Reshma Kapadia
NEW YORK: Internet media companies, reeling from a tough advertising market
made even worse by the Sept. 11 attacks on the United States, are likely to have
little good news to report for the third quarter.
While analysts do not expect the companies to throw in the towel, even the
largest of them are buckling under the pressure.
Although Yahoo Inc. on Wednesday posted third-quarter results that were
largely in line with lowered expectations, executives warned about the difficult
ad market and cut their revenue projections for the fourth quarter and full
year.
The company said it will restructure its business and reaffirmed its recent
focus on creating paid and subscription services to offset the advertising
downturn. The jury is out on whether and how much those new businesses will help
the company.
AOL Time Warner Inc., the largest Internet and media company, warned in late
September that 2001 cash earnings and revenues would miss its previous targets
due to the decline in ad spending and costs associated with the attacks.
While last month's attacks meant a sea change for the big media companies,
they had less of an effect on smaller companies that had already been struggling
for some time, said Jupiter Media Metrix analyst David Card. "Obviously,
the Internet ad market is bad as it has been," he said. "Overall the
economy is as scary as it has been."
Those factors, combined with the Sept. 11 attacks and their aftermath, have
produced a "triple whammy," he added, "but it's not clear that
it's much worse post-Sept. 11" for smaller Internet media companies. CNET
Networks Inc. is one of the smaller Internet media companies that analysts
continue to watch and still consider promising. Goldman Sachs analyst Anthony
Noto said CNET, which focuses on technology news, will probably meet or beat
third-quarter estimates, but it may have to lower its outlook for 2002.
Before the attacks, CNET said third-quarter revenues will be in line with the
$71 million generated in the second quarter. "They have actually proven the
value of the whole strategy," Card said, citing the company's content and
reach.
"They are blending marketing tools and comparison shopping and have been
aggressive in experimenting with new ad formats," he added. " ... I
like their chances of making it - independently or as part of a larger media
company."
Many online publishers are trying to get their readers to pay for news.
Online financial news company TheStreet.com Inc. has said repeatedly that it is
focusing on subscription-based products such as its Real Money Web site, which
by the end of the second quarter had signed up 66,000 subscribers.
Salon.com Inc., which recently received $750,000 in financing, began to
charge for virtually all its news and political coverage. As Internet media
companies try to find the right formula for survival, they have become the
targets of merger speculation, as well.
Online financial news provider Marketwatch.com Inc., whose major investors
include Viacom Inc. and British media group Pearson PLC, has a "great"
audience," Card said. "It just hasn't really flipped the switch on its
business model," he added, "so I think they are a good target for an
acquisition or merger."
(C) Reuters Limited 2001.