Why CBS Bought CNET, And Not The Other Way Around
- 1999: CNET is a $12 billion company
- January 2000: CNET Aquires MySimon for $700 million
- October 2000: CNET Acquires Ziff Davis (ZDNet) for $1.6 billion (after the March 2000 stock crash)
- July 2004: CNET Acquires Webshots for $70 million
- October 2004: CNET Sells Webshots for $40 million
- May 2008: CBS Acquires CNET For $1.8 billion
CNET announced its sale to CBS, a $16.5 billion company, today for $1.8 billion. In late 1999, though, CNET was a $12 billion company. They subsequently acquired MySimon for $700 million and ZDNet for $1.6 billion, and it’s been all downhill for CNET’s market cap since then.
So why didn’t CNET continue to grow and ultimately take over a media dinosaur like CBS, instead of the other way around? Perhaps it was because they did deals like buying Webshots for $70 million and then a couple of years later selling Webshots for $40 million. Or perhaps it was because they failed to realize the importance of blogs until 2007. Whatever the cause, or causes, CNET failed to disrupt the old guard, and will find itself to be a footnote in Internet history rather than the headline it should have been.
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Metacafe Founder’s New Startup: Clear Applications
Israeli paper The Marker is reporting (in Hebrew) that one of the Metacafe founders who recently cashed out and left has turned his attention to business recruitment technology.
Arik Czerniak is now working on Clear Applications, a company that he co-founded seven months ago with two other Metacafe ex-employees, Oren Blatt and Gil Solomon. The startup is developing analytics tools that will help medium and large-sized businesses filter through thousands of job applications and identify those candidates with the best personal and cognitive skills.
Blatt, a former fighter pilot for the Israeli air force, holds the position of CEO. The company reportedly has six employees and is self-funded. No word yet on when they might launch their product, but it’s definitely not imminent; the Clear Applications website still points to a parked page.
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CNET CEO: “This Is An Exciting Day For Usâ€
CNET CEO Neil Ashe, who has been accused of “presiding over massive value destruction†will go down in history as the guy that was forced to sell CNET out to an old media dinosaur. But at least he’s given CNET’s stockholders back all of the losses they’ve sustained under his watch with the $1.8 billion sale to CBS. Ashe’s email to CNET staff this morning is below.
Hello Everyone,
This is an exciting day for us. Today, CBS and CNET Networks announced a definitive agreement under which CBS will acquire CNET Networks. This announcement represents an important strategic step for both of our companies. We expect to complete this transaction by early Q3 of this year.
You can read the full release formally announcing this acquisition here.
Together CBS and CNET Networks represent an unbeatable combination of premium content online, premium content on air and premium audiences. As a leading online media network, we will have an impressive portfolio of leading brands, including CNET, CBS.com, CBSSports.com (formerly Sportsline.com), GameSpot, BNET, and TV.com to name a few. Together we will be bigger, bolder and better than we could be apart.
Both CBS and CNET Networks share a common vision about interactive media, the importance of category defining brands and how to build online destinations that give people more of what they crave. CNET Networks brings unique skills and assets to CBS including our ability to build, operate and grow interactive brands, our flexible technology platforms as well as some of the most talented interactive media professionals in the industry today.
There will be significant promotion opportunities for our brands online across CBS’s Interactive portfolio, as well as offline across CBS’s leading media properties.
CBS’s brands complement our existing categories, giving us quality reach across premium audiences. On the sales side, we now have the ability to offer advertisers a larger audience, more brands, and more page views – providing marketers more scale. For example, we can now build the ultimate men’s network with sites like CNET, CBS Sports, GameSpot and BNET.
On Tuesday, May 20th, I will host a Company All Meeting in San Francisco. We’ll talk about the transaction and the exciting opportunities that it creates for both NCAA and CNET Networks and we’ll answer your questions. Stay tuned for details and logistics on that meeting.
So what now? We must remain focused on our day-to-day responsibilities. We still need to deliver on the commitments and promises we made to our users, our advertisers, our shareholders and our fellow employees.
In the weeks ahead, as we work to ensure the smooth integration of our two companies, we will continue to provide you with regular updates. If you have specific questions, please feel free to submit them through offline. We will aggregate your questions and incorporate answers into our communications.
