CBS Joins the Social Networking Scene

Summary

CBS announced today that it has acquired London-based social networking site Last.fm for $280 million. The site claims about 15 million monthly users (4 million in the U.S.) and hangs its hat on music video distribution – thought to be a good fit with the traditional broadcast giant. The site also has video distribution in development, in line with the YouTube-esque marriage of social networking and viral video distribution. The price tag for Last.fm is well below Google’s $1.65 billion acquisition of YouTube and competitor News Corp’s $580 million acquisition of social network market leader MySpace. In many ways this is in fact a move for CBS to build off its radio, music and television assets to etch out an online presence similar to the way that News Corp has done it with Fox Interactive Media and its darling MySpace.

Analysis

It’s interesting to see television networks go about online establishment and growth in a way that is similar to the growth strategy they know best; television. In this way they are assembling assets like building TV schedules and looking at how to best aggregate audiences around specific interests, using demographic targeting. MySpace has done this with premium rates for display and video advertising, as well as integration of Google ads throughout the site.

CBS will employ a similar strategy with ad units demographically targeted to Last.fm’s musically oriented set of users. MySpace started out with a similar profile but has since grown into many other things, while it remains a place for bands to promote themselves with songs and videos.

In short, Last.FM works by allowing allows users to connect with other listeners with similar music tastes, to custom-build their own radio stations and to watch music video-clips. This happens through streaming radio based on the playlists of songs users have been listening to on their own computers, as well as what’s on playlists of peers. It is leading a new breed of online companies – also including Pandora and Finetune – known as music discovery engines.

For CBS this brings new reach and online targeting capability and represents a change in direction for one of the countries largest radio networks. This direction was also recently indicated by the company’s majority investment in, and partnership with, TargetSpot (the Spot Runner of radio) which we wrote about here; and the deal to bring video content from its television stations to Yahoo! News.

CBS is also trying to expand an advertising portfolio that includes terrestrial and online radio, broadcast and cable TV, and outdoor advertising. But instead of focusing solely on creating programming, the company is turning a corner to reach broadcast audiences through a variety of mediums. Online is the latest and mobile could be next.

The Last.FM acquisition for one could bring CBS the foundation for a pay per action model around songs. The product comes with a recommendation engine that provides links to buy music, based on what users and their friends are listening to. This could have nice synergies with its existing music properties, and for music it doesn’t have licenses to play, it offers 30-second samples. Bottom line, it extends CBS’s reach, and brings many possibilities for new ad formats and distribution to new online audiences.

“Their demographics also play perfectly to CBS’ goal to attract younger viewers and listeners, said CBS Chief Executive Leslie Moonves in a statement. “Last.fm adds a terrific interactive extension to all of our properties and also is a huge step in CBS Corporation’s overall strategy of expanding our reach online to transition from a content company into an audience company.”

Leave a Reply

Your email address will not be published. Required fields are marked *

13 − five =