CNET Swallows KillerApp in $46 Million E-Commerce Deal

Online publisher CNET, Inc. (Nasdaq: CNET) announced on Tuesday that it has acquired KillerApp, Corp. in a stock deal valued at approximately $46 million (US$). KillerApp, Corp. owns and operates KillerApp.com, an e-commerce site which provides online comparison shopping services for computer and consumer electronics products.

CNET already operates an extensive network of comparison shopping for computer-related products, which far exceeds KillerApp’s offerings. However, this acquisition enables CNET to expand its e-commerce oprerations by adding consumer electronics to its arsenal, just in time to get ready for CNET’s big AOL deal. For this reason, CNET announced that it will begin to incorporate KillerApp into its shopping services immediately.

“With the continuing convergence of computing, technology, telecommunications and entertainment, we see a clear opportunity to provide a comprehensive resource for the multitude of products that are emerging,” said Halsey Minor, chairman and CEO of CNET. “With this acquisition, we have taken another step toward providing the quintessential online marketplace for the technology buyer.”

CNET’s AOL Deal

On February 11, 1999 CNET announced that it agreed to pay $14.5 million (US$) for the exclusive right to provide computer buying guides on America Online and CompuServe, for the next two and a half years. CNET will also initially be the exclusive provider of free-to-download software on AOL.COM. In addition, CNET’s technology news will be integrated throughout the AOL branded services.

The deal, which guarantees the payment of $14.5 million by CNET to AOL, plus additional payments once a certain (undisclosed) revenue is reached, has been described by the companies as an “alliance.” As part of the alliance, CNET will create co-branded versions of its computer hardware and software buying guides. In light of this latest acquisition of KillerApp, it is very likely that CNET will fold in consumer electronics offerings, as well.

The Perfect Target Market

“At CNET, we are committed to building the Internet’s largest database of products and prices for our large and loyal audience of computer and technology enthusiasts,” said Kevin McKenzie, CNET’s associate vice president of shopping services. “We also see this audience becoming buyers of consumer electronics who place the same level of importance on reviews, pricing and comparisons for these kinds of products.”

The company rightfully views the addition of consumer electronics to CNET’s existing listings of products and prices as a natural progression for the network. CNET reports that a recent survey of its users revealed that they are avid consumers of convergence technology products, including digital cameras, DVD players and PDAs. According to the survey, CNET users intend to purchase approximately three new consumer electronics devices in the next twelve months. For example, more than half of CNET users surveyed (53%) anticipate buying a DVD player in the next year. The study cited by CNET was conducted by SiteCentric in September of 1998.

The Players

Killer App

KillerApp is an e-commerce company that offers a network of comparison shopping services that helps consumers research and buy products online. As one of the first-ever companies to deliver real-time street pricing over the Internet, KillerApp has expanded its services to represent an ever-broadening range of products and interests. KillerApp is headquartered in Fremont, California.

CNET

In addition to its network of technology and business information Web sites, CNET produces television programming focused on the Internet and digital technologies which airs in 40 countries, and in the U.S. on USA Network and the Sci-Fi Channel. CNET also owns 40 percent of Snap, a search and navigation service for Internet users, co-owned by NBC, and approximately 2.3 million shares of Vignette (Nasdaq: VIGN), a manufacturer of high-end Web publishing software. In addition, CNET owns approximately 16 percent of BuyDirect.com, an online software store that recently announced a merger with Beyond.com.