Finally, I want to thank you for your continued hard work and support. It is because of you that 160 million people show up each month to interact with some of the best websites in the world. It is because of you that we have been recognized as a leading company with a unique culture and exceptional employees. It is your dedication to our users, our brands and each other that have enabled us to take this exciting step.
Today, the next chapter in our story begins.
Best, NA
*****************
Neil Ashe
CNET Networks, Inc.
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Dude, William Shatner Totally Loves TechCrunch
Autograph sports and celebrity memorabilia is a $1 billion/year business in the U.S. alone. The problem is, up to 90% of it is counterfeit.
Enter Los Angeles based LiveAutographs, a site that sells celebrity autographs that are guaranteed to be authentic - because they take a video of the celebrity writing the autograph and message and post it on their website. I am a huge William Shatner fan (who isn’t?), so I paid $149 to get him to sign a photo with the message “I Love TechCrunch.” Given that Shatner is just an awesome actor, I’m hoping the video shows an authentic level of love for our site.
Hey, I’m testing software. This is a writeoff.
The site has a handful of celebrities signed up to participate, including Hulk Hogan, Carmen Electra, Slash and, of course, William Shatner.
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Dear Yahoo: You’re Fired
As expected, Carl Icahn presented an alternate slate of directors for the upcoming Yahoo shareholder meeting. The letter to Yahoo Chairman Roy Bostock says it all:
Carl C. Icahn
ICAHN CAPITAL LP
767 Fifth Avenue, 47th Floor
New York, NY 10153
May 15, 2008
Roy Bostock
Chairman
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Dear Mr. Bostock:
It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft’s bid of $33 per share is a superior alternative to Yahoo’s prospects on a standalone basis. I am perplexed by the board’s actions. It is irresponsible to hide behind management’s more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo’s closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.
During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched. I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies. I have therefore taken the following actions: (1) during the last 10 days, I have purchased approximately 59 million shares and share-equivalents of Yahoo; (2) I have formed a 10-person slate which will stand for election against the current board; and (3) I have sought antitrust clearance from the Federal Trade Commission to acquire up to approximately $2.5 billion worth of Yahoo stock. The biographies of the members of our slate are attached to this letter. A more formal notification is being delivered today to Yahoo under separate cover.
While it is my understanding that you do not intend to enter into any transaction that would impede a Microsoft-Yahoo merger, I am concerned that in several recent press releases you stated that you intend to pursue certain “strategic alternatives”. I therefore hope and trust that if there is any question that these “strategic alternatives” might in any way impede a future Microsoft merger you will at the very least allow shareholders to opine on them before embarking on such a transaction.
I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.
Sincerely yours,
CARL C. ICAHN
SLATE BIOGRAPHIES
Lucian A. Bebchuk
Lucian Bebchuk is the William J. Friedman and Alicia Townsend Friedman Professor of Law, Economics, and Finance and Director of the Program on Corporate Governance at Harvard Law School. Bebchuk is also a Research Associate of the National Bureau of Economic Research and Inaugural Fellow of the European Corporate Governance Network. Trained in both law and economics, Bebchuk holds an LL.M. and S.J.D. from Harvard Law School and an M.A. and Ph.D in Economics from the Harvard Economics Department. He joined the Harvard Law School faculty in 1986 as an assistant professor, becoming a full professor in 1988, and the Friedman Professor of Law, Economics and Finance in 1998. Bebchuk has written extensively on corporate governance, corporate control, and corporate transactions. He has published more than seventy research articles in academic journals in law, economics, and finance. Upon electing him to membership in 2000, the American Academy of Arts and Sciences cited him as “[o]ne of the nation’s leading scholars of law and economics,” who “has made major contribution to the study of corporate control, governance, and insolvency.” He is the 2007-2008 President of the American Law and Economics Association, and a former chair of the Business Association Section of the American Association of Law Teachers. Bebchuk’s recent writings include Pay without Performance: the Unfulfilled Promise of Executive Compensation (Harvard University Press, 2004, co-authored with Jesse Fried), “The Case for Increasing Shareholder Power” (Harvard Law Review, 2005), “The Costs of Entrenched Boards” (Journal of Financial Economics, 2005, co-authored with Alma Cohen), and “The Myth of the Shareholder Franchise” (Virginia Law Review, 2007). Bebchuk has been a frequent contributor to policy making and public discourse in the corporate governance area. He has appeared before the Senate Finance Committee, the House Committee of Financial Services, and the SEC. He has published many op-ed pieces, including in the Wall Street Journal, the New York Times, and the Financial Times. He was included in the list of “100 most influential people in finance” of Treasury & Risk Management and the list of “100 most influential players in corporate governance” of Directorship magazine.
