Chalk one up for David in the neverending David-and-Goliath battle of start-up vs. huge corporate giant. Like new kid on the block America Online buying the old media daddy Time Warner, CNet Networks announced Wednesday the acquisition of ZDNet for some $1.6 billion worth of stock. If the deal goes through, the combined technology news and reviews sites would form the eighth largest property on the Net, according to Media Metrix, with some 16.6 million users in the United States alone.
The irony is that Ziff-Davis, once the giant of tech trade publishing, could have been the single largest shareholder in CNet from its inception, says Fred Davis, a former Ziff executive. As a consultant to both Ziff and CNet, Davis tried to broker a deal between the two for Ziff, then the leader of the tech trades, to be a key investor in the fledgling start-up.
"For a few million dollars, Ziff could have owned a substantial chunk of CNet when the company was just getting started. Ziff could have been the single largest shareholder and their exclusive content provider," says Davis. Picture shows like PC Magazine TV, produced by CNet, as well as a CNet Web site chock full of ZD reviews. Blaise Simpson, spokeswoman for CNet, confirmed that Ziff-Davis had an opportunity to invest in CNet in 1993 and turned it down. No one at Ziff was available to comment on this bit of corporate history.
Needless to say, Ziff pooh-pooed CNet's plans to launch TV shows about computers, says Davis. "Ziff was kind of trashing the idea. They said: 'Oh no, we're sticking with our core business of print.' They didn't realize that the rules were being changed around them." Ziff later went on to copy CNet, both by moving into television -- launching ZDTV, which has since been sold off to Paul Allen's Vulcan Ventures -- and by beefing up its online presence, with ZDNet, which CNet is now acquiring.
But even when Ziff did get Web religion and turned its focus to online content, not just print, it allowed its Web site to depend too much on its legacy print brands, repurposing stories and reviews culled from the print magazines for the Web site. From Day 1, CNet designed its content for the Web, whereas Ziff included a lot of longer magazine stories ported over from its print division.
When Ziff sold the print magazines group, including some 80 magazines, to Willis Stein & Partners in Decembers 1999, the deal provided for ZDNet to retain the online rights to those magazines for five years. In a strange twist of fate, now CNet will get what it wanted from Ziff more than five years ago: the online rights to the trade magazines.
One loser in the deal is billionaire investor Paul Allen, who dumped his CNet stock when Vulcan Ventures, his investment vehicle, bought ZDTV last January for $205 million. It wouldn't do to have holdings in both, since CNet News.com and TV.com shows are ZDTV's biggest competitors. Of course, he made a lot of money on CNet over the years, and the company's stock was punished by the markets today, because of the expense of the deal. But the ZDNet and CNet marriage puts ZDTV in an awkward situation, carrying the family initials ZD, of what is now its competitor. Look for an expensive name-change in ZDTV's future, unless it wants to continue to plug the Web properties now owned by CNet with every airing of its shows.
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