Three Suggestions for CNET From a Shareholder

As a long-time CNET (CNET) shareholder, I was more than a little disappointed by the company's most recent lackluster quarterly earnings report. Quarterly revenue rose just 10% year-over-year and CNET broke even on a continuing basis. Not horrendous, but certainly not what one expects from a fast growing Internet company.

It's been quite awhile since CNET displayed real signs of life. Here are three ideas to kickstart the company:

* Pare down. While CNET has undergone waves of layoffs, it's still not enough. CNET needs to focus on more efficient ways of creating content. The company has to take a hard look at its business lines and ruthlessly cut those that are underperforming. Any division that's not growing revenues by at least 15% year should be axed. Is this easy? Of course not, but trimming the dead weight allows CNET to focus its resources on areas that have the potential for rapid growth.

* Harness user-generated content. One of CNET's biggest successes in recent years has been TV.com, a site that attracts 19 million users a month and is powered almost entirely by user created content. There is a built-in advertiser base of TV networks and an incredibly low cost to run the site. Why not take this unbelievably efficient model and apply it to complementary areas? CNET has a huge user base (144 million people visit CNET properties each month) that could be leveraged to get community sites going on a variety of topics. How about a user generated music site? A gadgets site? Let users connect in areas that are important to them - that's what web 2.0 is all about. To its credit, it looks like CNET is starting to do this with its new FilmSpot site. But the company should be running 100 miles an hour in this direction, not taking baby steps.

* Buy or co-opt blogs. How does CNET maintain its user base while cutting back its business lines? Tap into the blogosphere. Blogs are an infinitely more efficient publishing platform than traditional content creation with its layers of editors, designers, copywriters, etc. CNET has two options in this area. It can go buy some of the most prominent (and fast growing) tech blogs. Or, better yet, create a tech blog advertising network. CNET already has the deep ties into technology advertisers. Why not select a handful of the best tech blogs, make them "CNET Approved" and agree to sell advertising for them, splitting revenues 50/50. Even with a 50% revenue share, these small blogs would still be making a lot more money from the higher ad rates CNET could achieve. This gives CNET more ad pages without spending a dime.

CNET has a lot going for it: a strong brand, an enormous tech-savvy audience that advertisers should be lusting after, and a fundamentally sound business model. With the right guidance CNET could a great Internet company. But half-steps won't get you there - bold moves will.

CNET 1-yr. chart:

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