Transcript CNET2000
1-1 internet business models text and cases CNET 2000 Jeffery T. Pelletier © 2005 UMFK. 1-2 • • • • • • • • • • CNET2000 Outline Introduction and History Target Markets Business Model Competition Strategies GBF Marketing Campaign Where is CNET2000 today? Conclusion Questions? © 2005 UMFK. 1-3 Introduction and History • • • CNET is an information-based Online Vertical Portal. Founded by CNET Vice Chairman Shelby Bonnie. In June 1999 outsiders saw CNET as a success story: – – • • 600 employees in 1999. In 1999, invested $100 million in it’s advertising campaign. – – – – • • CNET’s share price increase ten-fold from April 1998-April 1999 Five straight quarters of profits. Stock fell 10% almost overnight Analyst thought this was crazy of CNET to do so. This is when Shelby Bonnie introduced CNET2000 All company employees went through extensive workshops and the new plan to reorganize the companies ideas were underway. Tried to distinguish itself as a vertical web portal and not a horizontal portal. The workshops and feedback session had three outcomes: – – – Clarified the market and customer segments of CNET2000. Would become an information intermediary instead of traditional content provider. (Clarification of CNET2000’s business model.) Came up with ways to achieve what they wanted to do and how to get there. © 2005 UMFK. 1-4 Target Market • CNET2000 decided that they would stay focused on Information Technology and not wonder into other markets. (Stay Vertical and go after the whole slice of pie.) • Compared itself to Amazon and came to the fact that CNET2000 was very different than Amazon. • After research, found what there was too much too gain from IT market: – $511 billion in US annually – $500 billion abroad. • Barely scratching the surface of the IT market and decided, that unlike Amazon which had everything from IT to Autos to clothing, CNET2000 would go one direction and that would be providing IT knowledge. © 2005 UMFK. 1-5 Business Model • • • • At first, it was aimed at television and online programming about IT products. Later became focused on online programming on IT products because website generated more traffic than expected. Focused efforts as an information intermediary. Branched off to 11 other different websites to take care of many different customer needs. – – – – • Downloading software Buying PCs Price Comparisons News about technologies and businesses Main objective was to connect the consumer to retailers and give them all the information needed to make the right buying decision. © 2005 UMFK. 1-6 Competition • Competition included old competitors, as well as, new competitors that were never looked at as competitors before. – ZDNET which was an Internet company ran by Ziff Davis that did the same thing CNET did. – Other companies similar too CNET were IDG, and CMP. – Microsoft, Amazon Yahoo! were all new competitors that kind of followed CNET into this type of portal and became some of the major competitors • Divided their market into three tiers: – Top tier were the ‘Aggregators.’ These included Yahoo!, AOL and Excite that were search engines. – Next tier which was the ‘Providers.’ Included themselves, as well as, Ziff, IDG, and CMP. – The last tier were the ‘Executers.’ These included companies like Amazon which actually sell the products. • CNET had a plan to out aggregate Yahoo! and out integrate Amazon. – Out aggregate means that their would more experts on a particular subject than Yahoo! Would have to give the customer the best possible response. – Out integrate means that CNET2000 would have unbiased views and share that with the customer. © 2005 UMFK. 1-7 • CNET2000 Strategies The was CNET’s journalist had to act towards Internet and online users. – Users on Internet had less tolerance than reading a paper. – With old-fashioned newspaper, you start with a thesis, then you build an argument, and then a conclusion. – CNET2000 had an approach of giving conclusion right away and then explaining how they got there. (Example is a rating of 1 to 10 on a particular product and then why it was giving that rating.) • CNET2000 planned to give reviews at a more rapid pace than other review sites. – Instead of an annual review, CNET2000 offered reviews up to date on products. • Last step was to integrate CNET2000 infrastructure into one database and have links to all aspects of CNET2000 in one specific place. – Went from 9 different servers and 9 different databases to one. © 2005 UMFK. 1-8 GBF • Economics of Scale: – $12 per customer, per year. – Marginal costs with servers and bandwidth and sales were 15%. – Goal was to jump from $12 to $40 per customer, per year through marketing investment and getting name out in public where it is viewable. • Network Effects: – High for the whole network because not just computer geeks were looking at this information now. Everyone from the common shopper, to company Executives were now entrusting their faith in the knowledge of CNET. • Customer Retention Rates: – High retention rates due to the ever-changing technology and the constant updating of IT info. © 2005 UMFK. 1-9 Marketing Campaign • CNET2000 had a plan to invest $100 million dollars in a nationwide marketing campaign which was much more than $1 million the previous year. – Campaign was too be accomplished through print, television, radio, and outdoor advertising. – This campaign would give CNET an operating loss for present year. – Outsiders and critics called move stupid and after stock dropped, didn’t think CNET knew what it was doing. • Reasons why CNET2000 would succeed in their marketing campaign: – Had posted profit in 5 previous quarters. – Thoughts were if you go in the red, what is the difference of $5 million and $25 million. – Had previously sold two of their Internet companies and had made $500 million from that sale. © 2005 UMFK. 1-10 Marketing Campaign Cont…. • CNET2000 had taken into consideration many factors that outsiders disregarded. – One was that there would a much broader audience on the Internet now then before with computer sales rising like never before. – Also IT professionals were looking even deeper for the best IT deals for their company and CNET2000 targeted that segment of the market in their marketing. – The last thing was the ‘early adopters’ needed to be up to date constantly with the latest technology and always stay ahead of the curve. © 2005 UMFK. 1-11 CNET2000 Today • CNET2000 has evolved the company and the website www.cnet.com into one of the most successful, post dot.com collapse, stories and is still thriving today. • One of the most trusted websites for information from computer hardware and software, to video game expertise. • Constantly stays up to date. © 2005 UMFK. 1-12 Conclusion • CNET2000 experimented and it paid off. • Successfully established itself as a high quality vertical portal. • Big marketing campaign paid off and it in-turn produced high profit margin resulting from company recognition. © 2005 UMFK. 1-13 Questions???? • ??????????????????? © 2005 UMFK.