughly 500 employees that it's O.K. to be merely knowledgeable about certain topics rather than authoritative sources. That's no easy feat considering that most traditional editorial operations frown on delivering someone else's handiwork--much less actually pulling it together for readers. So on Sept. 9, when staffers of the flagship CNET.com site were first briefed on Minor's vision, the initial reaction was tepid at best. "There was a notion that we could do all this amazing work and it wasn't considered valuable," recalls Alice M. Hill, editor of CNET.com.
CNET's discouraged workers came around when they listened to a reworked presentation that acknowledged the value of their editorial contributions and highlighted the overall benefit to the company should CNET change its ways. "If someone comes to our site, and they want to build a Web site and we don't do that, we're not useful for that person," says Hill. "Isn't it better to offer something to that person rather than nothing?"
CNET may have convinced its employees that it's on the right track. But analysts are still questioning the company's business prospects. CNET's online unit accounted for $11.2 million in its most recent quarter, up 69% over a year ago. Virtually all of that dough came from straight advertising on the sites.
The expanded CNET and its spiffy new look is all well and good, analysts say. But if the company wants to compete with the Web's elite portals, it will have to help sell products. "Content-specific sites without this other piece of the puzzle will have a very difficult time," says Mary Meeker, an Internet analyst at Morgan Stanley Dean Witter. "The real question for CNET comes back to how it will get people to buy products." Meeker adds that CNET probably delivers more goods--namely software--to its customers through its Download.com site than almost any other Web player. But CNET doesn't get a penny from that.
Minor says CNET has no intention of selling products directly. But he says the company in October began collecting fees for every potential buyer it sends to one of its advertisers through its Shopper.com site, which was launched in June. On Oct. 19, the company is expected to announce these so-called per-lead deals with 54 merchants, including Egghead.com and Dell.
Although executives won't say exactly how much any one company is paying, these deals could add up to a wad of cash since CNET says it sends on average some 40,000 potential customers a day to its commerce partners. Minor expects per-lead revenues to account for at least 50% of the company's total revenues by 2000--pegged by analysts at about $111 million. "We will be a huge source of leads to people who want to buy and to sell stuff," says Minor, adding that CNET will soon expand this service into new categories such as consumer electronics.
Advertisers must agree since few blinked when CNET told them that they would have to start paying for leads in addition to their ad buys. That may be because 46% of Netizens use the Web to research products they plan to buy, according to Forrester Research Inc. Says Craig A. Winn, CEO of Charlottesville (Va.)-based computer reseller Value America, a CNET advertiser: "CNET draws knowledgeable people in and generates leads to informed buyers."
CNET also is hoping to attract more non-tech marketers. Although technology companies currently make up 77% of CNET's advertisers, Gregory J. Osberg, president of sales and marketing, says the company has set its sights on five consumer categories of advertisers: consumer electronics, telecom, finance, automotive, and travel. He'll try to woo them with CNET's new advertising services that go beyond traditional banner ads, which are much like billboards on a highway. There will be sponsorships of product sites and seasonal sections such as holiday shopping guides.
Will this ambitious agenda work? CNET had better hope so. The company, while valued by investors at 9.7 times projected 1998 revenue, still isn't in the same league with such highfliers as Yahoo!, which is trading at 54 times 1998 revenue. To get there, CNET will have to work fast to establish its brand as the Web's be-all on tech. But with so much competition--and room for just one or two successful players in each subject category, CNET's future is far from assured. Then again, if Minor's bet is on target, his company can start whipping up those strawberry smoothies.