Cnet Networks Inc

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CNET NETWORKS INC.

CNET Networks Inc. is a leading provider of technology and e-commerce news and information across several media, including the Internet, television, radio, and print. Its target audiences include both consumers and businesses, and the company has created online marketplaces for technology and consumer products. Its subsidiary, CNET Data Services (CDS), plays a central role in providing information that drives computer and electronics sales and distribution channels. CDS licenses access to its multilingual product database to online computer retailers, resellers, and e-commerce companies. At the end of 2000 CDS had some 135 licensing agreements in place with companies that included Dell Computers, Hewlett-Packard, Ingram Micro, and Yahoo!. The CDS database included information on more than 600,000 different products.

CNET Networks has an Internet presence in more than 25 countries. Its Internet operations include flagship Web site CNET.com, which provides technology news and product reviews. According to B to B, CNET.com had 20 million unique monthly visitors during the first quarter of 2001, nearly 80 percent of whom were influential at all stages of their company's buying process. More than 95 percent of CNET.com visitors planned to purchase hardware or software during the next 12 months.

Following the acquisition of Ziff-Davis Inc. and ZDNet in October 2000, CNET Networks gained control of ZDNet.com, another flagship Web site that provides information on technology products and services. In January 2000 CNET Networks acquired the comparative shopper mySimon (www.mysimon.com). The company also operates dozens of other Web sites under a range of sub-brands and has two news sites, news.com and zdnn.com, that focus on breaking news in the technology industry.

CNET Networks also is active in television, radio, and print. Its television programming, News.com, can be seen on CNBC on Saturday and Sunday afternoons. CNET Radio, which can be heard in San Francisco, was formed in January 2000 through a partnership with radio station owner AMFM Inc. and was the first all-tech radio format in the United States. A live audio feed of CNET Radio can be heard on the Internet at www.cnetradio.com. The company's magazine, Computer Shopper, has a circulation exceeding 500,000.

CNET Networks also disseminates technology news and information through electronic newsletters. It gained some newsletters through the acquisition of Ziff-Davis, which helped to increase its number of newsletters from 61 in the first quarter of 2000 to 150 in the first quarter of 2001. The company boasted some 10 million opt-in subscribers to its newsletters.

According to an interview with CNET Networks' chairman and CEO Shelby Bonnie in B to B, about 66 percent of CNET Networks' revenue comes from advertising (online, print, and broadcast). Other revenue streams include lead generation (21 percent); channel services, including license and subscription fees (5 percent); and international revenue (8 percent).

FOUNDED IN 1992 BY HALSEY MINOR

CNET Inc. was founded in San Francisco in 1992 by Halsey Minor, 27, who led the company as its chairman and CEO until 2000. In March 2000 CNET's vice chairman Shelby Bonnie succeeded Minor as CEO, with Minor remaining as chairman. In 2001 Bonnie became chairman and CEO, with Minor becoming chairman emeritus. As a managing director of venture capital firm Tiger Management in 1992, Bonnie was the first major investor in CNET. In 1993 he became the company's third employee and was its chief financial officer and chief operating officer. Prior to founding CNET, Minor was an investment banker and publisher.

By 1994 the company was attempting to launch a new cable network, C\NET: The Computer Network. It planned to start with a single show called "C\NET Central" that would run for several hours over a weekend. The start-up cable network received a significant investment from Microsoft co-founder Paul Allen in 1994, and in 1995 USA Networks became a minority investor. At the time a competing computer channel, Jones Computer Network, reached 1.5 million homes, and Microsoft was planning to launch the PC Channel in association with cable operator Tele-Communications Inc. (TCI). USA Networks agreed to show C\NET programming on its USA and Sci-Fi cable channels.

The president of C\NET Networks was Kevin Wendle, who was an original member of the Fox Broadcasting team and an Emmy Award-winning producer. In 1995 the network was developing two shows in addition to "C\NET Central." One was to be called "The Web" and focus on the Internet, while the other would consist of multimedia software and product reviews. The company also began developing a Web site that would be a leading source of information about computer technology and digital media. By mid-1995 C\NET Online had more than 43,000 registered users. Its lead advertisers were Hewlett-Packard, IBM, and MCI. The demand for online advertising was such that CNET created a separate department to provide data to potential advertisers. Within four months the number of employees working on the Web site increased from six to more than 85.

In 1996 CNET and E!Entertainment Television formed a joint venture called E!Online, which began as a Web site providing entertainment news. However, the venture was short-lived. In 1997 E!Entertainment Television bought out CNET's 50-percent interest in E!Online for $10 million.

The national exposure that resulted from the weekly airing of "C\NET Central" on the USA and Sci-Fi channels helped toboost traffic at CNET's Web sites. The company's flagship Web site was CNET Online (www.cnet.com), which was getting 9 million hits a day in mid-1996. It offered technology news, game reviews, technical support, bulletin boards, and product reviews, as well as an online radio component that delivered audio. Visitors to CNET Online also could view C\NET Central's studio. In addition to CNET Online, the company also operated Share-ware.com, an archive of more than 170,000 free software titles, and Search.com, a Web site that gathered search engine programs that indexed Web sites.

