For investors in tech-related Web sites, the marquee name has always been CNet (CNET) - Get Report. But rival ZDNet (ZDZ) 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.

Combined at Home/at Work Viewers
Unique visitors per month, in millions, to company properties

Source: Media Metrix press releases

Home Viewership
Unique visitors per month

Source: Nielsen/NetRatings press releases

On Whose Side?
Average time spent per home user

Source: Nielsen/NetRatings press releases

Unfortunately for CNet, those statistics don't indicate a discernable boost from its 18-month ad campaign, on which it spent $65 million in the second half of last year.

Of course, statistics from the Internet ratings services -- derived from the surfing behavior of a small sample of Internet users -- have their pitfalls: a

recent study, for example, indicated that ratings firms' figures often don't match up to a site's own records of monthly visitors.

CNet Chief Financial Officer Doug Woodrum, in fact, says the company's records indicate its traffic grew from December to January, though he wouldn't supply specific numbers. (At other times, CNet, like other online companies, has publicized Media Metrix figures without dispute.) Woodrum also says that the roughly $43 per new user CNet has spent has improved CNet's standing among potential advertisers, has increased brand awareness in target markets, and will continue to pay off through the money that CNet makes referring site visitors to online merchants.

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Growth, Growth Everywhere

But the numbers raise another question: How effective could the ad campaign be if ZDNet grew, too? The answer, Woodrum hints, is something he says he's heard from third parties, but which CNet hasn't verified itself -- that ZDNet's reach has grown from download referrals -- notably a deal in which

Yahoo!

(YHOO)

users who want to download Yahoo! Messenger instant-messaging software are redirected to ZDNet before the download. The unique visitor resulting from that software download, Woodrum says, isn't necessarily a high-quality audience member -- someone who is an information services or information technology user.

The scenario that the Yahoo! download deal is pumping ZDNet's numbers is "insane," responds ZDNet CEO Dan Rosensweig. If the Yahoo! download were resulting in unique visitors who came only for the download, then left, he says, Media Metrix statistics would indicate a falling number for the average number of days that users visit the site per month. But, in fact, Media Metrix's numbers indicate that the days-per-month figure for ZDNet has remained around three over several months -- by comparison, CNet's days-per-month figure is a little over two. "Any one source like this is a very small percentage of our true incremental unique visitors," Rosensweig says. These referral deals, he says, are a good way for ZDNet to expose its brand to tech enthusiasts.

Despite the muddle over Internet users, investors are clearly favoring CNet with their dollars. On Friday morning, ZDNet's market capitalization was $2.3 billion, compared to $4.7 billion for CNet. Part of that difference is explained by the $1 billion more in cash and securities that CNet had at 1999's close. Subtract that number from CNet's market cap, and it's trading at about 18 1/2 times projected 2000 revenue of $200 million. ZDnet, by contrast, is trading at 16 times

Goldman Sachs'

estimate of $146.2 million.

The Redesign

Rosensweig says ZDNet stock -- a tracking stock of the shrinking computer publishing and trade-show operator

Ziff-Davis

(ZD)

-- has been held back partly because of the restructuring going on at Ziff-Davis. After Ziff-Davis' expected asset sale completion, ZDNet is slated to emerge later this year as a standalone company. Rosensweig, who talks extensively about ZDNet's global prospects, says that until the company implemented a redesign last fall, it was difficult for users to get a sense of the resources of the site. "We've got a great story to tell... We're telling it a lot more now as the Ziff-Davis strategic alternative process is winding down," he says.

Meanwhile, Woodrum says CNet's strength has multiple elements beyond the flagship technology sites: Its recently purchased shopping-comparison

site; CNet Data Services, which licenses a product database to online merchants; and the company's cash-rich balance sheet.

Goldman Sachs senior analyst Tonia Pankopf, who covers both companies, says that with technology representing 8% of the U.S. gross domestic product, CNet and ZDNet aren't in a zero-sum game. "These are two very strong players in what amounts to be one of the most attractive segments of the market for both advertising and e-commerce opportunities," she says. Pankopf has a trading buy, Goldman's second-highest rating, on ZDNet, for which her firm was a co-lead underwriter, and a recommended list rating, the firm's highest, on CNet, with which it has no investment banking relationship.