Robbie Stephens Conference: CNet Bets on Its Brands

SAN FRANCISCO -- About a week ago, CNet (CNET - Cramer's Take - Stockpickr) laid off 10% of its workforce and projected a major first-quarter revenue slide. But Thursday at the Robertson Stephens Technology 2001 Conference here, CEO Shelby Bonnie said the company expects to be able to leverage its many brands into a business that can generate substantial profit margins.

"We like the idea of brands, you won't see collapsing of brands," he said. Bonnie figures the company can boost profit margins on an earnings basis before interest, taxes, depreciation and amortization to 45%. The figure was 11% last year, and the company expects it to rise to 13% to 17% this year.

Bonnie also talked about the sagging Internet advertising market. "I think the pendulum has swung to the other side in an exaggerated sense," he said.

The key to CNet's strategy to keep advertising revenue growing is placement of the ads across its brands in a "contextual" setting that attracts readers interested in the ad content. CNet's brands include its CNet News, ZDNet sites, print publications such as Computer Shopper and MySimon, an online shopping guide.

CNet also is tucking advertising units in the body of news stories on the CNet News site, something that replaces poorly performing banner ads. Bonnie, who said the company can fit the same amount of information found in a three-page magazine ad in a single Internet ad, said the placement is being pushed by the idea that readers don't want to leave the page they originally sought. Clicking on the ad simply produces more information within the box instead of taking the reader to another page, as banner ads do.

"We're beginning to see good traction," Bonnie said, from advertisers such as Sun Microsystems (SUNW - Cramer's Take - Stockpickr) and IBM (IBM - Cramer's Take - Stockpickr).