Operator Instructions. Mark Mahaney, Citigroup.

Thank you very much. A couple of questions. First, I think if the trend holds seasonally in the December quarter, international will be profitable for the first time I think ever for CNET. I just wanted to see if you would comment on that. Secondly, on the publishing side of the business, I know you're not giving, you've given some guidance for 2006. What is your confidence level that publishing can actually not decline year-over year or can actually be, what is your confidence that it can grow again at some point? That's it.

Thanks, Mark. Let me, on the first question, that is right. We will see international profitable in the fourth quarter. I think I'm correct in saying it was slightly or just marginally profitable by a little bit in the fourth quarter of last year, so this would be the second time. But I think it really speaks to the leverage that we're beginning to see in that business and going into 2006. On the publishing side, it's kind of good news/bad news. I think the good news is we've done an incredible job over time of shifting dollars from off-line to online. I think what you see in our own results in the publishing area is consistent with what you're seeing throughout the market. And I think as we've said before, we are an interactive content company. We're focused on building out interactive content, and as long as we believe that the publishing assets can be strategic to us, we will keep them and use them, and when we think that is no longer the case, we won't.

Thank you.

Gordon Hodge, Thomas Weisel Partners.

This is Lloyd in for Gordon. I was just wondering if you could comment a little bit you mentioned that you were unifying some of the game and entertainment properties to make a unified marketing platform. I was wondering if you all were considering integrating Webshots into a similar platform. And as a sort of a follow-up to that, if you could perhaps give us some color as to how you all were able to attract New Line/Warner and AOL to the Webshots properties, whether they came from other CNET properties or whether they were new to Webshots and CNET altogether, and how they sort of look at Webshots versus other CNET properties?

On the unification side, one of the really interesting opportunities we've seen as you look at our games and entertainment properties is you have so many overlaps. When we launched MP3.com, one of the things we did well was beginning to take, for instance, soundtracks from games and tying them in and being able to do a lot of smart cross-promotion between the game site and the music site. And we're finding a lot of similar things with respect to the TV site. And so we've seen a real ability to take all of the different entertainment properties and literally have users stand at the center and be able to navigate and trade information between all the different properties. Now I think you should, you'll continue to see us add more and build out around that general theme within that group. At the same time, we think of Webshots really kind of in a different light. And I think it's a form of entertainment, but is really more focused kind of overall with respect to community and what we can build out there. And I think as you've seen in the last six to nine months, you're seen a lot more interest on behalf of marketers in that area. We're putting more focus behind it and our plans will be to be more aggressive in that area. I think we've demonstrated an ability to take Webshots, take what was already a valuable asset and I think make it more valuable, and that's been both through product enhancement and through platform enhancement. So I think we're feeling really good about that area. As I've mentioned, we've beefed up the dedicated sales effort behind Webshots, and I think, again, we're still early, but I think we're seeing some good traction there. I think the two advertisers that you pointed out are examples of what we're seeing with respect to traction of kind of bringing in new people into that opportunity.

And have they been advertisers elsewhere on CNET before that, or was this

No, these were new advertisers. And I think it's back to that theme, one of the things I said earlier is the more things we continue to do to broaden the opportunity, the more people we make aware of who we are and what we have, and so part of our focus on continuing to expand and add more categories really is the notion that it makes the whole thing more valuable, every new thing that we add.

Thank you.

Anthony Noto, Goldman Sachs.

Shelby, I was wondering if you could comment on whether or not there will be an increased focus or is there an increased opportunity to really leverage user-generated content and really the high-margin profitability of that type of content, as opposed to content that you're creating per se, and obviously user-generated content can actually be exclusive to you depending on how you deploy it. And then secondly, if I look at your trend in RPMs, it really, and using just the marketing services revenue as opposed to interactive revenue, it really looks like sort of bottomed out here. Do you think we've hit an inflection point where RPM could actually increase in 2006, given that the trend looks like it's bottomed out sequentially June to September? Thanks.