Frank J. Biondi, Jr.
Since March 1999, Mr. Biondi has served as Senior Managing Director of WaterView Advisors LLC, an investment advisor organization. From April 1996 to November 1998, Mr. Biondi served as Chairman and Chief Executive Officer of Universal Studios, Inc. From July 1987 to January 1996, Mr. Biondi served as President and Chief Executive Officer of Viacom, Inc. Mr. Biondi is a director of Amgen Inc., Cablevision Systems Corp., Hasbro, Inc., The Bank of New York Mellon Corporation and Seagate Technology. Mr. Biondi is a graduate of Princeton University and earned a Masters of Business Administration from Harvard University.
John H. Chapple
John Chapple is President of Hawkeye Investments LLC, a privately-owned equity firm investing primarily in telecommunications and real estate ventures frequently working in conjunction with Rally Capital LLC. Prior to forming Hawkeye, John Chapple worked to organize Nextel Partners, a provider of digital wireless services in mid-size and smaller markets throughout the U.S. He became the President, Chief Executive Officer and Chairman of the Board of Nextel Partners and its subsidiaries in August of 1998. Nextel Partners went public in February 2000 and was traded on the NASDAQ Exchange. In June 2006, the company was purchased by Sprint Communications. From 1995 to 1997, Mr. Chapple was the President and Chief Operating Officer for Orca Bay Sports and Entertainment in Vancouver, B.C. During Mr. Chapple’s tenure, Orca Bay owned and operated Vancouver’s National Basketball Association and National Hockey League sports franchises in addition to the General Motors Place sports arena and retail interests. From 1988 to 1995, he served as Executive Vice President of Operations for McCaw Cellular Communications and subsequently AT&T Wireless Services following the merger of those companies. From 1978 to 1983, he served on the senior management team of Rogers Cablesystems before moving to American Cablesystems as Senior Vice President of Operations from 1983 to 1988. Mr. Chapple, a graduate of Syracuse University and Harvard University’s Advanced Management Program, has 26 years of experience in the cable television and wireless communications industries. Mr. Chapple is the past Chairman of Cellular One Group and CTIA-The Wireless Association, past Vice-Chairman of the Cellular Telecommunications Industry Association and has been on the Board of Governors of the NHL and NBA. Mr. Chapple serves on the Syracuse University Board of Trustees currently as Chairman and the Advisory Board for the Maxwell School of Syracuse University. He is also on the Board of Directors of Cbeyond, Inc., a publicly traded Atlanta-based integrated service telephony company; Seamobile Enterprises, a privately held company providing integrated wireless services at sea; Telesphere, a privately held VOIP (voice over internet protocol) company based in Phoenix, Arizona; and on the advisory boards of Diamond Castle Holdings, LLC, a private equity firm based in New York City and the Daniel J. Evans School of Public Affairs at University of Washington.
Mark Cuban
Since early 2000, Mr. Cuban has been the majority and controlling owner of the National Basketball Association franchise, the Dallas Mavericks. In 2001, Mr. Cuban co-founded HDNet, an all high-definition television network on DIRECTV that broadcasts high-definition sports, movies and other entertainment. Prior to his purchase of the Dallas Mavericks, Mr. Cuban co- founded Broadcast.com in 1995 and served as its Chairman of the Board until it was sold to Yahoo! in July of 1999. Before Broadcast.com, Mr. Cuban co-founded MicroSolutions, a national systems integrator, in 1983, which was later sold to CompuServe Corporation in 1990. Mr. Cuban is an active investor in cutting- edge technologies and various industries, including the entertainment industry.
