NEW YORK (AdAge.com) -- It was the marriage of the oldest of old media with the oldest of new media. CBS was roundly criticized last summer for dropping $1.8 billion on CNet, an early web publisher with strong tech and gaming cred that over time had become a big, slow-moving, unprofitable bureaucracy.
But nearly a year later, integration is complete, and so far the marriage seems to be working, at least strategically. The message boards don't ring with internecine grumbling, and the cultures, while different, have grabbed hold of one another -- in part for dear life. As CBS Interactive CEO Quincy Smith said with a little hyperbole, "It has to work, for the internet."
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"It's good culture, good chemistry, and I think it really works," said Curt Hecht, president of VivaKi Nerve Center, a unit of Publicis. CBS Interactive has moved to San Francisco, where former CNet CEO and CBS Interactive President Neil Ashe and many of his top deputies are based.
Mr. Smith is based in New York, and pretty much lives on a plane. The question is whether the architect of the deal and of CBS's digital strategy will stick around when his contract expires this summer. While Mr. Smith has defined digital for CBS, he is a dealmaker and strategist, not an operator. He has not yet discussed his future with CEO Leslie Moonves, but execs close to the situation said Mr. Smith could move into a consulting role later this year. Mr. Smith is noncommittal. "This is not the Quincy show," he said. "I'll do what I can for the company."
In 'good hands'
Mr. Smith took over CBS's then-tiny digital business in 2006, bought a few companies such as Last.fm and DotSpotter, and started making cuts in places such as CBSNews.com. Now, in effect, management and whole divisions such as the web presence of CBS News are under complete control of former CNet execs, which you'd expect to annoy the heavyweights at CBS broadcast center. Instead, it's the opposite.
"We are in such good hands working with these guys, because they know the internet better than anyone I knew of at CBS News," said Jeff Fager, executive producer of "60 Minutes." "There is leaps-and-bounds improvement. They are full of new and interesting ideas. There is a real buzz there."
One of the original hypotheses for the deal -- that CBS and CNet shared very little audience overlap and, therefore, wouldn't cannibalize each other -- turned out to be true. Nine months after the deal, unduplicated U.S. unique visitors notched 54.4 million, slightly higher than before the deal, per ComScore, even as two of the biggest properties, TV.com and CBS.com, shed unique viewers while they repositioned as video-streaming sites.
CBS and CNet booked slightly less revenue as combined companies than they did apart, $133.6 million in first quarter 2009 compared with $142 million the year earlier, pre-acquisition. But, of course, there's the recession -- and they are profitable, earning $8.1 million last quarter, compared with CNet's $18 million loss in the same period a year ago. That's hardly a growth story, and digital is still a rounding error in CBS's $3.2 billion in quarterly revenue, but it's not bad compared with competitors AOL, whose revenue dropped 23%, and Fox Interactive Media, which lost $89 million.
Some CBS and former CNet properties have clearly benefited from the combination. CBS's strength reaching big-spending package-goods marketers has helped CNet's lifestyle and entertainment sites, such as TV.com and Chow, for example. CBSSports.com has doubled its audience in the past year, and advertisers such as AT&T Wireless, which sponsors the NCAA Tournament and March Madness On Demand, have extended their online buys to CNet's tech and gaming audiences.
Culture mesh
Before the acquisition, the only thing to say about CBSNews.com was that it didn't lose money, unlike the rest of CBS's storied TV-news operation. Now the unit is headed on both the editorial and business sides by former CNet execs Editor in Chief Dan Farber and Exec VP Joe Gillespie.
The CNet and CBS News the cultures have meshed, in part, because most CNet journalists have old-media print backgrounds, and because the CBS old guard gets that CBS News' storied brands must be given some relevance on the web to have a 24-hour presence in the news. No one has asked CNet staffers -- even New York-based ones -- to stop wearing sneakers, denim or performance outerwear. One CNet reporter said the bigger culture clash for CNet came in 2006, when the news staff was asked to start blogging.
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Has it helped? Not yet: CBSNews.com's traffic is still flat compared with a year ago, and it has a long way to go before it's even in the same league as MSNBC, Yahoo News or NYTimes.com. Mr. Ashe said CBS Interactive will make money on online news, and it has won at least one new advertiser in Microsoft, a longtime CNet advertiser that sponsors CBS News' online video.
The biggest concern facing Mr. Smith is what happens to CBS's online-video-distribution strategy now that it is the only Big Four network without a relationship with Hulu. "So far our business model is working, so there is no intent to change it," Mr. Smith said.
TV.com dispute
He has approached Hulu CEO Jason Kilar about a deal that would allow CBS to continue to distribute elsewhere, such as YouTube, and control the sale of ad inventory. Mr. Kilar and News Corp. President Peter Chernin have publicly said they're amenable to such a deal. The stumbling block is the continuing dispute between CBS's TV.com and Hulu, which began after TV.com, which had a deal to distribute Hulu content, fashioned itself as a direct competitor, under Mr. Smith's leadership.
Another question: Can CBS get Madison Avenue to spend online commensurate with its scale? "We are one of the largest internet companies in the world, and I think it surprises a lot of people when we say it," said Chief Client Officer David Morris.
Michael Hayes, managing director-digital for Initiative, a unit of Interpublic, said despite its reach, CBS can't really compete with portals, with their advanced targeting and reams of data. "In the digital space, you are buying audiences and eyeballs. You're not buying the full circulation." But "the first step," Mr. Smith said, "is being a part of the conversation."
via AdAge