CNET Ascendant

Online content still rules. Even though fourth-quarter shortcomings at bellwethers like Google (Nasdaq: GOOG) and Yahoo! (Nasdaq: YHOO) may have led some to believe that growth expectations in the Internet advertising market had been wildly exaggerated, it's great to see a company like CNET (Nasdaq: CNET) nail its landing.

The company behind popular Web destinations like News.com, Gamespot, and Webshots earned $0.15 per share in its fourth quarter, adjusting for one-time gains and charges. That echoed Wall Street's consensus and landed comfortably ahead of its $0.09 per-share showing a year earlier. Revenues climbed 20% higher, though interactive advertising -- now making up more than 93% of the revenue mix -- was up by a healthier 25%.

That's a number worth noting. Factor in the company's 13% quarterly spike in users across all of its sites (to 116.1 million) and a 22% uptick in daily page views, and you have the perfect storm -- more users spending more time on CNET even as the company generates more money per page view.

For 2006, the company expects to earn between $0.32 and $0.39 a share in earnings before stock compensation charges, on a revenue range of $395 million to $407 million. If that appears lower than the prevailing profit estimates reported by the media last night -- pegged at $0.40 per share, or a total $418.6 million -- let's clear it up.

CNET also announced that it was selling its Computer Shopper magazine. In an interview yesterday, CEO Shelby Bonnie explained that unlike the company's growing publishing business in Asia, which is stirring up brand awareness, Computer Shopper just wasn't much of a strategic fit.

According to Shelby, Computer Shopper generated $16 million in sales and $1.8 million in EBITDA last year. Back that out of the 2006 guidance, and you'll find the company smack in the middle of the top-line guidance, and in sync with analysts if it sticks to the high end of its profit range.

Ditching its domestic publishing business should end the sandbagging of CNET's overall growth. In 2006, the company appears to be focusing on deepening the user experience, making its sites even more addictive. Shelby cites TechRepublic as a successful example; thanks to its community-enhancing initiatives, registered users now compose 50% of the site's traffic.

With broadband access growing and bandwidth costs shrinking, Shelby wants CNET to grow the use of music, audio, and video across its sites. That could make a substantial difference on sites such as Webshots. At the moment, it's a popular photo-sharing site with more than 330 million uploaded snapshots. There are community features already in place, but if CNET is able to transform Webshots into a full-fledged social networking site like News Corp's (NYSE: NWS) MySpace.com, CNET would become even more irresistible to the investing community.

"I've never been more comfortable in the prognosis of online advertising," Shelby said. With CNET continuing to build out its network and looking for "disciplined" acquisitions in additional categories, the company may be one magazine lighter but several shades of optimism brighter.

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Longtime Fool contributor Rick Munarriz is a fan of CNET, but 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 the Motley Fool Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.