Earnings: Stock Option Fallout Moves CNET To Loss For Q2

Nearly $3 million in expenses from ongoing litigation over stock option accounting pushed CNET Networks (Nasdaq:CNET) into the red for the second quarter. CNET lost $76,000, compared with a profit of $5.2 million in 2Q06. Revenues for the quarter were $97.2 million, up 5 percent from the same quarter last year.

Those numbers were in contrast with good news on the user front: CNET closed the quarter with 137.5 million monthly uniques, up 18 percent from 2Q06. As has happened with others relying more on Flash, Ajax and streaming video, average daily page views of more than 74 million represented a decrease from the previous year although a decline of 19 percent seems sharp. When asked during the earnings call about the metrics, CEO Neil Ashe said users are the most important statistic for the company at this point but they are starting to focus more on time spent. Excluding Webshots, time spent across the network in Q2 was up 9 percent.

Metrics don’t equal revenue: One analyst congratulated Ashe on “some great metrics” — more users, more time spent — but noted that revenue doesn’t always seem to reflect that, asking “how do you sell the good things about CNET?” (Loose translation: how does a company with so much reach make so little money?) Ashe says the company emphasizes its reach with influencers, passionate users across a range of categories. The rest of his answer underscored the problems CNET has getting its message across about what the company is now versus what people think they know: “If there’s a stumbling block to selling our network right now it’s that people who don’t know us very well are surprised to realize we are as big and as influential as we are in as many categories as we are.” That’s why the sales team is being revamped and why, as we were first to report last month, ad vet Jack Haire has been brought in — to raise the profile.

Earnings release | Webcast

Advertising: In response to a question, Ashe said despite the page view drops, “CPMs have held constant over the past six months; we’re not seeing same CPM pressure Yahoo describes.”

Revenue breakout: Domestic accounted for the bulk, $73.7 million, with international contributing $23.5 million aided by recent acquisitions in France and China. Marketing services brought in 88 percent while 12 percent came from licensing, fees and user.

Choosing categories: Ashe was asked how the company decides when to expand into a new category. He described the criteria: Do we believe there’s a passionate user interest? Is this consistent with our other properties? Is there market interest if we build it? Do we think we can do it better? But Ashe said he still sees “strong expansion opportunities” in the brands CNET already owns. (One example: the acquisition of SportsGamer this month to extend GameSpot.)

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