CBS Digs Deep To Snap Up CNet
Expands Online Presence, But Was The Price Too Steep?
By Larry Barrett -- Multichannel News, 5/15/2008 8:19:00 AM
CBS Corp. Thursday announced it will pony up $1.8 billion in cash for CNet Networks, the online technology news and product review site, giving the broadcasting giant and its advertisers access to an addition 54 million unique online visitors each month.
The $1.8 billion purchase price, or $11.50 per CNet share, represents a 45% premium above Wednesday’s closing price of $7.95 a share.
Following the announcement, CNet shares stormed up $3.45 a share, or 43%, to $11.40 while CBS shares slid 72 cents, or 3%, to $24.10 a share.
“CNet Networks will add a tremendous platform to extend our complementary entertainment, news, sports, music and information content to a whole new global audience,” CBS chief executive Leslie Moonves said in a statement. “Together, CBS and CNet Networks will have significant additional exposure to the fastest-growing advertising sector and can accelerate our growth through a number of new content, promotion and advertising initiatives.”
Company officials said CNet, which operates a number of Web sites including news.com, ZDNet, GameSpot.com, TV.com and mp3.com, will be folded into CBS’s existing Internet unit, housing the likes of CBS.com, CBSSports.com, CBSNews.com, last.fm, Wallstrip and MobLogic.
The early consensus among financial and media analysts is that CBS paid too dear a price for CNet and its roughly 140 million aggregate monthly users, questioning whether or not CBS will be able to grow—or at least maintain—premium online advertising rates.
“We suspect CBS is trying to build a more formidable presence on the Web,” Citigroup analyst Jason Bazinet wrote in a research note. “But, the key CBS challenge will be sustaining premium CPMs. We estimate CNet generated about $12 per thousand page views in 2007, well above rivals.”
CNet, one of the few online media companies birthed during the dot-com bubble that managed to survive its implosion, was facing some heat of its own after hedge fund Jana Partners in the past year garnered a 10% stake in the company’s voting and stock and began pushing management to either improve its operational efficiencies or find a deep-pocketed suitor.
Analysts added that competition from smaller and more nimble tech news sites and blogs such as TechCrunch and Gizmodo were slowing both revenue and online traffic growth.
“We’re thrilled to join CBS and combine our interactive media experience with CBS’s world-class talent,” CNet CEO Neil Ashe said in a statement.
Forrester Research analyst Sarah Rotman Epps said the merger will give CBS a “more efficient way to reach a larger audience and wider demographics,” but said the union was “not a revolutionary move.”
“[CBS] definitely paid too much,” she said. “Add up the audiences across all the CNet properties and all the other assets including production staff and content and you still don’t get near $1.8 billion.”
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