'Personal Space' Sites Bring Old Media Back to the Net

(By Associated Press)
By Frank Ahrens
Sunday, March 12, 2006

Last week, NBC Universal Inc. became the most recent Old Media giant to graft on a small bit of New Media with its $600 million purchase of iVillage, a collection and aggregator of Web sites that target women. Or, as it calls itself, "the Internet for women."

NBC Universal -- created from the 2004 purchase of Vivendi Universal SA's movie and television assets by General Electric Co.'s NBC -- joins Rupert Murdoch's News Corp. and Viacom Inc. in delving into the "personal space" elements of the Web.

Last summer, Murdoch bought MySpace.com for $580 million. The community site, which allows users to post personal profiles and blogs, listen to music, play games, find dates, and browse classifieds, is popular among young Internet users and shares some of the personal-connection elements of Facebook and dating sites.

Also last summer, Viacom spent about $200 million on Neopets.com, the home of "70 million virtual pet owners," its Web site says. Users can create an animated online pet and entire virtual world, play games, message other pet owners, and so on. Viacom also bought iFilms, a short-film site.

If this sounds a little like 2000 to you, you can be forgiven. Back then, the old-line media companies -- typically made up of a television network, some cable channels, a movie studio, a music business and theme parks -- fell over one another in a rush onto that crazy new Internet thing where all the kids were. And some of them lost their shirts doing so.

The failed AOL-Time Warner merger was the most notorious, of course, resulting in an unfathomable $10 billion write-down in 2003. But Walt Disney Co. lost millions on the Go.com Internet portal, which only recently began turning a small profit. Time Warner Inc. itself sunk a bunch of money into trying to create a Web portal for all of its magazines. Vivendi Universal toyed with an Internet unit.

But that strategy, if you can call it one, was different. The idea then was to take traditional content -- such as TV shows, music and movies -- and sell it on the Internet. The plan hit a couple of snags: a) molasses-speed Internet connections, and b) Napster.

Today, the Old Media companies are spending more wisely, or at least more frugally, and not just throwing spaghetti at the wall to see what sticks. Further, instead of looking just for retail revenue from the Internet -- selling content -- the companies now seek Internet advertising revenue, a proven comer.

"We look forward to building on the considerable brand strength iVillage has developed over the past 10 years and to giving our advertising clients new and exciting ways to reach a valuable demographic," NBC Universal chief executive Robert C. Wright said in a news release.

One has to look only as far as Google Inc. to understand that advertisers are finally "getting" the Internet: The rapidly evolving search engine reported $6.14 billion in revenue for 2005, almost all of it advertising-based. To get that kind of money from advertising, Internet companies need the same thing TV networks need: big, demographically attractive audiences.

In the post-bubble Internet shake-out, community Web sites have proven to be among the most popular and fastest-growing. IVillage, for instance, reported $91.1 million in 2005 revenue. That's a modest figure, but it's up from $66.9 million in 2004. MySpace has 56 million members and keeps company with the likes of Google and Yahoo in total traffic.

Even Viacom Chairman Sumner Redstone, who is crazy for the video game industry, has yet to sink any company money into gaming (though he has invested his own), seeing community Web sites such as Neopets as a safer, surer new-tech play and corporate complement.

Of iVillage, NBC's Wright said: "We don't feel that this is faddish or the flavor of the month. We feel this has real staying power and will be around for a good long period of time."

Imagine that: Media moguls taking a sober, rational view of the Internet. Amazing what one little $10 billion write-down can do.

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