TV & the Internet: Old meets new
Networks search for a winning formula for Internet success
By Ken Kerschbaumer -- Broadcasting & Cable, 9/24/2000 8:00:00 PM
When a new medium comes along, the major networks have always been able to successfully get involved. The big radio networks begat the big television networks, and the big television networks begat some of the biggest cable networks.
But the Internet, for all its promise, has put the major TV networks and the companies that own them in a quandary: How does a company that is successful in one medium translate that success to another? The answer, so far, has been elusive.
"All the networks felt they should play the same role of being a network, a mass-market, general-purpose collection of services, and none of them have succeeded," says David Card, senior analyst for Jupiter Media Metrix.
"The Internet is a different medium than any that has come before," says Dick Glover, executive vice president, Internet Media, for ABC. "The key, however, is how do you leverage what you have in other media that takes advantage of all the unique elements of the Internet to create a new and compelling experience? If all you do is take the old medium and deliver it through a new medium and box, you haven't created a compelling experience for the consumer."
That lack of a compelling experience has resulted in some painful times for television-related Internet content. A perfect example is the woes the NBC Internet (NBCi) group has experienced since its launch in November 1999. NBC has a 39% stake in the company, and, since it went public, its shares have traded as high as $106. But, currently, the stock is hovering around $8 a share. For the six months ended in June, revenues totaled $60.6 million, up from $10.9 million. But net loss totaled $259 million, up from $10.1 million.
To analysts, the idea of taking on Yahoo and its tremendously successful search engine seemed like a bad one. And thus far, it seems that investors have agreed.
The impact of NBCi's difficulties has had a ripple effect on the other networks as well, with CBS now taking a particularly conservative approach to its Internet strategy-namely, making a move only when a good business model arises.
"We're still analyzing and weighing the company's assets to figure out the best way to apply our expertise-which is content-to the Internet," says CBS spokesman Dana McClintock. CBS recently announced a plan to offer interactive television for approximately 500 hours of programming this upcoming season with WebTV, but its more general Internet strategy is still being sorted out.
The early days of the Internet for the network resemble the early days of cable in this regard: Each of the neworks has taken a minority stake in a number of Internet companies, much as they were taking smaller stakes in cable-related companies in the 1970s.
"CBS' original approach was to swap on-air promotion time for equity stakes in a variety of companies. That was a great strategy when the stock market was raging along, but it doesn't look as good as a strategy now that the pendulum has swung the other way on Internet stocks," says Card. For CBS, those investments include sites like iWon.com, sportsline.com and marketwatch.com. But it's important to remember that those investments were primarily just that, investments; they were not necessarily indicative of the Internet strategy as it related to their TV content and the Internet.
So what exactly is the opportunity? "The killer opportunity is having a very engaged consumer in front of you," Glover explains, "so that, when you create a compelling, interactive advertising experience, you're going to drive purchases, and that's sort of the pot at the end of the rainbow."
One thing all of the networks have in common is putting their Web sites to good use as marketing tools for their on-air content. They also continue to work on new ways to complement the on-air content.
"Our focus is on content, and we've spent our efforts in building our three core properties: Fox.com, FoxSports.com and FoxNews.com," says Jordan Kurzweil, senior vice president of entertainment for Fox.com. "And we're building them out as studios that build content not only for the Web but look a bit farther ahead than what the other networks are looking at."
To Kurzweil, that means making further inroads into getting content into the wireless or enhanced-television arena, something ABC is also actively pursuing with its enhanced-television offerings for Monday Night Football and Who Wants to Be a Millionaire?
"It provides great opportunity for us to think beyond just Web pages and banner ads," says Kurzweil. "News Corp. is so well poised to distribute content digitally, it allows us to think about convergent programming."
But the most attention-getting aspect of the networks' Internet plans has been their investments in portal plays. NBC is concerned with the just relaunched NBCi portal (see page 60). ABC recently underwent a redesign via the Go.com portal by the Walt Disney Internet Group. As for CBS, it has a 38% investment in iWon.com.
The attraction in creating a portal is simple, according to Thomas Hartman, Go.com vice president of sales. "The portals are like TV. They're big advertising, audience-gathering sites," he says. "So we are, in essence, most like the networks in terms of aggregating audiences and delivering advertising. But we're different because we have all the targeting abilities that TV can't deliver."
Like NBCi, the Disney Internet Group has taken some financial lumps. Its 52-week high is just over $37 a share, and the stock is currently trading around $13. Third-quarter results saw Internet operations' revenues jump 39% over prior-year results, but operating losses for the quarter were $83.2 million.