Adam Dell
Since January 2000, Mr. Dell has served as the Managing General Partner of Impact Venture Partners, a venture capital firm focused on information technology investments. He also serves as Managing Director at Steelpoint Capital Partners, a private equity firm with offices in New York and California. From October 1998 to January 2000, Mr. Dell was a Senior Associate and subsequently a Partner with Crosspoint Venture Partners in Northern California. From July 1997 to August 1998, he was a Senior Associate with Enterprise Partners in Southern California. From January 1996 to June 1997 Mr. Dell was associated with the law firm of Winstead Sechrest & Minick, in Austin, Texas, where he practiced corporate law. Mr. Dell’s investments include: Buzzsaw (which was acquired by Autodesk), HotJobs (which was acquired by Yahoo!) and Connectify (which was acquired by Kana Software). Mr. Dell has been a director of XO Holdings, Inc., a telecommunications services provider, since February 2006, and of its predecessor from January 2003 to February 2006. In addition, Mr. Dell currently serves on the boards of directors of the Santa Fe Institute, MessageOne and OpenTable. He also teaches a course at the Columbia Business School on business, technology and innovation and is a contributing columnist to the technology publication, Business 2.0. Mr. Dell received a J.D. from University of Texas and a B.A. from Tulane University.
Carl C. Icahn
Mr. Icahn has served as chairman of the board and a director of Starfire Holding Corporation, a privately-held holding company, and chairman of the board and a director of various subsidiaries of Starfire, since 1984. Since August 2007, through his position as Chief Executive Officer of Icahn Capital LP, a wholly owned subsidiary of Icahn Enterprises L.P., and certain related entities, Mr. Icahn’s principal occupation is managing private investment funds, including Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Partners Master Fund II L.P. and Icahn Partners Master Fund III L.P. Prior to August 2007, Mr. Icahn conducted this occupation through his entities CCI Onshore Corp. and CCI Offshore Corp since September 2004. Since November 1990, Mr. Icahn has been chairman of the board of Icahn Enterprises G.P. Inc., the general partner of Icahn Enterprises L.P. Icahn Enterprises L.P. is a diversified holding company engaged in a variety of businesses, including investment management, metals, real estate and home fashion. Mr. Icahn was chairman of the board and president of Icahn & Co., Inc., a registered broker- dealer and a member of the National Association of Securities Dealers, from 1968 to 2005. Mr. Icahn has served as chairman of the board and as a director of American Railcar Industries, Inc., a company that is primarily engaged in the business of manufacturing covered hopper and tank railcars, since 1994. From October 1998 through May 2004, Mr. Icahn was the president and a director of Stratosphere Corporation, the owner and operator of the Stratosphere Hotel and Casino in Las Vegas, which, until February 2008, was a subsidiary of Icahn Enterprises L.P. From September 2000 to February 2007, Mr. Icahn served as the chairman of the board of GB Holdings, Inc., which owned an interest in Atlantic Coast Holdings, Inc., the owner and operator of The Sands casino in Atlantic City until November 2006. Mr. Icahn has been chairman of the board and a director of XO Holdings, Inc., a telecommunications services provider, since February 2006, and of its predecessor from January 2003 to February 2006. Mr. Icahn has served as a Director of Cadus Corporation, a company engaged in the ownership and licensing of yeast-based drug discovery technologies since July 1993. In May 2005, Mr. Icahn became a director of Blockbuster Inc., a provider of in-home movie rental and game entertainment. In October 2005, Mr. Icahn became a director of WestPoint International, Inc., a manufacturer of bed and bath home fashion products. In September 2006, Mr. Icahn became a director of ImClone Systems Incorporated, a biopharmaceutical company, and since October 2006 has been the chairman of the board of ImClone. In August 2007, Mr. Icahn became a director of WCI Communities, Inc., a homebuilding company, and since September 2007 has been the chairman of the board of WCI. In December 2007, Mr. Icahn became a director of Federal-Mogul Corporation, a supplier of automotive products, and since January 2008 has been the chairman of the board of Federal-Mogul. In April 2008, Mr. Icahn became a director of Motricity, Inc., a privately-held company that provides mobile content services and solutions. Mr. Icahn received his B.A. from Princeton University.
