Earlier this week, after CNET Networks (NASDAQ:CNET) posted better-than-expected second-quarter results, I had the opportunity to talk to CEO Shelby Bonnie. The Internet is becoming a hotbed of interest lately, with investors and acquisitive media companies taking good, hard looks at popular online destinations -- and CNET falls in that category. Its network of content-rich sites is attracting 115 million unique visitors a month, with daily page views just shy of 100 million.
I kicked off my interview with Bonnie by asking him about online gaming in China. His company publishes a few video game magazines in China and has also made some recent media acquisitions in the area. Here at home, Gamespot.com is a popular site for gamers and recently began beta-testing a new offering called Gamecenter, where fans of multiplayer games congregate to set up matches and share playing tips. Teaming up with Motley Fool Stock Advisor pick Electronic Arts (NASDAQ:ERTS) to showcase the popular Battlefield 2 computer game, CNET is excited about the new service and envisions free and premium offerings as Gamecenter nears its official launch.
Multiplayer online games are all the rage in China, thanks to the success of companies including The9 (NASDAQ:NCTY) and active Rule Breakers newsletter recommendations Shanda Interactive (NASDAQ:SNDA) and NetEase.com (NASDAQ:NTES). I asked Bonnie whether CNET has plans to expand into online gaming in China, to take advantage of the boom.
Bonnie doesn't expect that to happen. The company will continue to grow in China's surging market, but it will be through its role as a media company, by way of more magazine sales and more users flocking to the company's online platform to interact with fellow players. That makes sense. If the company can ride that medium, there is no sense in banking it all on one particular series of games.
I then asked Bonnie about the financial discrepancy in the company's performance. CNET reported a 55% increase in unique visitors and a 134% jump in page views, yet interactive revenues grew by just 30%. So why is it that visitors are spending more time on CNET's virtual porch, but online advertising isn't keeping up with the spike in new pages being served?
Bonnie points to recent acquisitions, particularly Webshots.com, as the reason for the discrepancy. As a popular photo-sharing site, Webshots is serving a whole lot of pages, but those impressions aren't as easy to monetize as are the company's content-rich pages from flagship sites such as News.com, CNET.com, and Tech Republic. Organic growth, he said, is closer to 20% in terms of visitors and page views for its original sites. As proof that things are going well on those fronts, he noted, interactive revenue there rose by a heartier 23%.
Ultimately, I had to ask him about the company's independence. Since late last month, stories have surfaced that the likes of Yahoo! (NASDAQ:YHOO), InterActiveCorp (NASDAQ:IACI), and other such companies are looking to grow their online content empires by acquiring CNET.
I certainly wasn't holding out for a public admission that the company was on the auction block. However, I wanted to compare his reaction to the one I got when I had asked him the same question in April. Back then he told me, "We just keep our head down and keep building our properties and hope that it's a long time before everyone else figures it out."
This time around, he didn't suggest that CNET isn't pinging on the market's radar. "Overall, we're very pleased with our business," he said. He then went on to mention that the recent media and advertiser attention was "well-earned" in the content space.
That's neither an admission nor a denial, though it seems clear that CNET's days of toiling away in obscurity are over. Everyone else has figured it out. Whether it's a suitor, a new wave of sponsors, or new shareholders, CNET can't hide its interconnected network of attractive online properties anymore. It can no longer acquire smaller players on the cheap.
In sum, these are some exciting times in the online sector. Tomorrow I'll be back with the rest of my interview with Bonnie, along with thoughts on how CNET can grow even faster in the future.
Related Foolish coverage:
- CNET earned nearly twice as much in its latest quarter as Wall Street was expecting.
- The company acquired Webshots last summer in a $70 million transaction.
- I originally asked Bonnie back in April about his company's independence.
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 Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
