Investors Pay Up for CNet's Expansion Plans as ZDNet Lags Behind

For investors in tech-related Web sites, the marquee name has always been CNet (CNET Quote). But rival ZDNet (ZDZ Quote) is fighting for top billing -- and spending a lot less on advertising to do it.

The two firms' competition for Web site visitors, advertiser dollars and investor attention raises several important questions for investors: How good a return has CNet gotten on that $100 million ad campaign it launched last summer? How accurately do Internet ratings firms measure the companies' audiences? And is Wall Street's lower valuation of ZDNet a result of temporary ownership upheaval or an accurate reflection of ZDNet's financial position and growth prospects?

It appears that investors simply believe that CNet, with its resources and expansion into new businesses, is a better prospect than ZDNet. But it also looks as if ZDNet deserves more benefit of the doubt than a valuation that's half that of its rival.

Crunching the Numbers

The comparisons between the two companies -- both of which focus on providing news and information to buyers and users of technology -- are especially relevant following the release last month of January Internet usage statistics from Media Metrix that looked bad for CNet but good for ZDNet. From December to January, the number of unique U.S.-based visitors to CNet's sites fell slightly, while visitors to ZDNet grew over 10%, according to the widely-followed Internet ratings firm. Since last summer, combined home and work audiences for both sites have grown at a roughly equal pace, and have drawn roughly the same size viewership, according to Media Metrix. Nielsen//NetRatings, which measures home audiences only, shows similar neck-and-neck growth. ...