(FORTUNE Magazine) – In a good week, NBC sells $100 million of TV advertising. That's more than Yahoo has sold so far this year and about four times what MSNBC.com has sold since its launch two years ago--evidence that despite the stupendous valuations of Internet companies, new media remains a relatively small business. But you won't find the top brass at GE-owned NBC scoffing about the Internet. On the contrary, they're racing to catch up with companies like America Online and Yahoo and are more determined than ever to leverage their power in television to build a big business on the Net. "We're believers," says NBC President Bob Wright. "This is way beyond the experimental stage for us."

NBC has managed to craft an Internet strategy that is very aggressive without--remarkably--spending much of GE's cash. NBC's activities have been bracketed by two well-publicized deals: the 1996 launch of MSNBC, the cable-and-online joint venture with Microsoft, and the recent purchase of a controlling interest in Snap, a fledgling "portal" site built by Internet startup CNET. In between, NBC created its own online programming, extending such TV shows as Saturday Night Live onto the net, and launched an ambitious partnership with its local TV-station affiliates. NBC has also acquired stakes in a host of Internet businesses, ranging from a popular-music site to a new-media production company to a technology firm that delivers Internet video.

So NBC is serious about its Internet business. And presuming Jack Welch's GE retains control of NBC--which is pursuing alliances with a studio or cable partner to expand beyond its broadcast base--that means getting into only those businesses the company hopes to lead. "This is not a popcorn stand," says Marty Yudkovitz, the president of NBC Interactive Media, which oversees the company's Internet ventures. "We are about big scale, big-asset value, big impact, and real earnings. This is about achieving a strategic objective that's fundamental to the growth of NBC." Name an Internet content play--news, sports, personal finance, weather, entertainment, music, chat, local information--and NBC is there or has plans to get there in a hurry.

The only trouble is, the field's already crowded with big players, notably NBC's broadcast rivals. Disney, with its ABC and ESPN networks and its popular sports, news, and kids' sites, has the broadest reach of any traditional media company on the Web; the Mouse House demonstrated its commitment to the Web by agreeing recently to buy 43% of the portal and search engine Infoseek. After a brief, unhappy stint as part owner of the online service Prodigy, CBS has made low-cost investments in CBS Sportsline and CBS Marketwatch that have already built hundreds of millions of dollars of asset value. News Corp.'s Fox, meanwhile, lost vast sums on its Delphi online service and on an ill-fated Internet venture with MCI, all the while alienating fans of hot shows like The X-Files by cracking down on unauthorized Websites. But Rupert Murdoch has deep pockets and can't be written off.

Television networks like NBC bring formidable assets and real liabilities to the Internet. Their brands and promotional platforms can drive traffic; it's no accident that the most popular news sites on the Web are CNN and MSNBC and that the top sports sites are ESPN SportsZone and CBS Sportsline. But TV networks must also worry about protecting their core businesses. Divided loyalties slowed the networks' entry into cable programming, a business they should dominate but do not. "Sure, they can promote the Internet if they want to," says Barry Schuler, a top executive at AOL. "But does NBC really want you to come home and flip on your computer to get your news?" For that matter, do the networks want to lavish promotional time on money-losing Web ventures at the expense of TV shows that, when they hit, generate tens of millions of dollars in profits?

NBC says it resolved its anxiety over channel conflicts when it built cable networks CNBC and MSNBC, almost from scratch; now, with some research indicating that TV viewing is dipping in homes that use the Internet, the company wants to pursue the audience whether it's staring at a TV set or a computer screen. More than that, NBC's broadcast network, which isn't growing, can be the engine to drive growth businesses on cable and the Internet. That is the thinking behind the Snap deal. Rather than pay dearly for a portal site that has more traffic, like Infoseek or Excite, NBC committed the modest sum of $38 million to buy 60% of tiny Snap--which it should be able to jump-start through on-air promotion. Shrewdly anticipating the stock market's favorable reaction to the NBC-Snap alliance, NBC also bought 4.99% of Snap's parent company, CNET, for $26.2 million. That scheme paid off. Since the deal was announced June 9, CNET stock has climbed by nearly 100%, lifting the value of NBC's stake to $50.5 million, which nearly covers the cost of buying Snap. NBC expects to eventually take Snap public as well, in part to finance future Internet acquisitions with its stock.

Using the magic of Web economics to finance its Internet strategy is crucial for NBC, which, as a unit of earnings-driven GE, would otherwise be hamstrung in an arena where earnings are scarce and asset values are out of sight. "That's one of our charges--'Thou shalt not rack up losses,'" says Yudkovitz. "We have put at risk an absolute minimum of cash." Instead NBC has traded on its cachet, swapping promotion for stakes in Internet startups that are desperate to emerge from Web clutter. Launch Media, a music site that offers news, interviews, and videos on demand, gave NBC a 5% stake in exchange for on-air and online promotion. "We're looking to build traffic with the biggest megaphone out there," says David Goldberg, Launch's CEO. Similarly, NBC received options to buy up to 20% of Talk City, a site that offers chat and home pages, as part of a deal that makes Talk City the chat provider for NBC. NBC also owns small stakes in InterVU, Auto-By-Tel, Golf.com, USWeb, Preview Travel, and Mining Co., among others. As for its own sites, NBC helps finance the Web spinoffs of such TV shows as Homicide and The Pretender by inviting sponsors like Pontiac and Oldsmobile to weave their products into the story lines. Overall, NBC execs say their operating losses on the Internet are less than $20 million a year, well below those of other media companies.

These moves and others to come, in such categories as E-mail and sports, add up to a smart strategy. The challenge facing NBC--as well as Disney, News Corp., and Time Warner--is to get scattered online ventures working together. One virtue of businesses like AOL and Yahoo is that they offer easy-to-understand one-stop shopping--for consumers, advertisers, partners, and investors. They are also ruthlessly focused on the Internet and nothing else. So far, at least, their model is winning. But no one can argue anymore that the old-media companies like NBC just don't get it.

INSIDE: Egghead saves itself, page 194... Telemarketers get even more annoying, page 196... Next on cable: dial tone, page 198... Alsop's three E-mail dictums, page 203