What does CNET Networks (Nasdaq: CNET ) CEO Shelby Bonnie see that others are missing? His company is diving headfirst into the bandwidth-intensive delivery of music, video, photo, and software files when most content players are playing it safe and frugal by sticking to text.
I spoke to Bonnie earlier this week, and after discussing his company's December quarter results, we began to go over the company's growth overseas and how being a slow-yet-steady grower has its advantages.
Between ZOL and Fengniao.com, CNET is now an unlikely player in the booming Chinese market. What kind of growth are you expecting with those properties?
Bonnie argues that CNET is not an unlikely player at all. The company has been in China since 1996 and has 150 employees in Beijing. Because of the company's tech influence in product reviews and technology news it has established great relationships with the country's advertisers and actually publishes eight different magazines in China to go along with its venue of online sites.
Yet while Rule Breaker newsletter stock picks Shanda (Nasdaq: SNDA ) and NetEase.com (Nasdaq: NTES ) are booming by providing online games, CNET views its role as a reviewer of the various offerings. That allows it to play no matter who is winning -- and will no doubt attract the market leaders as sponsors.
Revenues are expected to grow by 17% to 22% in 2005 after growing by 18% in 2004. Many online companies are growing faster -- with many doing so organically. What would you tell a growth investor who feels that CNET should be going a little faster?
"We have -- over time -- told a consistent story of 20-25% growth rates," Bonnie says. "This isn't a market where you will see triple-digit growth in any given year. In the media business if you can deliver 20-25% growth that would be considered great."
CNET has advantages as a media company because differentiated content creates its own barrier to entry and it provides more steady, predictable long-term growth.
"We're pretty darn encouraged," Bonnie then says about the company's future prospects. "The online ad market is getting stronger, and there is a shift in advertising to online content sites. Broadband trends will favor content players now that there is the ability to deliver a strong branding message. We're feeling quite good."
With the stock more than tripling over the past two years, investors may be feeling pretty good too.
Longtime Fool contributor Rick Munarriz was one of the 250,000 musical artists who were sad to see the original MP3.com site go away when CNET took over, but he's giving Music.Download.com a chance. He does not own shares in any of the companies mentioned in this story.The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.