NBCi to Relaunch Its Internet Properties - TheStreet

In the tradition of its television counterpart, NBC Internet (NBCI) is banking on a turnaround with the new fall season. But just as with TV, the critics have their knives out.

NBCi is slated to relaunch its Internet properties Monday with a three-month, $55 million advertising campaign, $15 million of which the company will spend by the end of the Olympics. NBCi, whose shares have fallen 94% from their January high, is hoping to improve its fortune among Net users and investors -- a process that one analyst warns won't happen quickly. NBCi stock fell 13 cents Friday to close at $6.19.

The company's effort, coming less than a year after NBCi was formed, reflects the struggles that numerous Internet arms of old-line media companies -- such as the

Walt Disney Internet

(DIG) - Get Report

unit of

Disney

(DIS) - Get Report

and the old

Pathfinder

unit of

Time Warner

(TWX)

-- have had in their attempts to transfer old media success into new media. Despite the undeniable marketing and promotion resources of the parent empires, the Internet offshoots have been cut down by relative newcomers

America Online

(AOL)

and

Yahoo!

(YHOO)

.

This time around, NBCi is hoping that tighter integration of its various Internet properties, along with heavy marketing on NBC media properties, will be the key to success.

"We are launching the right product, which we should have launched earlier," says Edmond Sanctis, NBCi's president and chief operating officer. "We really have to have one crisp, clean offering to the consumer."

New Site

NBCi's new site, which has been live on the Web in preliminary form since earlier this month, follows up on the company's June

announcement that it would phase out its

Xoom.com

and

Snap.com

brands and Web sites in favor of NBCi.com. NBC Internet was formed last November as a combination of Snap, a portal launched by

CNet

(CNET) - Get Report

, community site

Xoom.com

and various Internet properties of

General Electric's

(GE) - Get Report

NBC

unit, which owns about 40% of NBCi.

In addition to a recognizable brand name, NBCi executives believe they have a few other things going for them. As the new promotional campaign begins, NBCi has $327 million in advertising credits on NBC properties, which it will be using to run ads on NBC,

MSNBC

,

CNBC

and certain local NBC TV stations -- credits that won't affect NBCi's cash flow. In addition, NBCi will benefit from other promotions on NBC for which it won't have to dip into its credits kitty -- in-show mentions that have proven extremely effective in driving TV viewers online in the past.

Like Disney's online unit, NBCi is focusing on a narrower audience than it has in the past; it's going after the same demographic target that NBC TV is reaching, Sanctis says, that is, sophisticated urbanites aged 18 to 54. "We will extend that to the Internet -- that's our model," he says. That means NBCi is de-emphasizing operations that don't fit into that view. Along those lines, Alan Braverman, the former

Banc of America

analyst who joined NBCi in December 1999 to head up its business-to-business unit, departed NBCi around Labor Day, Sanctis says.

Personal Agent

NBCi will be pitching the new NBCi.com as a user's "personal agent on the Web" by aggregating what it says will be "highly personalized and relevant Internet content, utility and commerce." One thing NBCi hopes users will appreciate is the site's ability to automatically detect the speed at which users are connected to the site, and to feed users audio and video appropriate for that speed. Another is a persistent window that makes it easy to jump from any Web page or word processing document to relevant sites on the Web. As part of its new distribution strategy, NBCi is working with the privately held

Wards

stores to offer a free Internet service, similar to

deals that other retailers are doing with online services.

Wall Street, which has driven down NBCi's market cap to $387 million -- not too far north of the value of its ad credits -- apparently believes the odds are against NBCi. Sanctis says he isn't fazed by the established positions of Yahoo! and AOL as similar online resources. "Why is the game over because our competitors -- some of our competitors -- have a head start?" he asks.

Nevertheless, the game will be slow, suggests Catherine Skelly, a new media and e-commerce analyst at

Gruntal

. "The biggest challenge that the company has is communicating what it does to its audience," she says. "In my opinion, nobody has better portal technology, better access to content, better marketing resources and a better brand name. But they've gone through so many changes in their strategy and their Web site offerings, that users are clearly confused." (Skelly rates the stock a market perform over the next six months, her firm's second-highest out of three rankings. Gruntal was an underwriter of an NBCi stock offering earlier this year.)

The company needs to build up its audience and get more real-world advertisers instead of dot-coms, she says. But it will probably take at least six months, she says, "before we see real milestones achieved for this company."

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