CNET's Mr. Fix-It
By launching a host of splashy new ad formats, CEO Shelby Bonnie helped lead the dramatic comeback of online advertising.
(Business 2.0) – In late 2000, CNET Networks CEO Shelby Bonnie was running a business few would have envied: an online media empire that relied on the dying banner ad for nearly all of its revenue. It would be easy to call Bonnie's tenure since then another nice turnaround tale. A company that lost more than $2 billion in the dark days of the dotcom bust and saw its stock price dive to $1.10 a share is now on the edge of profitability, with revenue expected to surpass $290 million this year, up from $246 million in 2003. More than 70 percent of CNET's revenue, it should be noted, comes from—what else?—advertising.
Yet Bonnie, the 40-year-old Harvard MBA who co-founded CNET with Halsey Minor back in 1993, didn't just lead a turnaround. As much as anyone in tech, he helped fuel the dramatic resurgence of online advertising, which is expected to grow 25 percent this year to an estimated $9.1 billion—making it the hottest growth market in media today and even bigger then it was before the crash. The handful of new ad platforms that Bonnie launched on CNET in 2001 not only allowed his company to ratchet up revenue and expand offerings into music, games, and photography, but also became the new standards now used by most digital media companies, from America Online to New York Times Digital. Says Mark Mahaney, an analyst with American Technology Research, "Much of this rebound is due to Shelby."
Beyond the Banner
The online advertising market quadrupled to $8.1 billion between 1998 and 2000, then dropped way back down to $6 billion in 2002. CNET got double-whammied by the ad recession in general and the technology market in particular, since its network of sites "ranged" from technology news at News.com and consumer technology reviews at CNET to videogame info at GameSpot and software downloads at Download.com. "We couldn't give away the ads," says Vince Broady, senior vice president for CNET's games and entertainment division, who had to slash his staff from 100 to 20. "Clients wouldn't even take meetings. They didn't care."
With advertisers in rapid retreat, Bonnie faced the same question that panicked so many online media execs at the time: "Do you give up on advertising and go to a subscription model?" he recalls. "What do you do?"
For Bonnie, the choice was obvious: Start planning for the inevitable rebound. As CNET was paring back expansion plans and jettisoning workers, Bonnie began trading notes with colleagues at the Interactive Advertising Bureau, the nonprofit trade group that sets industry standards for online ad packages. Knowing that the IAB's influence would be critical to any rebound, Bonnie began lobbying with the group to promote a series of new ad formats. Says Bonnie, "I put my money where my mouth is."
Bonnie knew that marketers had lost faith in banner ads because of their abysmal click-through rates and small size, despite research that showed they helped build brand awareness. Bigger formats, he thought, might solve the problem. The bigger the ads, the argument went, the less advertisers would rely on readers clicking through to their websites. Ad designers could build more interesting, eye-catching ads within larger formats and take advantage of broadband to throw in multimedia too. Bonnie and the IAB then began talking to member companies like MSN and America Online about signing on to the plan.
In January 2001, Bonnie debuted CNET's strategy with the relaunch of News.com, with multiple small ads per webpage replaced by one big ad. The new format wowed the major advertisers—including Oracle, IBM, and Nextel—who joined soon after the launch. "We were looking for big, splashy real estate," recalls Oracle marketing vice president Chris Hummel. In mid-2001, Bonnie even took on a second job as the new chairman of the IAB.
Despite the economic malaise following 9/11, by year's end Bonnie caught a glimpse of the spending rebound that would start in 2003: The top 20 tech companies had spent 6.5 percent more on advertising with CNET than they had in 2000. Meanwhile, IAB membership bloomed from 35 members to almost 200 today. Even more important, content sites across the Web had begun rejiggering their computer systems to handle ads of all formats, shapes, and sizes.
Pulling In the Right Crowds
With the ad formats gaining traction, Bonnie focused on tailoring CNET's content offerings—and acquiring new sites—to position the company for the rebound. The best way to do that, Bonnie believed, was to ensure that every CNET-branded site catered to the company's composite ideal customer: a 37-year-old male tech-oriented "decision maker" with a $70,000 income and $2,300 to spend on new tech gear every year. You'll find him at GameSpot, an information portal for gamers with an online community of 3.5 million registered users; at music-download site MP3.com; and at newly acquired Webshots, a profitable photo-sharing service. Though the age target varies slightly between the sites, all of them deliver advertisers a highly prized demographic.
At CNET.com, the Web's most comprehensive site for consumer electronics reviews and buying guides, users can click through a virtual house and check out the latest gadgets available for each room. Video clips play as reviewers describe what they like—or don't like—about each of the products. That's dream content for a consumer electronics maker such as Sony, which spends nearly a third of its online ad budget with CNET; indeed, ads (as well as links within articles) boosted referrals to the company's shopping site, SonyStyle.com, by more than 200 percent last year. "CNET brings the type of customers we're looking for," says Jennifer Sassen, vice president for direct marketing at Sony's e-solutions group.
CNET's May relaunch of MP3.com—which it bought from Vivendi Universal and rebuilt from scratch—also helps push CNET into the consumer advertiser's sweet spot: mostly 18- to 34-year-old males, who use the site to download and purchase music from a variety of music libraries, including Apple's and Napster's. Already the site has lured to CNET's coffers a new crop of consumer advertisers, including McDonald's, Panasonic, and Toyota's Scion brand. Those newcomers are expected to boost CNET's ad revenue this year by $20 million to $40 million, according to Piper Jaffray analyst Safa Rashtchy.
Then there's GameSpot, the Web's most popular gaming information site. Two years ago CNET's games division was a money loser, yet Bonnie believed that GameSpot—acquired through CNET's purchase of ZDNet in 2000—had a passionate audience that advertisers would covet. Today users can play video clips of a new game, scan a CNET review, and try a demo version in a matter of minutes—one reason games and entertainment is CNET's fastest-growing line of business. GameSpot traffic hit a record of just under 1.5 million unique viewers one day in August. "I remember walking into a game company three years ago and begging them to run a $10,000 campaign and being told, 'Sorry,'" CNET's Broady says. "Now companies spend $100,000 or more to launch a single game on GameSpot."
Catering to advertisers doesn't end there—not with Google and Yahoo towering above CNET in overall ad revenue. In July, CNET launched GameSpot Trax, a Web-based service that lets marketers track activity on more than 8,500 game products covered throughout CNET. Using it, a game publisher can see how many, say, 18-year-olds downloaded a promo for a new videogame from CNET's site, track them by zip code, and plan an ad campaign around the data. "Showing clients this data gives them confidence their investment is paying off," says CNET chief operating officer Barry Briggs. Indeed, Forrester Research last year reported that 81 percent of marketers said they would raise their online ad spending if research proved the ads would increase sales.
While CNET isn't poised to become the dominant media company of the Web, as Halsey Minor had hoped it would someday be, Bonnie says the company is on track to be comfortably successful. With Google and Yahoo thriving on services like paid search—with which Bonnie is just getting started—he's happy to focus on what CNET does best. "We remained true to advertising," he says, "and it's starting to pay off." With a modest $13 million profit expected by year's end, he's finally running a business anyone would envy.