Great. We have been very focused over the last really two years on user-generated content. I think you see it if you look at all of our different properties, whether it's users contributing FAQs within our games environments or writing user opinions or helps and how-tos or other things. Same thing on CNET.com, when you look at kind of a show me yours, where users are going in and showing their own systems and how they set them up and what they bought and what has worked and what has not worked. What is unique about how we focus on user-generated content is we focus on really delivering high-quality user-generated content. So one of the things, for instance, you've seen on sites like TV.com is even things like a minimum number of words you have to do to fill out a review of a show. And so kind of consistent with this notion of the passionate third, we very much are positioning user-generated content as something that we think is critical to everything we do, but we're very much focused on kind of the best users and the highest-quality content that can be provided. With respect to RPM, I think as we have said consistently over the last couple of quarters, we're really focused on two things. One is we're focused on growing users and usage faster, as fast as we can, to kind of build inventory in anticipation of the opportunity we see, and second, growing revenue. So at different times I think you're going to continue to see RPMs bounce around. We really aren't building or designing the business against that particular stat. That's more kind of a function of both users and usage and revenue rather than something we're kind of driving to independently.

I was wondering if we could revisit the first topic on user-generated content. Do you think you could take it to the next level, I'm not suggesting that it's the right thing to do, but Yahoo! started to experiment with some things sort of below the radar screen, like the Yammys when they've had users send in various types of entertainment content. Is there an opportunity to take a whole new dimension on user-generated content for CNET?

Yes. We think of user-generated content as a very important kind of piece of the puzzle. But we believe it needs to be much more kind of the notion of structured participation. So how do you create forums where it can be done in a way that people can, you can kind of optimize to getting the highest-quality information, it's easy to find and it's functional, things like that. So it's clearly a very important theme. We think it's a important complement to what we do. Even when you look at, for instance, the redesign of News.com, you see that we're beginning to really focus on how do we leverage more content from our user base, even within a news environment? So it's something that we recognize and believe in as kind of a critical component and we continue to look for more ways to do it, but it's not something that's really new and it's something since way back when, launch of CNET.com in 1995, the whole notion of user participation has been important. I just think as the medium is getting richer, broadband is, you're seeing broader penetration, there's a lot more ability to get participation, especially among sites like our games and entertainment group, where you're dealing against a younger demo. So it's an area that I think is an important area. We think we have a unique ability because we can really anchor it against high-quality content, so we give people a reason to be there and a reason to kind of participate with our brands. And we also do it in a way that we make it attractive to marketers. And so marketers want it to be an environment that's credible that they understand that is well organized, and I think that mix of how do we take good journalistic content and marry it with really good user content I think is something we can do uniquely and is a real opportunity.

Okay thanks.

Paul Keung, CIBC World Markets.

It's Akil for Paul. Just one quick housekeeping question. What was search as a percentage of revenue? Then also, the sequential growth in uniques was down for the first time since 2Q '04. Was that just from redesigns or was there something else behind that? And then finally as it relates to Computer Shopper, the publishing trialing that Google is doing with the magazine ad initiative. That's something that they mentioned some of the Computer Shopper's competitors have embraced. Can you give us any color there? Is this something that you're looking into or already trialing? Thank you.

The search as a percentage of revenue we don't break out. Over time, what we've said about kind of our Google relationship, which makes up most of our searches, has been, at different times been at 10% or close to a 10% revenue stream for us. On the uniques being down, we did do a lot of redesigns this quarter, and I think it's something, we went in with expectations of we want to get our services kind of buttoned up into great position as we go into fourth quarter. And as I mentioned in my comments, you always get dislocation when you make redesigns. This is just kind of part of it. But it is really critical if you're going to do this well, you need to keep kind of raising the bar and challenging sites and building better and better services. And I think we're very pleased with where we are overall with respect to product. And now on the third question, it is not something that we're participating in now or really planning on participating in.

Brian Fitzgerald, Morgan Stanley.

I got the majority of my questions answered. One I had was you mentioned advertisers in video advertising right now is at about 1% of revenues, but interest is high. Do you care to comment on how high that could, what percentage that could get to in, say, '06 or '07, ballpark range?