Keith A. Meister
Since March 2006, Keith Meister has served as Principal Executive Officer and Vice Chairman of the Board of Icahn Enterprises G.P. Inc., the general partner of Icahn Enterprises L.P., a diversified holding company engaged in a variety of businesses, including investment management, metals, real estate and home fashion. Since November 2004, Mr. Meister has been a Managing Director of Icahn Capital LP, the entity through which Carl C. Icahn manages third party private investment funds. Since June 2002, Mr. Meister has served as senior investment analyst of High River Limited Partnership, an entity primarily engaged in the business of holding and investing in securities. Mr. Meister also serves on the boards of directors of the following companies: XO Holdings, Inc., a telecommunications company; WCI Communities, Inc., a homebuilding company; Federal-Mogul Corporation, a supplier of automotive products; and Motorola, Inc., a mobile communications company. With respect to each company mentioned above, Carl C. Icahn, directly or indirectly, either (i) controls such company or (ii) has an interest in such company through the ownership of securities. Mr. Meister received an A.B. in government, cum laude, from Harvard College in 1995.
Edward H. Meyer
Mr. Meyer serves as Chairman, Chief Executive Officer and Chief Investment Officer of Ocean Road Advisors, Inc., an investment management company. From 1970 to 2006, he served as Chairman, Chief Executive Officer and President of Grey Global Group, Inc., a multi-billion dollar global advertising and marketing agency. Mr. Meyer serves as a Director of Harman International Industries, Inc., Ethan Allen Interiors, Inc., National CineMedia, Inc. and NRDC Acquisition Corp. Mr. Meyer holds a B.A. in Economics from Cornell University.
Brian S. Posner
Brian S. Posner is a private investor. From 2005 through March 2008, he served as Chief Executive Officer and co-Chief Investment Officer of ClearBridge Advisors LLC (and its predecessor company, CAM North America), an asset management company based in New York with approximately $90 billion in assets and a wholly owned subsidiary of Legg Mason Inc. Prior to ClearBridge Advisors, he was a co-Founder and the Managing Partner of Hygrove Partners LLC, a hedge fund company that was formed in 2000. Prior to ClearBridge Advisors and Hygrove Partners, he served as a Portfolio Manager and an Analyst, first at Fidelity Investments from 1987 to 1996 and then at Warburg Pincus Asset Management/Credit Suisse Asset Management from 1997 to 1999. At Warburg Pincus Asset Management/Credit Suisse Asset Management he was a Managing Director and served as the Senior Investment Manager of the Value Equity Group, co-Portfolio Manager of the Warburg Pincus Growth & Income Fund, and Portfolio Manager of the Warburg Pincus Institutional Value Fund and the Warburg Pincus Trust, Growth and Income Fund. Prior to the acquisition of Warburg Pincus Asset Management (”WPAM”) by Credit Suisse Asset Management in July 1999, he was co-Chief Investment Officer, Director of Research, Chairman of the Global Asset Allocation Committee, and a member of the Executive Operating Committee at WPAM. At Fidelity Investments, he was the Portfolio Manager of the Fidelity Equity Income II Fund from 1992 to 1996 and the Fidelity Value Fund from 1990 to 1992. He also managed the Select Life Insurance, Select Property Casualty Insurance and Select Energy Portfolios. From 1987 to 1990, he was an Oil, Insurance, and Financial Services Analyst. From August 2000 to April 2003 he served on the Board of Directors for Sotheby’s Holdings, Inc. He currently a member of the Board of Trustees at Northwestern University and the Board of Visitors for the Weinberg College of Arts and Sciences at Northwestern University. Mr. Posner received his undergraduate degree in history from Northwestern University in 1983 and his M.B.A. in finance from the University of Chicago Graduate School of Business in 1987.
Robert K. Shaye
Robert Shaye is Co-Chairman and Co-CEO of New Line Cinema. As the Founder of New Line Cinema and a filmmaker himself, Robert Shaye has spent more than 40 years developing and distributing films that reflect a wide array of cultural movements, creating new paradigms for the motion picture business, and most importantly, entertaining millions of moviegoers. Since he founded New Line in 1967, Shaye has guided the company’s growth from a privately-held art film distributor to one of the entertainment industry’s leading independent studios and a veritable box office force. He has been involved in such films as The Lord of the Rings trilogy, Rush Hour, Austin Powers and Seven. A University of Michigan graduate with a degree in business administration and a J.D. degree from Columbia University Law School, Shaye is also a Fulbright Scholar, member of the New York State Bar, and serves on the Board of Trustees of the Motion Picture Pioneers, and the American Film Institute.
