Ok, the CNET news we hinted at is starting to roll in. They’ve sold Webshots, a photo sharing site, for $45 million in cash to American Greetings. The reason, says CNET Neil Ashe, is to allow CNET to “focus on key areas of growth.”
Webshots seemed to be growing pretty fast, though. The site attracted 7.2 million visitors in the U.S. in September, up 25 percent from last year.And just a year ago it was considered a key part of CNET’s strategy to become the Viacom of the online space.
Webshots was purchased by CNet from Twofold Photos, Inc. in 2004 for approximately $70 million. If you’d like to hear about the fascinating history of Webshots prior to CNET’s acquisition, listen to the first few minutes of this podcast, where Narendra Rocherolle, one of the founders, tells the story.
Neil Ashe has also sent an email to all CNET employees, where he mentions this and other news. He also says “CNET Networks is not the site-of-the-day. CNET Networks is the media company of the future.” (why does that remind me of the “To Infinity And Beyond!” quote from Toy Story?):
From: Neil Ashe
Sent: Thursday, October 25, 2007 1:47 PM
To: Employees – Global
Subject: Some important announcementsHi Everybody,
The third quarter marks a turning point for us. After a year on the job, I am confident we are building a company that can succeed in 2008 and beyond. Today, during our Q3 Earnings Call, I will make several major announcements that underscore our progress.
Strategically, we are focused on providing people with brands that make a difference and that help marketers win. Financially, we evaluated our asset mix and are focused on those areas that best fit within our brand portfolio, represent the largest opportunity and where we can be leaders. Operationally, we have a winning team that knows what success is and is committed to achieving it.
Let me provide more detail for you on those announcements.
Sale of Webshots
Today, Webshots was sold to American Greetings for approximately $45 million. This was a tough decision but the right business decision. Selling Webshots allows us to focus our efforts against long term strategic goals, and concentrate on the passion-based categories we believe offer the most promise for CNET Networks.
We are pleased that Webshots can become an important ingredient to American Greetings’ business, and we are committed to making this a successful transition over the next several months.
New Head of the Combined Entertainment and Lifestyle Business Unit
I am pleased to announce Stephen Colvin as EVP of our new Entertainment & Lifestyle business. A 20-year media veteran, Stephen joins us from Dennis Publishing, where he built Maxim, Blender, Stuff and The Week magazines. He has a track record as a dynamic leader and brand builder. Steph en will be based in our NYC office which allows us to expand our presence in a city that is the hub of the media world. Stephen will be spending a lot of time in San Francisco.
The merger of CHOW and Urban Baby into the Entertainment & Lifestyle business unit simplifies our business, and allows us to leverage infrastructure, tools and best practices across this larger group. Over the next few days and weeks there will be individual and team meetings within Entertainment and Lifestyle to discuss the transition process.
Stephen will be in San Francisco next week, and he is looking forward to meeting the team.
Partnership Marketing and Sales
Jack Haire joined us several months ago to evaluate and evolve our sales structure and go-to-market strategy. As a result of his assessment, Jack will be taking on the newly formed role of Chief Client Officer. In his new position, Jack will oversee the Partnership Sales team, chair the revenue council and have responsibility and final decision making for sales best practi ces, infrastructure and policies.
This new sales construct provides the flexibility to tap our best people across the company and align them against our best opportunities for revenue growth. The team will include dedicated centralized resources as well as part time allocation of resources from each BU. More announcements regarding this new team structure will be made in the coming weeks.
Channel Moves into the CNET BU
The joining of Channel and CNET brings together two category leaders. Together, they cover the spectrum of bringing information and services to manufacturers, distributors, retailers and consumers. The two businesses will benefit from a holistic view of tech consumption with the channel and to the consumer.
Steve Parrot will report to Joe Gillespie and continue to manage Channel as a stand alone business within the CNET BU.
Credit Facility
Last week we announced that we secured a $250 million credit facility. A credit facility is a set of loans that allow us to borrow money in order to enhance our ability to grow. Together, with the proceeds from our sale of Webshots, we have the financial resources available to create value for our shareholders.
Q3 Earnings
We reported that revenues for the third quarter were $99.5 million up 7% compared to the same period in 2006. Excluding all exited businesses, including Webshots, from both 2007 and 2006, total revenue increased 11% during the quarter. In addition, CNET networks ‘ global Internet properties reached and average of 141 unique monthly users consuming over 91 million pages per day.
At the beginning of the year, I laid out three initiatives and key areas of focus as part of our long term growth strategy:
First, realize the potential and opportunity of existing brands.
Second, identify new opportunities for growth.
And third, continue to strive to do what we do better.