We did not break out a percentage, but we did say that it's a small number. You know, it's hard to know right now because the market is changing a lot faster than I think any of us could have imagined. I think, as I mentioned, I think that the iTunes announcements with Disney is an important one and really could mean kind of a further acceleration of what we see with respect to video. But as I think I said on the quarterly call 90 days ago, part of what's been the most helpful about video is it's really forced advertisers to take a hard look at the medium, and I think for many, they've said this is a direct marketing medium. And as they see the really interesting things and the way you can deliver kind of very meaningful emotive stories within video delivery, I think it's really changing people's perceptions. So I don't know that we have a forecast for what it looks like 2006 and 2007, but what we do see is it's having a very meaningful impact on kind of overall perceptions of broader marketers. And I think that is very important for what you see kind of in the broader advertising opportunity.

Great thanks

Safa Rashtchy, Piper Jaffray.

Good afternoon Shelby. A couple of questions, first, could you give us some measure, if necessary, qualitatively at least, on the revenue breakdown between the traditional, kind of your classic CNET-branded properties and tech advertisers, those might be two different ways of looking at it. And your new properties and the new type of advertisers and I have a follow-up.

We haven't broken those numbers out. I think what we have said kind of publicly is that the CNET brand of properties from a size-wise have been our largest as compared to our other properties. But we don't break them out specifically. What I can say overall is when you look at kind of overall growth in our business in the second quarter or third quarter, most of it has come from kind of that definition of in category contextual advertisers. And so whether it's within the Red Bull environment, people that are advertising in an overall personal technology environment, or the games and entertainment group, where you're going to see game companies and TV companies and music companies and others, or in the B-to-B properties, where you see people that are marketing into the enterprise space. So we're still overall looking at kind of revenue growth. It's still really coming out of what we kind of commonly refer to as endemics. So I think the whole notion of what we see out of kind of broader-based consumer advertising is still something that we see being more of a 2006 and 2007 story.

Okay thanks. And second, as I'm sure you have noticed, there have been many reports in the media about potential takeover or merger between CNET and others. And it's been reported that this has been an ongoing kind of discussion between the management and many potential acquirers. And I obviously don't expect you to comment on it directly, but my question is with these stories continuing, how much of the management time is devoted to these issues and to what degree kind of it distracts you from focusing on a longer-term strategy?

I would say we're very focused on operating our business. As we have all kind of looked at each other, if you think about what it was like to put your trousers on and go to work in 2001 and 2002, it's a very different market today. And we're seeing a lot of opportunity. We're really excited. We have a lot of confidence in our ability not only to deliver on the categories we're in, but to be able to add new categories. It's nice for the first time in a while to have a little bit of wind at your back, and we're just seeing a lot of opportunity. And so I think it's a time that we're very encouraged about what we're seeing in our business. Clearly, there's been a lot of broader interest in the content space, and I think when you live in an attractive neighborhood, other people are going to want to live there. And so we do see a lot of that interest as a real validation on the things we're doing. But you know, management team is very focused on delivering for the fourth quarter and delivering going into 2006 and 2007, and it's a time where I think we're very excited about what we're seeing overall.

Okay thanks.

William Morrison, JMP Securities.

I was wondering if you could clarify the comment about the incremental margins. I just wanted to make sure I got it right. And what I heard was that you said the 50% incremental margin target is still unchanged, although it may bounce around from quarter to quarter. I just wanted to make sure that you weren't trying to say the 50, you made maybe below 50% next year, if you could just comment on that. And then secondly, you mentioned both in your verbal comments, Shelby, and in the release a bunch about the podcast products you added in the quarter. I was wondering if you could comment about how your you're monetizing those products and services, or if you're just using it to drive traffic to the site or if you might, if you're going to be putting ads in front of them or inside the podcast to monetize those products? Thanks.