DEVELOPED NEW ONLINE PROPERTIES, 1996-1999

CNET went public in 1996. Later in the year the company added more Web sites and scaled back plans to operate a 24-hour cable channel, deciding instead to stick with limited cable TV programming and to focus on the Internet. CNET's newly launched Web sites included News.com, a source of technology news; Download.com, a library of software demo titles; and BuyDirect.com, a site that allowed registering, purchasing, and downloading software. TV programming included three additional shows: "TV.com ," which featured presidential son Ron Reagan as a correspondent; "The Web," in which young hosts discussed cool Web sites; and "The New Edge," which looked at how technology was affecting our daily lives.

In 1997 CNET launched Snap! Online, a combined online service, directory, and tutorial. Challenging America Online, which then had 12 million subscribers, Snap! included a comprehensive CDROM tutorial for first-time Internet users. The free service also organized Internet content into channels for news, sports, entertainment, and other topics. In 1998 Snap! attracted a $5.9 million investment from NBC, which had an option to acquire a 60-percent interest in the Web portal for an additional $38 million.

In mid-1998 CNET launched a comparative shopping site for computer and technology products called Shopper.com. The site maintained a database of 100,000 products and 1 million prices. It had 62 participating computer retailers who listed their products on Shopper.com and then paid a fee based on a "pay-per-click" advertising model.

For 1998 CNET's revenue increased by 69 percent over 1997, from $33.6 million to $56.4 million. Net income for 1998 was $2.6 million (later reclassified to $3 million), compared to a net loss of $24.7 million in 1997. The company's Web sites were generating 8.2 million page views a day at the end of the year, and analysts forecast that CNET's multiple revenue streams would enable it to sustain its profitability for the next several years.

CNET continued to develop its e-commerce strategy in 1999 with the acquisition of NetVentures Inc. and its ShopBuilder (www.shopbuilder.com) online store creation system for $12 million. It planned to help resellers of unbranded computer systems, or "white boxes," build their own online stores and benefit from CNET's marketing clout. In August 1999 CNET began a store-hosting service for small-to-mid-sized merchants at www.store.com.

In early 1999 CNET began providing online computer buyer guides to America Online. Around this time CNET reorganized its Web sites into an efficient e-commerce platform. Shopper.com, News.com, Builder.com, and Computers.com were reconfigured into 10 content areas. The company's main page, www.cnet.com, focused on searching and included archived articles, editors' picks, the Snap portal, searches from Inktomi, and links to retailers. In May 1999 CNET strengthened its search engine capabilities by acquiring Sumo Inc., an Internet Service directory, for $29 million in stock. In a separate deal with RealNetworks, Snap.com would be used as a search tool to locate video and audio content online by users of RealPlayer G2 and on all RealNetwork sites. Later in 1999 CNET acquired Internet search firm SavvyS-earch Ltd. for $22 million.

CNET stepped up its branding efforts in 1999 as well. The company started out the year with an advertising budget for a national branding campaign estimated at $40-$45 million. Then, putting growth before profits, CEO Halsey Minor announced in mid-1999 he would spend $100 million on advertising to build CNET's brand and make it synonymous with technology. The new national branding campaign featured the tagline: "CNET: The source for computers and technology."

ACQUISITIONS AND MERGERS, 2000

CNET continued to be active in broadcast media in 1999 and 2000. In fall 1999 CNET News.com debuted on CNBC, and the company launched the CNET Investor Channel. In January 2000 CNET formed an alliance with AMFM Inc. to create CNET Radio, the first U.S. all-tech radio format. That same month CNET spent $700 million to acquire comparative shopper mySimon.com. In March the company changed its name from CNET Inc. to CNET Networks Inc.

In July the merger of two major technology portals, CNET and ZDNet, was announced, with CNET acquiring Ziff-Davis Inc. With 16.6 million unduplicated users, CNET Networks became the eighth-largest Internet property, according to Media Metrix. The sale of Ziff-Davis Inc. and ZDNet to CNET was completed in October for approximately $1.6 billion. Earlier in the year Ziff-Davis Inc., ZDNet's parent company, had sold its Ziff-Davis Publishing business, which included computer magazines PC Magazine, PC Computing, and PC Week. Also not included in the sale to CNET was ZDTV, which had been sold to Paul Allen's Vulcan Ventures. In addition to the Web portal ZDNet.com, CNET gained Computer Shopper magazine, the SmartPlanet online service, and an equity stake in Red Herring Communications. Japanese software giant Softbank Corp., which owned 50 percent of Ziff-Davis, would have a 17-percent interest in the new company.

As a result of its acquisition activity, CNET reported revenue of $264 million for 2000, compared to $112.3 million for 1999. However, acquisition costs and interest expense resulted in a net loss of $484 million, compared to net income of $416.9 in 1999. For 2001, the company appeared committed to making more acquisitions. In April it acquired a 90-percent interest in the technology industry research firm TechRepublic Inc. from the Gartner Group for $23 million.