Today’s announcements directly support our ability to achieve these initi atives and build a vibrant and valuable company that seizes the long term opportunity and creates value for users, employees, marketers and shareholders.
As we exit the third quarter, we have made real progress on our transformation to a new CNET Networks. A bold company that is entrepreneurial and aggressive. CNET Networks is not the site-of-the-day. CNET Networks is the media company of the future.
Best, NA
This makes me sad.
Michael is absolutely right. The history of Webshots is truly fascinating. The founders sold it to Excite@Home for nearly half a billion dollars in the dot-com heyday, then formed Twofold Photos and bought it back for something like $5 million. From there, they sold it (again!) for a significant return to CNET for $70 million. Now, CNET’s been forced to sell it at a loss to what will likely be its final owner, American Greetings (which also bought Blue Mountain Arts from the bankruptcy proceedings of Excite@Home).
Webshots must have one of the juiciest wikipedia entries on the Internet.
Cheers,
Doug
I wonder if this Photo space is hot enough for another startup. I flirted with the idea of creating a contest-driven photo website but gave it up – wish I had the persistence!
Way to go Mike publishing another confidential internal email.
If companies don’t want people to spread internal emails they shouldn’t be sending out emails. Nor have anyone talk to people off the record.
CNET gone nuts? Why did they sell it for a loss? Stange Internet Media!
Acquired in 2004 for $70 million.
Sold in 2007 for $45 million.
What kind of bubble is this?
RBA – you may lose a little on every transaction but you can make up for it with volume.
Wow! That’s $45,000 per registered user!
That’s some expensive ads!
http://fakestev...er.blogspot.com
@4. John, with the greatest of respect, you Sir are an ass.
If you simply wish to read the hackneyed press releases and sympathetic journalism of sycophantic industry journalist might I suggest you’re in the wrong place.
Whilst I don’t always agree with the editorial decisions made here, I at least can gain something from the knowledge that we are, at the least, gaining a useful perspective from the point of view of those who influence the industry.
Arrington, carry on.
Except what was “hinted at” in that post had nothing to do with what was actually announced and has been thoroughly debunked (since it didn’t make any financial sense) in the comments.
RBA, if the site made absolutely no revenue between those two years, I would agree.
$45 million for photos.
CNET sold this acquistion for a 25M loss.
“…f’n bitch”
wow! this actually came as a sad news to me. I have been using webshots since ‘99 and is one of the oldest and one of the first photo sharing sites on the net. They even offered free wallpapers. Webshot is an excellent source for professional photographs. I hope the new owners don’t wreck it.
I think in those two years they should have made enough money to justify to sell at $45M.
So help me understand something… if CNet sold Webshots… why is CNet hiring a Site Director? I put a screenshot at – http://www.inte...activesalsa.com
Kind of funny. Of course, it is just a matter of being out of sync with the announcement.
Thanks for covering this story.
I thought this blog was about facebook only? How come we are seeing other stories?
Boring.
Does this sale affect AllYouCanUpload.com? I use this service a lot. Please clarify this…
Yes, it looks like it includes All You Can Upload, Julan. I love AYCU for its simplicity and ease of use. I use Google Bookmarks to save my uploaded stuff, too.
Cheers,
Doug
It’s really kind of sad, since CNET previously spent $70 million on this site just three years ago
When CNET purchased WebShots in 2004, the site was earning around $3.5M in revenue per quarter. If the site consistently brought in $3 million per quarter, 11 quarters later the site would have generated over $30 mil in revenue. (The site contributed around $2 million in operating income or $22 million while held by CNET.)
This site was probably a breakeven transaction for CNET. If you ask me, they sold Webshots at the perfect time.
@2: Doug Mehus
Per the podcast the original sale of webshots was for $80mln which was mostly stock which lost most if not all of it’s value over the following 2 yaers. They purchased it back for 2.4 million and then subsequently sold it to CNet for $70mln.
Just fyi
— still an amazing story.
C|NET has ‘key areas of growth’? Eh, like what? Does anybody even VISIT C|NET? They’ve been around since nearly the very beginning, but I have NEVER understood what their deal is. They are the epitome of the sort of fluffed-up nothingness that web-crazy marketeers conjure up to create value out of thin air – an “internet property,” as they call it proudly. I have no idea how they’ve lasted this long. They lack any sort of specialty. Nobody is drawn to the site – there is no gravity, no genuine interest or utility in any sense whatsoever that gets people to type “CNET.com” in their window. They are completely irrelevant. A waste of a good four letter domain. The site doesn’t even load quickly, it’s sluggish and outdated. Like Windows.
I am surprised they sold Webshots. I think it was a good thing. I never used it but knew lots of people (generally less technically literate) who loved it.