CNET's Results: Some Positive Signs

This afternoon CNET released its quarterly results (although it only released revenues and not earnings due to the ongoing stock options investigation). CNET is clearly in a challenging environment, but I found some positive takeaways:

• While page views declined, visitors were up. This supports my earlier analysis that CNET's page redesigns were responsible for the page view decline, not an overall drop in visitors. It's also worth noting that CNET's page views declined only 13% year-over-year, not the 50% that was being bandied about the blogosphere last week.

• CNET continues to efficiently monetize its traffic. The company's revenues increased 13% year-over-year even though its page views dropped by the same amount. This indicates that CNET is pumping out more sales leads per page view to its participating merchants - in other words it's getting more efficient in converting readers to buyers.

• CNET is broadening its footprint. In the last quarter CNET launched sites on food and television, further cementing the company's recent move out of the tech sphere. I think this is a smart stategy, although I don't yet see how CNET is tying all of these sites together - in fact there's no link to any of the non-tech sites from CNET's home page.

• CNET is poised for the oncoming onslaught of branded advertising. A recent study indicated that brand advertising on the Internet will grow much more quickly over the next few years than the direct-response type of text ads Google has grown fat off of. Over the last 10 years CNET has pioneered the development of online branding opportunities for marketers and I believe this work will be rewarded in the coming quarters.

To be fair, not everything is looking up for CNET. The company has to resolve the stock options issues quickly and definitively before the stock will go anywhere. CNET also has to get its debt rating up, which will hopefuly happen if the company pays off its $125 million in notes with the cash it has on hand.

With new leadership in place at CNET there will likely be a transition period during which the company finds its feet. But I believe once it does, the company has shown its ability to execute which will put it in a good position as tech advertising bounces back.

Full disclosure: I am long on CNET. I used to work at CNET several years ago, but have no inside knowledge of the company at this point.