Wondering why there's a flood of dot-com advertising this quarter? Maybe you can blame it on CNET.
The technology news and commerce company made waves in July by announcing it would spend $100 million on a branding campaign over 18 months--nearly 80 times what it spent in its entire seven years of existence. On the day CNET announced its campaign and that it would result in several quarters of losses, its stock fell dramatically.
Analysts scratched their heads, saying, as one did in a report, "CNET does not have to undertake the kind of aggressive marketing spending that it now plans" since it's already a premier Internet brand.
CNET saw another problem.
"We were lucky to have first-mover advantage," said Annie Williams, CNET's VP-marketing. Research, however, showed only 4% of online consumers named CNET when asked to list Web sites of which they'd heard.
'NO ONE KNEW'
"The basic findings . . . shocked us," Ms. Williams said of the proprietary research conducted earlier this year. "No one knew us. No one knew [competitor] Ziff-Davis. And the foremost place people go to get answers to questions about technology are friends."
To be that friend and be there first, CNET decided to flood the airwaves with ads. So what does $100 million buy? The company is just now getting the first results from the campaign. Weekly traffic to the site has increased 34% since the campaign broke, reaching 2 million unique visitors in the week ended Oct. 10, according to Nielsen/NetRatings. And in a survey by Opinion Research Corp. conducted in September, 37% of consumers (online and offline) said they recognized the CNET brand in a list of Web sites, up from 23% before the campaign began.
"The early indicators are that the ad campaign has raised the visibility of the brand," said Lanny Baker, research analyst with Salomon Smith Barney.
But rival ZDNet--with no major ad campaign--saw its traffic increase 22% during the same period, to 1.9 million unique visitors, according to Nielsen/NetRatings.
ZDNET HAS ITS OWN AGGRESSIVE PLANS
ZDNet is not idle. The site, majority owned by Ziff-Davis, this week will reveal plans for its own campaign, said Barry Briggs, exec VP. He declined to reveal details before this week's quarterly earnings report, but suggested it would go beyond ZDNet's current ads, which mainly run on ZD properties and on Web portals.
"We're going to become more aggressive in our advertising campaign," Mr. Briggs said, declining to name the agency that will handle the ads.
Spending, ZDNet's Mr. Briggs said, will be well under CNET's planned $60 million media budget for the last six months of 1999.
CNET has also made some changes, switching broadcast ad agencies as it moves into the second phase of its massive effort. Earlier this month, it added Leagas Delaney, San Francisco, to the account, to handle all broadcast TV and radio work. Citron Haligman Bedecarre Euro RSCG, San Francisco, which created the notorious TV spots featuring a proctologist and fetal pig, continues on print and outdoor. Lot21 Advertising, San Francisco, has picked up Internet advertising, on which CNET expects to spend $5 million this quarter, up from the previously planned $1 million.
"The fourth quarter is really, really crucial for us," Ms. Williams said, in explaining the agency shift. "I want to do something that is going to stand out. Citron is good at that edgy humor, but that isn't what I want to do in the fourth quarter."
SPOTS BREAK ON ABC
New Leagas-created TV spots, breaking tonight on ABC's "NFL Monday Night Football," will be "quiet and simple and stark," Ms. Williams said.
The commercials will focus on CNET as a destination for shopping advice--a way to find "the right product, at the right price, at the right time," Ms. Williams said.
That's been CNET's goal as well, but it's had trouble finding its way.
The company launched in 1992 with the goal of becoming a cable TV channel. With the rise of the Internet, however, that strategy gave way to an online focus (though CNET still creates several technology TV programs). It made waves in 1995 with a $1 million online ad campaign that was created in-house, then one of the largest commitments to online advertising ever.
News.com, CNET's news service, launched in fall 1996, shortly after the company's initial public offering of stock. Another $300,000 in trade ads and bus ads supported that launch, via Saatchi & Saatchi, San Francisco.
1997 WAS A TOUGH YEAR
Things began to spin out of control in 1997.
That's when CNET launched a series of Web properties, such as Computers.com, Search.com and Builder.com. Each had its own management and each had its own idea of how to build revenue. At a time when other Web companies were talking "portal," CNET was taking its technology properties in the opposite direction.
Adding to the turmoil: CNET's expensive and distracting attempt to launch a consumer-oriented search site, Snap. The site launched in September 1997; CNET sold a partial stake in the site to NBC in June 1998 and another stake this year. CNET now holds only 14% of the venture.
In the meantime, CNET got a host of new online competitors, ranging from a rejuvenated ZDNet, Ziff-Davis' online property, to the portals, all of which were offering technology news and shopping opportunities.
REORGANIZATION IN '98
In the summer of 1998, CNET began a complete company reorganization, which was dubbed CNET 2000. All nine of its sites came under one umbrella and each manager had to cede some authority to CNET as a whole.
"No one would have the money to build nine different brands," Ms. Williams said of the reorganization.
"We should put them into a hub, portallike, and have the front door of CNET finally mean something," she added.
Change took place on the marketing front as well.
Senior VP-Marketing Ellen Atkinson left in 1998 and was succeeded by Ms. Williams, who came from The New Yorker.
Then in January of this year, Gregory Osberg, CNET's president of sales and marketing, joined Kaplan Professional Centers, having spent the previous 18 months dividing his time between the East Coast, where his family was, and CNET's San Francisco office.
ADS DIDN'T MAKE SENSE BEFORE
"I don't know if it would have made sense for us to do a lot of consumer advertising before" now, Ms. Williams said. "I don't know that we knew what we wanted to be when we grew up."
The current ad campaign is an expensive gamble. One of CNET's stated goals is to double awareness among Internet users--to a very conservative 8%. CNET says it will remeasure awareness in January.
CNET's other goal: to be among the top 10 Internet sites as tracked by Media Metrix. Here again, CNET faces a significant challenge.
In June--before any ads--CNET topped out at No. 17 in ratings by Media Metrix; it jockeys for that position every month with ZDNet. In August, CNET ranked No. 18, with 8.5 million unique visitors. To reach No. 10, CNET would need to surpass general-interest sites such as eBay, About.com and AltaVista.
ADDING NON-TECH ADVERTISERS
A goal that CNET doesn't talk as much about is the addition of more non-technology advertisers to its site.
Though CNET has signed at least three non-tech advertisers, which include Amazon.com, E*Trade and American Express Co., since the start of the advertising campaign, it's unclear whether the campaign was a deciding factor.
But if CNET is successful in attracting a wider audience, that will help make non-tech advertisers more comfortable with the site, Salomon Smith Barney's Mr. Baker said.
"CNET is twentyfold stronger than anyone perceives them to be," said Courtney Buechert, managing director of Leagas. "They've been around seven years and have worked through various iterations."
CNET's fourth-quarter strategy is to focus attention on commerce, just like almost every other Internet company advertiser these days.
The company doesn't actually sell any products, but CNET does take a cut of revenue for leads that are sent to companies that participate in CNET's shopping services.
BREAKING THROUGH THE CLUTTER
It will be a challenge for CNET--or for any dot-com advertiser for that matter--to stand out this quarter.
In the next quarter, CNET may emphasize other offerings, such as News.com or its newly launched Help.com, a free site for Internet-related technical help. Whatever site is featured, these sub-brands will always be pitched within the context of CNET as a single source for information and advice about technology.
"We have always been consistent in being about technology," said Ms. Williams.
"We're entrenched with a small group of people that should grow," Ms. Williams said. "They love us and they're loyal, but there's a lot more people out there."
Contributing: Alice Z. Cuneo.
Copyright October 1999, Crain Communications Inc.