Cnet Goes For Broke
For five quarters running, CNET Inc. has done what few Internet companies have done: shown a profit. But now Chairman and Chief Executive Halsey M. Minor is chucking his conservative, money-making approach. On June 30, Minor announced that he will plunge into the red with a $100 million ad campaign aimed at making CNET's name as synonymous with technology as ESPN is with sports. Says Minor: "This is a bold play for a dominant position."
In putting growth ahead of profit, Minor hopes to emulate the success of other Web companies such as Amazon.com Inc. The online retailer is one of the top companies in cyberspace and the darling of investors--even though it won't make a dime until 2001 at the earliest.
But CNET is switching strategies just when Wall Street wants Web companies to turn profits. Indeed, CNET shares rose 287% from Jan. 1 to June 30 while other Web stocks fell, in part because of its profitability. In its most recent quarter, CNET earned $3.2 million on $19.6 million of revenue. CNET is also tops in its category--a portal dedicated to technology news and information. In May, more than 400,000 more individual viewers clicked to CNET than to rival ZDNet, says researcher Media Metrix.
Minor says he needs to do better to make it into the Web elite. Just 4% of Internet users knew CNET in a recent brand study, vs. 14% for Amazon and 41% for Yahoo! Inc. The reason was clear: CNET spent less than $400,000 on marketing in 1998. Now, CNET is betting $100 million that it can use a slick ad campaign to elevate itself from a nerd's outpost to a popular site for all sorts of consumers. Welcome to the red-ink pool.
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