CBS Acquires Clicker to Expand Digital Business and Tap Internet TV’s Growth

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CBS (NYSE:CBS) announced last week that it will acquire Clicker Media, a guide to Internet TV, and also appoint Clicker’s CEO, Jim Lanzone, to head CBS Interactive. CBS competes with other media conglomerates like Disney (NYSE:DIS), News Corp. (NASDAQ:NWS), Time Warner (NYSE:TWX) and Viacom (NYSE:VIA). While this move looks like one to strengthen its position in digital media, CBS could also position itself to better understand consumer habits and use it to its own advantage. We take this opportunity to look at Clicker’s business, the importance to CBS Interactive (the company’s digital arm) and what CBS might be thinking with this move.

Our price estimate for CBS is $26.34, which is roughly a 10% premium to market price.

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Clicker at a Glance

Clicker is an online TV guide for programming available on the Internet. The site itself does not host any of the TV shows or movies, instead it acts as an aggregator and directs user to other sites like Hulu, NBC.com, iTunes, Amazon etc. which host these shows. Clicker is quite new and was launched in 2009, and definitely holds its importance given the surge in online video viewing. According to CBS’ press release, Clicker indexes about 1 million online TV shows and movies from both free and paid services.

Clicker is going to be a part of CBS Interactive, which is a group of Internet properties owned by CBS. Although financial terms were not disclosed, we believe that any revenue contribution to the company is likely to be limited in the foreseeable future. CBS Interactive itself is a very small contributor of the stock while containing multiple Internet properties.

CBS Interactive is Just 4% of CBS’ stock

CBS Interactive includes sites like CNET.com, TV.com, CBS.com, CBSSports.com, CBSNews.com and Gamespot.com. CNET is best known for its service allowing users to download freeware and shareware applications and news dedicated to the technology sector while Gamespot.com is one of the best sites for video game news, reviews and rankings. CBS.com and TV.com are focused on programming content and CBSSports.com provides sports scores, news, statistics and video programming related to sports. According to our estimates, these multiple properties contribute just 4% to CBS’ stock. Although the growth is good, the revenue contribution is low compared to other parts of the business.

What CBS May be Thinking?

CBS states in its press release:

“Clicker’s products and proprietary technologies add firepower to our existing portfolio of entertainment properties, and if we can help grow Clicker to its full potential in the years ahead, the strategic value could be tremendous.”

What this strategic value might be?

Given that Clicker is a navigation tool, CBS could potentially use its data to understand viewing habits on the web. This could be used as a powerful tool to help sell more targeted ads for its digital content, which could command a higher price than other ads. This site could potentially serve as a predictive tool for its content and programming businesses, which represent the lion share of the company’s value. By better understanding viewers’ online behavior, CBS can prioritize its shows, better direct its advertising and select new content based on market trends.

See the complete $26.43 Trefis price estimate for CBS’ stock.