CNET Execs Tell Goldman Sachs Why They Love CBS Deal

It’s early, but Goldman Sachs sure lobbed some softballs at CNET CEO Neil Ashe and CFO Zander Lurie at its Internet conference in Las Vegas. Few details here on the integration with CBS or any additional restructuring that may be in the offing.

Here’s what we learned: the online ad market is soft, partly because of the economy, but also because Google is taking 50 cents on every new ad dollar that comes online, and there’s a glut of inventory thanks to social networks.

CNET is restructuring its online sales force around advertiser categories (like TVs or autos), rather than specific CNET brands (like BNET or GameSpot). CNET sales may be integrated with CBS, but Ashe wouldn’t say for sure. The integration process with CBS has not yet begun.

The Goldman Sachs Q&A:

What has the investing community missed about CNET? Why did CBS pay such a high multiple?

Ashe: There is no other business on the Web like CNET. CBS recognised that if you want to buy a Mercedes you buy a Mercedes. We are excited about it. They’re excited about it. It’s good for our shareholders, for our employees and for CBS.

Do you think you’ll have the opportunity to reach new advertisers that have not advertised on CNET in the past?

Ashe: If you look at the dollars we do from pharma, there are opportunities and we will be able to absorb significant new money we haven’t had access to before.

What does Yahoo partnership mean going forward?

Lurie: Yahoo has transitioned to a platform company in display advertising. Yahoo is playing a big role and that is going to get bigger. We brought on Yahoo to be our exclusive third-party partner to sell unsold inventory. The second part is our sales force will be able to sell our users while they are on Yahoo. The third piece is–we are now going to help them with Yahoo toolbar so our ISPs will be able to make more money. CNET will become premiere programmer on Yahoo Tech. We will expand in areas we sell well and contract in areas we haven’t done well.

What are you seeing in the online ad market? Signs of economic weakness impacting the business?

Ashe: Yes, there are some things that are CNET specific. I wouldnt say specifically you can put a finger on a category, but there is a general sluggishness. We had a tough comp in the first quarter from last year. But generally we remain long-term bullish on display advertising. No question share continues to come online. Google took 50 cents on every new dollar in the first quarter–but that won’t last forever as the larger advertisers continue to move share. 43% of auto magazines are still in magazines. There is a wave of dollars that will continue to come.

Talk about trends in video advertising on your site?

Lurie: Video advertising online is still nacent–no consistent ad units and no consistent counting. Consistent demand at high CPMs. The high CPMs won’t last forever. We are sold out on video and have a backlog. We do 2-3 million video impressions per day.

Ashe: The market needs to make it easier for advertisers to advertiser on video. Pre-roll ads are bad.

Lurie: Pre-roll has taken off with marketers but not with users. Apple’s Mac-PC campaign is an example of good creative ad campaign. I believe you will see that development accellerate.

What is your view on emergence of ad networks? Who is geared to benefit in that environment?

Ashe: There are a lot of ad networks–too many. Ad networks are in general the wrong strategy. CPMs are not sufficient. You have to have a layered business model with search and direct relationship with marketers. There will be a shakeout. Some of the larger networks will consolidate. There is just no need for as many networks as there are now.

Lurie: Once you get past Google or Yahoo you need to be really specialised or have some other point of differentiation which are hard to develop.

Do you feel advertisers are reluctant to work with ad networks?

Ashe: You can use them for broad reach campaigns. The rates ad networks can afford to pay are balancing that concern. They are really dirt cheap. Traditional advertisers aren’t headlong into networks but they are using them more than we expected.

How much is the weakness in display related to networks?

Lurie: There has been an explosion in supply of inventory due to social networks. But the top 100 advertisers haven’t changed. Its the supply-demand imbalance that we are starting to work through. Ad networks by definition can sell IAB standard ad units. We can build you an integrated program with significant reach–thats where premium publishers will differentiate from the ad network.

Additional restructuring or changes in sales force for the Yahoo ad sales deal?

Ashe: We are reorganising our sales force around categories. Now we have teams that sell CNET, BNET, GameSpot, etc. We will evolve to focus sales force on categories–like TV’s. We will have consistent in sales on autos, for example.

Integrating sales team with CBS?

Ashe: We haven’t started that. We expect the opportunity is cross platform sales. Whether we have two sales forces or one sales force is yet to be determined. Our sales folks just want to know when they get NCAA basketball tourney tickets.

Where is CNET on mobile initiatives?

Ashe: It’s always ‘next year’ for mobile. We think about it, but do not generate any revenue from it.

Lurie: The iPhone and WiMax … its about transfering the online experience to mobile as opposed to WAP. It has never warranted an investment from us.

Call ends.


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