Photo Software - Thursday, October 25, 2007
Webshots Packs Its Suit Case Again As CNET Sells It To American Greetings
CNET Networks has sold its Webshots subsidiary to American Greetings for $45M in cash. CNET has bought iin August 2004 Webshots for $70M. Webshots launched in 1996 as a professional photo screensaver/wallpaper site, but expanded into photo sharing in 1999. Excite@Home bought Webshots in 1999. Two years later Webshots' management team bought Webshots back from Excite for pennies on the dollar and then subsequently sold it to CNET for another big gain in 2004.
Why would CNET sell Webshots at this point and at a loss? Because CNET is the New York Knicks of online media. Webshots is one unit at CNET that has been showing success, with traffic up 25% from last year to 7.2M uniques in September. Hang on to Webshots at least another year and at least CNET doesn't take a loss on it. What's more CNET doesn't need the money. It just closed a $200M credit line. CNET's CEO says it was a tough decision and hints at upcoming strategic changes which will become apparent to us. Still we can't imagine they can give us a reason for panic selling on Webshots.
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It's a little "after the fact", but I can tell you why they sold Webshots at a loss. Their "paying" customers were not happy with how they were doing things and were not renewing their Premium Memberships. And they were the bread and butter of Webshots. Some members speculated that they lost somewhere between 500,000 and 1 million members after they bought the company in 2004.
If they actually lost 500,000 members, at $29.88 a year each, that would be a net loss of $14,970,000.00. If they actually lost 1 million members, that would be a loss of $29,880,000.00. I can also see how it would be possible that they could have lost even more member than that as well.
While paying customers are complaining, the worst thing you can do is ignore them. And that is exactly what they did. People were not happy with that response, so a lot of them didn't renew their memberships the next time they came due. And that is a pretty good reason to sell the company and get back what you can, while you can, before you lose it all...
Posted by: Axel at September 22, 2008 03:41 AM
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