Every day it seems we are reading about the power of social networking to transform the Internet and how we communicate online and also consume and discover new content. While that is true and clearly changing the consumption habits of online users, today seems like a flashback to the old school Internet days where traditional content was king. First IAC announced the acquisition of Lexico Corp which owns dictionary.com, thesaurus.com, and reference.com and then CBS announced the acquisition of CNET. With $400+ million of revenue in 2007, it seems like a good buy for CBS at a little over 4x trailing revenue. So looking at the fact that people are recognizing that social networks are not as easy to monetize as previously thought and the understanding that old school content can still be monetized, I wonder what other old school content companies may be in play in the future (can anyone say the Knot.com or the thestreet.com - full disclosure, i bought shares of these companies for my own account during the last couple of months). Given the weakening ad spending environment and the fact that many of these small public Internet companies reported lower guidance for the rest of 2008, it is clear that now is a good time for strategics to buy and expand their uniques and ad inventory. As I have always said, when it comes to the web, scale matters! Also see Silicon Alley Insider for some comments from the CBS conference call regarding scale and the value of premium content:
CNET's been very disappointing for past few years. What are your strategy for improving CNET revenue growth, margins?
CFO: We think that they have the asssets to do that, they've revamped a number of the sites. Combining with us is good because there's very little overlap with our advertisers (auto, pharma, etc), but CNET audience demo very attractive to our advertisers. And then they reach advertisers (electronics, etc) that we don't. Other efficiencies: One public co instead of two. Combining some ad platforms, etc.
Given MSFT/YHOO, other consolidation, does this make you big enough on the Web?
Les: We just tripled our digital platform. Are there possibilities to do tuck-ins? But right now, we have taken a major leap forward. We are very happy with the cards we're holding now.
CFO: We're now a top 10 Internet company. Could we be a top 5 over time? Sure. But would be through growth, not acquisition.
Les: Remember! Premium content!