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Online media companies reel after attack

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CIOL Bureau
New Update

Reshma Kapadia

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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.

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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."

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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."

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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.

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