The marriage of a portal to a television network allows for a number of synergies, both promotional and business. "IWon is independently operated with the backing of CBS," notes McClintock. "They get ad time on lots of different properties, and we also work with them to do additional synergies."
For now, the Internet formula for the networks seems to be to grab a minority interest in an Internet company, like iWon or Quokka Sports, in which NBC has an investment, and let the Internet company take the lead in driving revenues and operations. Bill Daugherty, founder and co-CEO of iWon.com, gives a lot of credit to the leadership of CBS for recognizing that the online world is different from television.
"Yahoo has done a number of things right over the years, and one of the most important has been a singular focus on the user," he adds. "It has to be a seamless process when you go around the site. And CBS, from the beginning, has told us to do what's in the best interest of iWon and our users. So we have the best of all worlds, and we've been correctly set up so we can be very nimble."
But there are some analysts who believe that the portal game has been decided and that networks hoping to compete with the likes of Yahoo are bound for failure. Instead, a more focused approach will help them drive revenues.
"The strategy of not competing with Yahoo is right," says Card. "But they have to execute it. And there isn't any evidence to me that the portals are more focused."
Moreover, for executives like Fox's Kurzweil, the portal pursuit is a bit limited. "If you look at the Web as the endgame and flat Web pages and banner ads is what this is all about, then I would agree with that perspective of needing to be a portal," he says. "But if you view the Web as a stepping stone and believe that broadband is part of our future and that content will go beyond the Web page, then I would disagree. We tend to take the latter approach."
Daugherty, however, thinks the networks can find benefits in the portal play. "If you have a great product, you're going to generate attention and an audience," he says. "But also the next 50 million people who come online are not those with a first-mover advantage. And they want a portal to bring things into one place. The billions of Web pages are pretty intimidating for those who have joined the Internet revolution in the last year."
One thing all the networks make clear is that, in the Internet universe, they are not competing with the other television networks; the universe is simply too broad. "Winning is going to be driving more revenue per page view and driving more page views," says Hartman.
He believes the Go.com site will find its success now that the site will reflect the Disney brands of ABC, ESPN and Disney. The Go.com portal has been up and running since January 1999. But once Disney acquired it, energies and promotions were given to redesigning the portal. It now has a split-screen interface, allowing for greater advertising opportunities while also making search results more focused.
"The mission is to create a powerful connection to the consumer for the Walt Disney Co. on the Internet," says Hartman. "We have great brands that provide great content as their own sites and as content providers to the portal. If you think of the portal as a hub, feeding traffic to our other sites and gathering content from our sites for the portal, it's a very integrated environment."
The new approach seems to be having an impact on sales, according to ABC's Glover. "We just began to reap the rewards of that in this upfront selling season a couple of weeks ago. For the first time, we were able to sell online/on-air packages to an extensive degree, and the reason is we're providing better value to the advertiser because we're providing a better consumer."
Much has been made of the Internet business model in recent months, particularly as more and more Internet companies find themselves financially pinched. The networks also find themselves in a struggle to retain eyeballs in an increasingly fragmented marketplace. For the networks and their related Internet companies, the key is to move forward assuredly yet cautiously.
"Anybody who stands pat in the present and doesn't try to grow for the future," Glover stresses, "is bound to run into problems in their business, but that is definitely true for the media companies."
Top 10 portal sites
| Sites | Unique visitors home/work (000s) | Digitalmedia reach home/work % | |
|---|---|---|---|
|
|
Total portals |
71,123 |
88.8% |
|
1 |
Yahoo.com* |
48,236 |
60.2% |
|
2 |
MSN.com |
40,172 |
50.2% |
|
3 |
AOL.com |
34,336 |
42.9% |
|
4 |
Lycos.com* |
26,506 |
33.1% |
|
5 |
Go.com (ABC) |
20,055 |
25.0% |
|
6 |
Netscape.com |
18,422 |
23.0% |
|
7 |
Excite* |
17,084 |
21.3% |
|
8 |
iWon.com (CBS) |
8,758 |
10.9% |
|
9 |
Infospace.com |
8,716 |
10.9% |
|
10 |
Xoom.com (NBCi) |
6,983 |
8.7% |
|
Source: Media Metrix |
|||
|
Note: Ranking, visitors and reach figures based on Internet traffic for July 2000. Sample size: approximately 55,000 U.S. individuals. Unique visitors:actual users that visited the site at least once during the month. Reach %: the percentage of projected users within a market category that accessed the site compared with the total projected Web users in that month. |
|||
|
*Represents an aggregation of commonly owned/branded domain names. |
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