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CNet: Net media next focus
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February 11, 1999: 9:26 p.m. ET
Advertising, e-commerce should work together, publisher's chairman says
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NEW YORK (CNNfn) - Internet media companies are likely to claim the spotlight from e-commerce companies, the head of the CNet destination site said Thursday on CNNfn.
Media companies -- those that provide information over the World Wide Web -- offer higher profit margins, Halsey Minor, chairman and chief executive officer of San Francisco-based CNet, told John Metaxas on "Street Sweep."
CNet's broadcast capabilities also should serve the company well as faster online connections enable Web surfers to access audio and video files, Minor said.
Here are highlights from that interview:
JOHN METAXAS, CNNfn ANCHOR, STREET SWEEP: CNet rebounded today after three days of losses. Late yesterday, the Web publisher reported better- than-expected profits and announced a 2-for-1 stock split. Nationsbanc Montgomery upgraded the stock to a "buy." It rose more than 38 at $129-1/2.
You with this latest quarterly report joined the few number of the Internet companies that are actually profitable. How did you do it?
HALSEY MINOR, CHAIRMAN AND CEO, CNET: It's actually our third profitable quarter. We surprised analysts to the upside because we had a very strong fourth quarter. We're a media company on the Internet, and we primarily help people who are interested in computers and technology buy products. There are a lot of people who wanted to do that.
METAXAS: You had a public deal with NBC, you gave a portion of your Snap portal, you're in a joint venture with them now. Why did you make that move to in effect divest a part of your ownership in Snap?
MINOR: Well you know, we have two brands; we have CNet, which is of course the company that reported its earnings yesterday, and was profitable. We also have an on-line search and navigation service called Snap, and it became really clear to us that that business was going to be one where the cost of marketing and acquiring the users was going to be very high, and that the larger media companies have a real advantage, and so we decided in the summer of last year to partner with NBC, and really began the whole frenzy now of larger media companies deciding to enter the space.
METAXAS: It also was a trend, in that since the AOL-Netscape deal, we saw the portals basically fall one by one, or try to go into mergers or joint ventures. Do you see that process as having played itself out?
MINOR: Well, I think when we first announced our deal with NBC, we fairly accurately predicted that virtually everybody else, with the possible exception of Yahoo! (YHOO), was going to have to seek a partner, just because the game had been so fundamentally changed. I think you're seeing fairly rapid consolidation. It's been less than a year since we announced our deal, and as you mentioned, just about everybody, with the exception of Yahoo!, has done a deal with a large media company and that even includes Netscape (NSCP), who decided to partner with AOL (AOL).
METAXAS: What do you think is going to be the dominant business model moving forward, e-commerce or advertising or perhaps one of the other business models?
MINOR: Well, I don't think you can separate e-commerce from advertising. One of the things that's beginning to be clear is that being a media company on the Internet is a pretty good place to be. Selling products, goods and services, is a relatively low-margin business, whereas being a media company like us or Yahoo! is a relatively high-margin business. So you're seeing a bit of a shift in focus away from, in the fourth quarter, a real focus on retailing and towards more media-centered business models.
METAXAS: Now, in terms of the deal we saw this week between Lycos (LCOS) and Home Shopping Network and USA Networks (USAI) -- a deal between an Internet-based company and a television programmer, not unlike yours with NBC, Snap's with NBC -- are we seeing the convergence of television and the Internet and do the companies that have broadcast partners have any advantage in this process?
MINOR: I think (having) broadcast partners is really the key. The Lycos-USA Networks arrangement was between Lycos and the Home Shopping Network, which is a cable channel. The advantage you get with a broadcast network is you get to reach a lot of people and extend your brand at a fairly early and nascent stage of the industry where a lot of people haven't developed brand preferences yet.
I do think it makes sense what we've done with NBC. I certainly think what Infoseek (SEEK) did with Disney (DIS) makes sense. I think that when you select a partner, it's very important that you choose one that can give you reach and help you -- can act as a catalyst for building your brand very rapidly.
METAXAS: Tell us about the television programming that you're planning and how that's going -- how that part of your business is moving forward.
MINOR: We've been doing television programming since 1995. We produce four shows that are on cable, the USA and Sci-Fi Channel, and one show that is in syndication, and our shows are in 45 countries outside the United States.
We run that as a slightly profitable division that really is a great way for us to market ourselves because we essentially market ourselves to about 8 million people a week and do it at a profit.
It also generates content. And 1999, it's going to be a year where we'll see broadband, or fast access of the Internet that supports audio to video begin to happen. Our TV operation positions does very well for that.
METAXAS: You see yourself putting television-style programming out on the Internet?
MINOR: Well, I think what we really see is using our content on the Internet. I don't think that people are going to want to watch 30-minute shows on the Internet quite the way they do with television. When people search for stuff, if they could get clips of video that are related to what they're interested in, people would find that valuable -- just as valuable in many ways as they find searching for text that answers their question.
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