CNET to buy ZDNet for $1.6bn

What will the regulators say?

CNET is to buy Ziff-Davis inc for $1.6bn stock, in a deal that will see two of the world's biggest Web sites establish a dominant position in the IT news and shopping sector.

Softbank, Ziff-Davis majority owner, will end up with 17 per cent of the enlarged company on completion of the takeover, expected in Q4. The combined business will employ 1,600 and is expected to turn over $500 million in 2001. Turnover also includes a contribution from Computer Shopper, ZD's sole remaining print title.

This is good news for Softbank: CNET can fund any future financing requirements for ZDNet, the ZD IT portal, out of its enormously deep pockets - unlike Softbank, which would most probably look for a cash call.

It is also good news for CNET, which is rich and huge in America, but has a limited presence in Asia-Pacific, and next to no presence in Europe. Currently, millions of CNET page impressions generated in Europe are going to waste - ZDNet has soldiers on the ground here to mop this up.

But is it good news for competitors or for IT advertisers? CNET reckons the market overlap between the two companies is "only 25 per cent", but how does it arrive at this figure?

Presumably, the overlap refers to people. According to Media Metrix, CNET and ZDNet sites are America's 18th and 19th biggest Web properties with more than 20 million readers a month between them. Depending on what CNET means by 25 per cent overlap, this could mean anything between 15 and 17.5 million individuals checking out either site. Combined, CZDNet jumps to anywhere between seventh and ninth in the charts, tucking in neatly behind the giant portals.

This is not grounds enough in itself for anti-trust enquiry, but considering that CZDNet only deals with IT, and considering that there are no other computer content sites in the top 50, surely the deal should be subject to some regulatory scrutiny?

And no, this is not special pleading: The Register is far too small to be affected by this massive consolidation. ®

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