NEW YORK — NBC has continued its commitment to new media by spending $26 million for a 5% stake in Internet company CNET and roughly $11 million for a 19% stake in CNET’s Internet portal service Snap!
NBC has the option to increase its ownership stake in Snap! to 60%, which would require a $38 million total investment. Snap! is a wholly-owned subsidiary of CNET.
Both CNET and NBC are banking on NBC’s promotional muscle building the fledgling Snap! into the leading Internet directory and search brand.
“Snap! is a unique opportunity for us because it’s not a content site, but it’s where you go to find out how to get to the content sites you’re interested in,” said Robert Wright, president and CEO of NBC. “The only thing it doesn’t have is consumer awareness.”
Halsey Minor, chairman and CEO of the San Francisco-based CNET, will serve as CEO of Snap! and continue to be responsible for the overall operations of the service.
Tom Rogers, president of NBC Cable and business development and executive VP, NBC; Marty Yudkovitz, president of NBC Interactive Media; Scott Sassa, president of NBC Television Stations; and Neil Braun, president of NBC Television Network, will all take seats on the Snap! board of directors and comprise the majority of the board.
Wright said that NBC will begin promoting Snap! on the broadcast network this summer, but he declined to provide details.
Analysts said that the deal was certainly positive for CNET but it was too early to tell how much NBC will benefit from the arrangement. David Simons, managing director of Digital Video Investments, estimated that CNET has invested $10 million in Snap! since its launch last September.
“This deal really saves their bacon,” said Simons, referring to CNET. “So, it’s clearly a good move for CNET. How good a move it is for NBC remains to be seen. Snap! is a work in progress, as is everything else on the Internet.”
Wall Street loved the deal. CNET’s stock leaped 37% Tuesday, to close at $45.13 in very heavy trading.
Simons added that until now, America Online has been the only Internet-related company to advertise consistently and frequently on national television. Presumably, Snap! will now give AOL a run for its money as NBC promotes the service on the network.
“We know we have formidable competition from people like Yahoo!,” said Yudkovitz. “But the space is wide open. It’s the equivalent to 1950 in the TV business. Eighty percent of U.S. households are not on the Internet yet.”
In addition to Snap!, CNET has launched a slew of other web sites and also produces TV shows about the Internet and computers for USA Network and its sibling Sci-Fi Channel.
NBC’s Rogers said that a public stock offering could be in the future for Snap!
“One of the key reasons to do that is to create a currency in the form of stock, which is helpful for the purpose of acquiring other companies,” said Rogers.
Other Internet stocks also surged on the news of NBC’s investment in CNET and Snap! Yahoo! jumped $8.50 to $117.88, Amazon.com gained $5 to $51.25, Infoseek Corp. increased $4 to $27.25 and Lycos rose $3.31 to $53.56. AOL, which announced a deal with Compaq Computer, increased $3.75 to close at $88.56.