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CBS To Acquire CNET For $1.8 Billion
“The core businesses of CNET Networks and CBS Interactive represent near perfect category symmetry in premium online content,”
Quincy Smith, President, CBS Interactive.
And that symmetry is apparently worth about $1.8 billion, which is what CBS just agreed to pay for CNET. The deals values CNET at $11.50/share, and puts a 45% premium on stock from their closing price yesterday. CBS, which is worth a little over $16 billion, is down just over 3% on the news as of 7:45 am PST.
The deal is about increasing CBS’s reach, as noted in the press release: The acquisition will make CBS one of the 10 most popular Internet companies in the United States, with a combined 54 million unique users per month, and approximately 200 million users worldwide.
The deal also likely ends the months-long fight between CNET and the activist investor group led by Jana Partners. Jana had accused CNET’s board and management of “presiding over massive value destructionâ€
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Amazon Funds Animoto Music Video Creator
Amazon has taken a special interest in one of its web service customers: Animoto, the machine-driven music video creator that launched last August and now has over 160,000 users. The online retail giant has decided to fund the startup with an undisclosed amount of money.
Animoto takes photo and music files from users and essentially turns them into souped up slideshows with background music that synchronizes with effects and transitions. The service uses Amazon’s simply queue, S3 and EC2 to store the requisite files and process the videos.
Cloud computing has been so vital to Animoto’s operations that Jeff Bezos even used the company as example of how well EC2 helps web apps scale when their traffic hockey sticks (in Animoto’s case, when its Facebook app took off last month).
To celebrate Animoto’s new influx of money, I’ve compiled the following video with background music by Pink Floyd. My only quibbles when putting it together include the inability to use PNG files or search for photos on Flickr by tag.
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TechCrunch EuroTour: Hello Hamburg!
So today I’m at the Next08 conference in sunny Hamburg, Germany, my first stop in the TechCrunch EuroTour. There are about 1,200 people here, up from around 700 last year which just goes to show how much the industry is changing here in Europe. As one delegate described it to me, it’s one of the few - if perhaps the only event - to bring Geeks and Investors together in Germany. A number of German startups are pitching here, many with international rollout plans, and I’ll update this post later on with my notes. If you are here and would like to say hi here’s my contact details (and what I look like!).
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Strands Absorbs Another Personal Finance Company
Strands has made a second recruitment in its effort to develop a Mint competitor called moneyStrands that leverages the same recommendation engine behind its video and music products.
Just over two weeks ago Strands acquired Expensr, and now the company is announcing its acquisition of NetworthIQ. Both are personal finance applications that Strands’ wanted mostly for their human capital, but also for some of their technology assets. The terms of both deals were also not disclosed.
While the media has yet to get its hands on moneyStrands and give it a spin, the product has been in development since December and it marks Strands’ attempt to aggressively apply its recommendation technology to new fields.
Just how that technology will be applied to personal finance is not altogether clear. The core Strands technology digests and analyzes behavioral information to make its recommendations. This is fairly straightforward when it comes to music: frequently play two or more songs with one another and Strands will learn something about how you prefer to experience music.
Apparently this technique will transfer over into personal finance by analyzing the sets of purchases that consumers make and then recommending how they can make better purchases. This analysis will not only consider the various purchases that one consumer makes; it will also compare these purchases to those made by others.
Aside from detailed personalized recommendations, Strands hopes to differentiate itself from competitors like Mint and Wesabe by providing superior mobile support and widget integration.
Strands is mum on the fate of NetworthIQ as a stand alone service, but I think we can safely assume it will shut down eventually as its team focuses on the development of moneyStrands.
