As someone who has witnessed the meteoric rise of CNET and its role in technology media from the very beginning, I was shocked to learn that they are being sold for $500 million to Red Ventures, a North Carolina-based media investor.
After all, CBS had acquired CNET for $1.8 billion in 2008 — but then I remembered that CBS already sold off the China operations. And they milked the property nicely after a turnaround by former CEO Jim Lanzone and his team. What’s left is finally getting a new home, and at a price much higher price than traditional private equity buyers were willing to pay.
Why did Red Ventures pay so much for the company? If I was to guess, it is because they know the real value of CNET lies in its “reviews” business. The “news” is an exciting lure, but the reviews business is a honey pot of referral revenues. And even with Amazon cutting its affiliate fees, others are willing to pay CNET for a piece of the action.
These “referral revenues” are now part of all significant companies’ operations — The New York Times (via Wirecutter), Vox, and Buzzfeed all rely on these kinds of kickbacks. CNET often gets overlooked, mostly it lacks the cachet of its newer competitors. According to Business Insider, about 15 percent of the total digital media advertising revenue is linked with affiliate marketing. In 2020, this is estimated to be around $7 billion in the US alone.
Frankly, those guys at Red know the referral revenue business better than anyone else. They own ThePointsGuy, Bankrate, Best Colleges, and a slew of other properties that would fall in what you might call “service journalism.” As a working journalist, I hated this business and wanted to write sexy cover stories. Though in reality, readers loved my work when it helped them solve a problem. Service journalism was one reason why Business 2.0 managed to find its footing in the post-dot-com bubble era.
Red’s properties, which also include things like Healthline, are just referral engines. They attract people looking to solve a problem. CNET gives Red a foothold in the technology and product reviews business. ZDNet is a good base for the company to build a referral engine for the SaaS-applications that are now multiplying like mushrooms in the cloud era. I believe ZDNet is an under-monetized asset.
Given the debt situation of ViacomCBS, it is not surprising the Redstone family company is looking to shed assets — Simon & Schuster, a book publisher, is up for grabs for about $1.5 billion. Don’t be surprised if Showtime is also put on sale.
When it comes to CNET, I would say that Red Ventures got a real bargain.