CBS and CNET: A $1.8 Billion Folly?

This pig in a poke may prove to be a poke in the CBS eye.

As I write this, the news is rolling across the wires that venerable old CBS has agreed to buy the CNET Networks (which is what C/Net's been called since it scarfed up ZDNet) for $1.8 billion.

I assume they are clinking champagne glasses back at Black Rock, but here in Silicon Valley the news has been met with jaw-dropping disbelief, cheers and chagrin.

The disbelief came with the price tag: Does CBS really believe that CNET is worth more than YouTube? Is there anything in the CNET business model that can justify half-again the current stock price? Most of all: Just exactly how did CNET doll itself up so well to get that kind of offer, and how can the rest of us copy it?

The cheers, of course, were at CNET. This CBS bid is so impossible that the CNET folks must have grabbed their desks to keep from slipping to the floor in a dead faint. And one can only hope that, as they revived themselves and headed off for a good three-day drink they at least stopped off at the nearest church and tossed a couple grand into the offering plate, because they had truly just witnessed a miracle.

There were other cheers as well, all across Silicon Valley. Every time some Web content or social networking site finds some big East Coast corporate sugar daddy to throw a bag of money at them, it gooses all of the other sites to do the same thing.

If I were Gawker Media I'd be smearing on the lipstick right now and trolling in front of ABC headquarters and 30 Rockefeller Center (NBC). A crazy deal like CNET/CBS is just the latest reminder that the best exit strategy for a startup company nowadays is not to go public, or even to sell to Google, but to sell at a massively inflated price to some media company that's afraid of Google.

Finally, the chagrin: CNET, because it was essentially an on-line trade magazine-meets-Consumer Reports, has never been a site that induced fanatical viewer loyalty. On the other hand, it is one of the most consistently useful tech sites on the Web.

Over the last few years I've found myself dipping into it every few days to find out the latest product announcements, tech news and reviews. So apparently did enough other people to give the site an impressive traffic rate of 160 million visits per month.

Furthermore, with the ZDNet purchase, CNET essentially became the only game in town for this kind of coverage. (There are some who will say that CNET lost its edge once it didn't have to compete with Ziff anymore.) And so the fear is that the Tiffany Network, the land of Katie Couric, and the network that loses its viewers not to cable but to the graveyard, will slowly smother CNET to death -- and kill off the one encyclopedia new product site we have.

Why did CBS want CNET so badly as to pay such a wacky price for it?

One obvious answer is that it will make CBS the 10th most visited U.S. site on the Web. Though that hasn't exactly helped Yahoo.

The formal explanation came from CBS CEO Les Moonves, who told The Wall Street Journal, "There are very few opportunities to acquire a profitable, growing, well-managed Internet company like CNET Networks."

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