NBCi reboots as losses grow
Full-brand recasting to NBCi.com planned as stock plummets
By Richard Tedesco -- Broadcasting & Cable, 6/18/2000 8:00:00 PM
NBC Internet unveiled plans last week to dispense with its individual brands and reassemble them under an NBCi.com umbrella portal in the fall, as it reported expectations of higher losses this year.
The restructuring under an NBCi.com portal is intended to capitalize on the NBC brand identity and incorporate features from Snap.com, Xoom.com and VideoSeeker as they're phased out later in the year. "This is a big brand," NBCi CEO William Lansing told analysts last week.
It may be a big brand, but its big losses will persist until the second quarter of 2002, according to Lansing, who estimated losses of 10 cents to 15 cents more than the 70 cents per share anticipated for the second quarter, and 75 cents per share more for the year. That moves the previous prevailing wisdom that losses of $2.84 per share for the year, according to First Call/Thomson Financial, will increase to approximately $3.60 per share.
Increased losses are attributed to a slowdown in Web advertising and costs of supporting AllBusiness.com and FlySwat.com, the business and Web locator services NBCi acquired earlier this year.
That's why the stock initially dropped by more than $9 per share, to less than $16 per share, before coming back a bit in mid-week trading to just above $17 per share. Its 52-week high was $106 per share.
But that was when NBCi was another high-flyer IPO spun off from a high-profile media company, and when portal was still a magic word in the Web world. Last week, analysts were voicing doubts about the future for broadcast players in that space.
"The chastening lesson here-and we saw the same thing with Go.com-is that television just isn't capable of driving enough traffic here," says Barry Parr, e-commerce analyst for International Data Corp., adding, "There was a belief that television was capable of building these brands, but it still requires a pretty significant expenditure to make that happen."
Lansing indicated last week that NBCi still had plenty of leverage for growth with approximately $700 million in cash and advertising credits from NBC. That breaks down to more than $400 million in cash and $300 million in credits, according to a source.
But the longer haul that NBCi anticipates is necessary to achieve profitability indicates just how expensive a proposition building this portal can be.
"It's shake-out time," says Gary Arlen, principal analyst for Arlen Communications. "NBC has cast its fate with the consumer sector, which is a costly business."
NBCi plans to cash in some of those advertising credits with an aggressive on-air campaign over NBC TV properties this fall, according to Lansing, who says they're counting heavily on the brand-name switch. "Consumer behavior in the portal space is basically about going with a big brand name, and repeat use. Going with the biggest brand we had seemed like the obvious thing to do."
Lansing said there were actually "mixed feelings" about the efficacy of some on-air promos. But he pointed to a potential traffic generator in new interactive applications planned for the NBC.com site.
With AOL, Yahoo and MSN as the big three portals, IDC's Parr foresees potential consolidation among the other players, or possible extinction: "You could see these guys atrophy and whither away."
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