MMPT=beneficiary of.......CNet, Yahoo ramp up ad initiatives
By Emily Church and David Wilkerson,
CBS MarketWatch
Last Update: 5:10 PM ET Jul 1, 1999
NewsWatch
NEW YORK (CBS.MW) -- Two big announcements are sending the
message Thursday that online advertising spending is set to swell while
Internet companies are looking offline for brand exposure.
CNet's (CNET: news, msgs) stock dropped 10
percent, or 5 7/8, to 51 3/4 after the company
revealed plans to spend over $100 million on
marketing its brand over the next 18 months and
report a loss for 1999 as a result.
Meanwhile, Yahoo (YHOO: news, msgs)
trumpeted an expanded marketing relationship with
Proctor & Gamble (PG: news, msgs), one of the
nation's biggest ad spenders. The portal didn't give
much indication how the pact will boost its own
bottom line. Investors poured into the stock,
sending it up 5 to 177 1/4.
"Certainly, it sounds like another ad deal that could
add to Yahoo's revenue," said Daniel King, analyst
at LaSalle St. Securities in Chicago, adding that
"whenever you have a large mainstream advertiser
move more spending online that's going to be good
for a wide-range of Internet companies." See
Internet Stocks.
Offensive move
CNet said it's spending the cash to "establish CNet as the one place to go
for computer and technology information."
Chief Financial Officer Doug Woodrum said CNET hopes to acquire new
users "at a value of $15-$20 per user, in terms of what we expect to get
back from this $100 million."
Some 40 percent of the campaign spending is earmarked for television
followed by 19 percent on print; 15 percent outdoor; 11 percent radio;
10 percent online and 5 percent on events and promotions, he told
CBS.MarketWatch.com.
"The risk here is that it doesn't work, that they spend an incredible amount
of money and don't develop the brand awareness and the traffic," said
analyst Derek Brown at Volpe Brown Whelan.
"My sense is that this is a tremendous opportunity and I think they are
wise to take advantage of it," he added.
"CNet's focus is very different in this space. They're looking to become
the dominate aggregator of buyers and sellers of technology products and
services," he said.
CNet said it would
finance the marketing
campaign "through its
balance of cash and
marketable securities,
which currently totals
approximately $700
million." The company
has $200 million in
cash and about $500
million to $600 million in near-liquid securities, Brown said. See full story.
Hambrecht & Quist analyst Daniel Rimer told clients he was raising his
1999 revenue estimate to $100 million from $93 million after factoring in
the marketing initiative, and lowering estimates to a loss of 53 cents per
share for the year, down from an estimate for a 19-cent per-share gain.
He maintained a "buy" rating on the online media company.
"While we consider this ad spend to be aggressive, and while the
campaign will sacrifice earnings for the second half of 1999 and into
2000, we believe the campaign may prove invaluable over time," Rimer
said. |
