By Yinka Adegoke
NEW YORK, May 29 (Reuters) - Comcast Corp’s (CMCSA.O) digital unit is on target to turn profitable this year as revenues from search and advertising partnerships with Google Inc (GOOG.O) and Yahoo Inc YHOO.O exceed expectations, senior executives said.
The largest U.S. cable operator is also setting up an in-house sales team to focus on selling graphic and in-video advertisements for its entertainment sites Fandango and Fancast.
Comcast Interactive Media (CIM) President Amy Banse and Executive Vice President Sam Schwartz told Reuters that traffic and ad revenue had beat expectations at the unit’s consumer websites, which include Comcast.net and Game Invasion.
“The Yahoo deal has been very lucrative for us and the Google (deal) continues to be lucrative and grow and we’ve bought a number of businesses,” said Schwartz. “We’ll be there in 2008 in terms of profitability,” he said.
While Comcast’s decision to build its own ad team raises questions about the future of its relationship with Yahoo, Schwartz said the company is “very happy” with the partnership, signed just a year ago and kicked off in the fourth quarter.
Since its formation in December 2005, CIM has acquired online start-ups including online video publisher thePlatform, movie site Fandango and social networking company Plaxo.
Comcast Chief Executive Brian Roberts told investors last year the company expects to take in $1 billion in advertising revenue by 2012 and that CIM would be profitable this year.
Comcast has also invested in organic growth, by building on the strengths of its existing Web portal Comcast.net, which is the gateway for its 14 million high speed Internet subscribers. The five-year old site accounts for the vast majority of CIM’s revenues from search.
But not every project has been a success. Executives said Ziddio — an online video site set up in 2006 to combine the spontaneity of user-generated content with Comcast’s traditional expertise on TV — had failed to gather fans in significant numbers. They are currently evaluating its future.
In January, Comcast unveiled its flagship online video site Fancast, which aggregates thousands of hours of free programming from many of its cable network partners including Viacom VIAb.N, CBS CBS.N, NBC and News Corp NWSa.N.
While programmers are putting more content online, at Fancast and other sites like NBC and News Corp’s Hulu, there are also concerns that such sites will cannibalize cable TV’s traditional business model.
Banse said Fancast would always run TV shows and movies online in a way that would complement scheduling windows for broadcast TV and DVD sales or rentals.
“We’re not asking programmers to collapse their windows because that’s how they make their money,” said Banse. “We’re not saying everything needs to be online. We’re saying we can give you an on-demand experience on all platforms.” She said CIM has prioritized growing Fancast’s user traffic with extensive content and features, such as adding a digital video recorder button to the website in the fourth quarter to allow subscribers to program their TV DVRs over the Internet. Schwartz said Comcast is in active discussions with other cable companies to offer the online DVR service beyond its own 24 million subscribers. Satellite TV operator DIRECTV Group DTV.O started offering a similar feature earlier this year. Banse and Schwartz said as well as internal developments Comcast is still looking at acquisitions that suit CIM and its parent.
According to sources familiar with each deal, Comcast spent around $100 million on thePlatform, $200 million on Fandango and $175 million on Plaxo.
“We have a high level of interest in continuing to innovate products related to entertainment so we’ll continue to look at potential M&A in that area,” said Schwartz, who also heads Comcast Interactive Capital, Comcast’s venture capital fund.
“We also have ambitions to grow our scale in advertising so we’ll look at things that can grow our scale,” he added.
(Editing by Dave Zimmerman)
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