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Amazon May Sell $750 Million In Kindles by 2010 (That’s A Lot Of Kindles)
The Kindle, Amazon’s ugly but useful ebook reader that launched in November 2007, may be a burgeoning hit, says Citigroup Analyst Mark Mahaney. Citi expects Amazon to generate between $400 million and $750 million in revenue from the Kindle by 2010, or 1% - 3% of Amazon’s total revenue.
The key points of differentiation with the Kindle and competing devices is the fact that books and other content is delivered to the Kindle wirelessly and that the Kindle has the largest book selection by a significant margin (more than 120,000 books, magazines, newspapers, and blogs, including 98 of 112 current New York Times Best Sellers). Mahaney also points out that the Kindle has more memory than competitors, and supports newspapers, magazine and blog subscriptions. See Mahaney’s comparison chart below for additional details:
Mahaney points to slim public data about Kindle sales to date in making his predictions:
How Is Kindle Doing So Far In The Marketplace?
Our ability to answer this question is very limited. Amazon is the sole retailer of the Kindle and it has disclosed no information about its sales other than to say
that it sold out in the first 5 1â„2 hours. But we have pieced together four different clues to gain a sense of Kindle’s traction.First, we note that Kindle has consistently been ranked among Amazon’s Bestsellers in its Electronics category. Ahead of the Apple iPod Nano, the Garmin GPS Navigator, and the Canon Powershot Digital Camera.
Second, we note that the Kindle has received a very large number of customer reviews. Per the exhibit below, we note that Kindle has received more customer
reviews than any of the other Top 10 Bestselling items in Amazon’s Electronics category – 2,537 reviews as of May 12th – vs. 663 for the Apple iPod Nano 4
GB Silver (3G), the #2 Bestseller. This is in part an unfair comparison. Kindle is a new product sold only on Amazon.com, while there are numerous versions of the iPod, and they are sold by numerous retailers. But still, the volume of reviews does indicate material traction for the Kindle.Third, we see that the quality/tone of the customer reviews the Kindle is receiving is relatively positive. Below we compare the Star Rating Diffusion – 5 Stars vs. 4 Stars vs. 3 Stars etc… – for each of the Top 10 Bestselling Electronics Items on Amazon. What we see is that the Kindle actually receives fewer high scores than the other Bestsellers – 69% of its reviews are 4 or 5 Stars vs. an average of 80% for the other items. And it receives more low scores than the other Bestsellers – 22% of its reviews are 1 or 2 Stars vs. an average of 13% for the other Items. But for a Version 1 of a product “competing†against a several times iterated leading consumer electronics item like the iPod, a 69% Star 4 or 5 rating is relatively positive.
And fourth, we note that the most reviewed Customer Review of Kindle (“Why and how the Kindle changes everything†by Steve “eBook Lover†Gibson) has been reviewed by at least 27,000 people. Specifically, as of May 13th, 26,931 have read Steve Gibson’s review and actually commented on it by pressing the Yes or No button when asked if the review was helpful. And logically, there would be more people who read the review and didn’t bother to vote, although the voting step is hyper-easy. We believe that this helps provide something of a proxy for how many Kindles have likely been sold. We’d peg the number as somewhere between 10,000 and 30,000 Kindles sold to date.
Citi took this indirect sales data and built a model based on the adoption curve of the iPod “Here’s what’s known. Launched in CQ4:01, the iPod went from 129,000 unit sales in its first quarter to becoming a mass market phenomenon, with a current installed base of approximately 100MM.”
They apply similar adoption rates to the Kindle that the iPod saw (starting at a much lower base: 129,000 iPods v. 10,000 - 30,000 Kindles in first three months on the market) and then discount the entire model by 50% - 75% to hedge risk in coming up with the three year revenue model. “So perhaps, if Amazon executes right with its Kindle product and marketing strategy, the iPod analogy for the Kindle won’t be too far stretched,” Mahaney says.
About half the projected revenue is from Kindle sales, half from book sales after purchase.
What’s our take? I was down on the Kindle when it first launched but quickly fell in tepid like with it once it was in my hands for a few weeks. But then John Biggs at CrunchGear borrowed it from me in January, apparently permanently. I’ve learned to live without it. The biggest issue I had with it, once I got the hang of it, was accidental page turns. I’m still buying a lot of normal books, but when I get my Kindle back I’ll happily switch back to the ebook world.
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