CNET también está disponible en español.

Ir a español

Don't show this again

Christmas Gift Guide
Tech Industry

2HRS2GO: No powerhouse with NBC-Snap-Xoom

This broadcast-Internet marriage thing is overrated.

Executives from NBC, Snap and Xoom.com Inc. (Nasdaq: XMCM) touted today's merger announcement as the "the true convergence that everyone has so breathlessly waited for and talked about for so long," since it combines a leading TV broadcaster with a Web portal and an e-commerce site. That's the positive spin.



Will the new NBC Internet be a Web force to reckon with?



Now look at what's actually happening: basically, a pair of second-tier websites get tagged with the Peacock brand, and combined with small minor NBC assets. It's not a watershed deal, even if it does create the seventh-largest Web property in terms of reach.

The new venture promises to get tons of promotion on NBC television, which always helps. Unfortunately, NBC Interactive also promises to pay for it, committing to at least $880 million worth of ads over the next decade.

NBC adds brings little else to the deal besides a self-promoting site in NBC.com, and a 10 percent stake in CNBC. Oh, and the NBC moniker, of course, which seems to be the linchpin of the whole thing.

Xoom CEO Chris Kitze might as well have chanted "branded media property" like a mantra for all the times he mentioned it during this morning's analyst conference call, but despite what he and other executives claim, NBC's power to lure TV viewers to the Web isn't proven. Snap's reach has grown to 16 percent from 3 percent since NBC bought a piece of Halsey Minor's portal idea, but who's to say how much of that would have happened anyway? It's not like Cnet doesn't have pull of its own.

Besides, it's a lot faster to go from nothing to something, than to go from something to something even bigger.

Not to worry -- the Brand will rule all, claim this deal's advocates. "We think that the next way to go is going to be in a branded media environment, we think the next thing to create is an integrated media platform," Kitze declared.

Is that right? Then explain the Go Network's performance so far.

During the analyst call, Kitze did take the time to twice disparage Infoseek as having no media brand of its own ("They haven't had the full wind of Disney behind them"), simply because Infoseek isn't called "Disney.com", while Snap-Xoom-and-friends will become a publicly-traded company known as NBC Internet. But make no mistake about it, the Go Network is a Disney property, and gets a ton of promotion on ABC television and through other Disney properties.

All the properties would combine to rank seventh in terms of percentage of Internet users reached, a metric even Kitze admitted "isn't necessarily the best way to do a measurement." But NBC Internet won't be about advertising, it's hoping to take advantage of Xoom's e-commerce model and extend it. There's a lot of extending to do; on a pro forma basis, the combined entity saw revenue $10 million in the first quarter, and expects annual revenues of up to $70 million at first, said Bob Wright, NBC's president and CEO.

Yahoo raked in $86 million in just in the first three months of this year. America Online saw $1.3 billion. NBC may be a television giant, but it's a peanut in the Internet world.

At least the division of equity is even, with Xoom, Snap and NBC's other contributions each representing roughly third of the new company, which means NBC, because of it already owns a big chunk of Snap, ultimately gets anywhere from 49 to 53 percent of the whole thing.

If NBC Internet's prospects still don't daunt you, Xoom's Kitze can tell you how to get a piece of the action: "From a Xoom shareholder point of view" -- Kitze happens to be one 4.1 million times over -- "if you want to own this stock, buy some Xoom stock today. That would be the way to participate in this venture."

And make him even richer.

Other issues to think about:

  • Lycos Inc.
  • (Nasdaq: LCOS) At least Xoom and Snap have a brand. What does Lycos have, now that the USA Networks deal seems to have collapsed? David Wetherell, we're waiting for that mystery buyer to pop up...

  • Inacom Corp.
  • (NYSE: ICO), Ingram Micro Inc. (NYSE: IM), Merisel Inc. (Nasdaq: MSEL); Tech Data Corp. (Nasdaq: TECD) The quartet will be the beneficiaries of Compaq's decision to whittle its number of distributors. Good for them, but it's still disturbing to see Compaq Computer (NYSE: CPQ) vacillating between the retail and direct-order markets.

    The overall technology market was up a bit in mid-afternoon trading. The Nasdaq Composite Index had gained 20.58 to 2524.20, the S&P 500 was down 1.50 to 1343.50, and the Dow Jones Industrial Average clung to a slight gain of 2.29, to 11033.88. 22GO>