It must be good to be CNET Networks' (NASDAQ:CNET) CEO Shelby Bonnie these days. Last night, the company posted a profit of $0.02 a share on $63.4 million in revenues. Backing out some favorable onetime charges, the company still reported a modest $0.02 loss for the March quarter. That was half the pool of red Wall Street had been expecting.
In raising its 2004 outlook, CNET looks to produce an operating profit on revenues of $275 million to $285 million. That implies top-line growth of 12% to 16% this year and includes projected declines in the company's fading print business. The core interactive segment is looking to grow by at least 20%.
I had the opportunity to reflect on the company's improving state with Bonnie yesterday. Here are snippets of the Q&A that followed.
Q: Video, software, music -- obviously these consume a lot more bandwidth than serving up a page of static content. How do you go about monetizing those areas -- especially when so many have failed in the past?
A: There are two things to point out. Bandwidth costs have come down over time. I'm surprised at the dramatic decreases in overall costs in just the past few years. At the same time, you are seeing more opportunities to monetize those areas.
Q: Paid searches through Google, which recently replaced a deal with Yahoo!'s (NASDAQ:YHOO) Overture, have become an important piece of the CNET pie. Would that influence future acquisitions, in the sense of looking to expand into areas in which keywords are being bid the highest?
A: We have been in the paid search business since we became a GoTo.com customer in 1998. It's been a good area for us, especially now that we have been able to consolidate that business through Google, but it's still just one more revenue stream. We would rather build around an attractive audience. We're in three very strong categories. These are content areas where we can add real value. We want to be in categories where we can be a leader.
Q: You've done well in the Internet land grab. However, while you own Search.com, you aren't the top search site. While you own News.com, you aren't the most popular news site. Can generic domain names be branded or is it a case of cursed good fortune?
A: In some respects that's why you see us call it CNET News.com and CNET Download.com. We try to build as much equity as we can in the master brand. We have other domains like Tv.com, radio.com, events.com, and future.com that we have yet to develop.
Q: Acquiring the mp3.com domain from Vivendi (NYSE:V) could be a brilliant move with many of the 250,000 independent artists still directing traffic to their now shuttered mp3.com sites. Why try to migrate them over to music.download.com rather than re-establish mp3.com as the online music hub?
A: We bought what Vivendi would sell us. Domain name. Trademark. Hardware. That was it. So we approached mp3.com as a way to build a really immersive environment in music -- more than just a place to get free downloads? I think folks will be encouraged by what they see. A lot of the download.com activity centers around music applications, so it was a perfect fit for us.
Q: Interactive revenues grew by 32% in the March quarter while the company is looking to grow that by just 20% to 24% for the year as a whole. Will that be strictly the result of slower growth in unique visitors, or is the welcome trend of milking more revenue out of each eyeball coming to an end?
A: Actually, it was during the first half of last year that we saw the re-emergence of growth, so the comparisons now get harder. Annualized growth rate is what we're focused on and we're pleased with what we're seeing there.
Q: The renewal rate for your top 100 advertisers dipped below 90% for the March quarter. Is that a seasonal thing or a reason for concern?
A: 89% is still a great number. It speaks to the value of our offerings. A few years ago, we would have sold our left arm for numbers like that.
Q: You've got the programming techies, diehard gamers, and garage band musicians on your side. Now with companies like iVillage (NASDAQ:IVIL) and TheKnot.com (NASDAQ:KNOT) turning the corner of profitability, will there be some estrogen in CNET's future or is MySimon as far as the company will go on that front?
A: Clearly, when we look at categories like consumer electronics, the female audience will become a more important part of our audience. I'm married with three kids and the ultimate decision maker in my home is my wife, and that's not an isolated incident. That's clearly a category where we can grow if we find leadership positions.
CNET's download.com site is a popular hub for authorized software downloads, including many worthy popup blockers and spam killers. Have any recommendations on that front? What is the best anti-virus program? All this and more -- in the Viruses, hoaxes, & spam, oh my! discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz was one of the original mp3.com artists and is in the process of migrating his band's music over to the new CNET site. He does not own shares in any companies mentioned in this story.
