Friday, 16 May 2008

CBS buys CNET for $1.8b

I’m sure that many of you have used CNET (or its other sites like ZDNet, GameSpot,, UrbanBaby, Chow, and MySimon). Of course, I’ve always had an interest because:
a) they often quote me (or the analysts from Ovum and
b) their valuation metrics tend to have some bearing on the businesses I am involved or invested in (like Strategyeye).

So the $1.8bn valuation (a 45% premium to the previous close) put on it by CBS is interesting as it represents over 4x CNET’s c$400m 2007 revenues. CNET was loss making at both the operating profit and EBITDA levels in Q1 2008 but expects to post revenue of $450 million in 2008 with earnings of less than $200m.

But what CNET delivers is 100m+ unique visitors a month – all tech-savvy with an interest in buying everything from the latest gadget to an enterprise system. Readers may remember that at the height of the Microsoft/Yahoo! bid battle, I suggested that CNET (amongst several others) would be a better (and much cheaper) acquisition for Microsoft; delivering them all those tech-savvy users.

But the real action now has swung to ‘conventional media groups’ buying into high value content to drive users to their sites so they up advertising revenues.

Anyway, the combination of CBS and CNET creates the 10th most visited “internet group” in the US.

For more details of the deal, see today’s Financial Times CBS to pay $ for CNET networks

Footnote – Holway got 4-5x revenues when he sold Richard Holway Ltd to Ovum in 2000. Datamonitor was bought by Informa for around 5x its 2007 revenues. This should give hope to all HotViews readers currently trying to build content and social networking internet site-based businesses right now!

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