I'll take the first question, which was about our expectation for incremental margin. And that's just to say that we expect that our future performance will generate incremental margin on EBITDA of 50%. But if in a particular period we see attractive investment opportunities to expand existing brands or to launch new brands that we would expect that that 50% incremental margin rate may be below that level.

And I just, I might add to that that overall, our number one focus is how do we build the most shareholder value. And I think the degree to which, we don't, as we go over time, we want to make sure that we're being prudent in terms of our own ability to reinvest against our business. And so it's just I think we want to be in a neutral position relative to what we see, and our expectation is it would all be done kind of against the guise of how do we ultimately build the most shareholder value and deliver the best returns for our shareholders? With respect to the podcast side, we've seen some good sponsorship opportunities around podcast. I think it's still early, I would say it's unclear to me whether video is not going to kind of jump over podcast. So it's unclear to me how significant and important podcasts are going to be. It clearly gets more interesting when you get Wi-Fi-enabled automobiles and people can in theory listen to podcasts interactively on their way to work and other things. But I think we're putting a lot more shoulder and see a lot more opportunity specifically on the video side. Yet you did see us make a series of announcements. And we think you've got to do everything; you've got to try everything. And our number one objective is to just deliver better, more engaging, more authentic experiences for our users.

Thanks a lot.

John Glen, CSFB.

It's actually Bill Drewry here. A couple of questions, Shelby. On the 16 million of international revenue, how much of that came from China?

We do not break the percentage out of China. What we have said is that China and the UK are our two largest markets and our two most attractive markets within our international properties.

Okay. And given that you guys continue to make acquisitions here, I mean, you are not seeing any issues with the authorities there in terms of, you know, they've obviously had some high-profile crackdowns on the traditional media companies in terms of incremental investment and they're taking some steps to ensure that control of content is still within their realm. Do you see any of that in the space that you're trafficking in?

No. Clearly, we've been with our China properties, been very focused on kind of product-focused coverage as opposed to kind of general news-focused coverage. And so we've had a team kind of that's been in place since 1996, I think, we've been very happy with both what our team has been able to deliver in terms of kind of existing businesses and their ability to find new business under attractive terms. And so I think we've been very pleased with what we've seen. You always kind of want to knock wood a little bit, but it's been very attractive. And I think importantly, we're seeing strong growth out of our online properties within China, and I think that was one of the more encouraging things we've really seen over the last three months to six months, is we made some key acquisitions with both ZOL and PCHome, and I think those are paying off and we're very encouraged with what we're seeing.

And just two other follow-ups. You cited traditional media companies moving into the online realm pretty aggressively here, and I'm just wondering as these deals get done, News Corp.'s probably a good example here recently, are you seeing either competition for properties that you might be interested, or are you seeing, and/or are you seeing potential prices go up against what you might otherwise you want to pay for something?

Bill, it's Neil. We have, obviously, we've seen more people at every potential acquisition than we did six to 12 months ago. We've had the most success in our acquisition strategy around smaller properties, where we haven't run into these folks as much. As they've entered the market, they have been focused on the larger opportunities. So as we participate in those ongoing forward, we probably will see them there, but we continue to have an attractive backlog of interesting smaller to medium-sized opportunities that we're focused on.

And just one last question, if I could, for you, Shelby. You were talking about pre-2000 trends and also what you thought the sustainable growth rate for you guys is going forward. And I was just wondering against that, there is a school of thought with portfolio managers that going forward, we could see some consumer-led economic weakness. And I think investors are worried on the traditional media companies that an advertising slowdown could be a reality going forward, not saying it's going to happen, but that's just one school of thought. And so under that kind of scenario where we potentially have an advertising recession again, '06-'07, what this time around do you think your growth rate would be against that? Would you go down with the market, or do you think you can grow through it this time?

Well, I think the more interesting thing going on right now kind of with respect to that question is you look at an announcement like the Ford announcement, which is to take 15% of their budget, which would be about $150 million, and move it to the interactive space. And that is not a single announcement you've seen. You've seen that among a lot of different players, which is clearly you are seeing very dramatic shifts or intended shifts in dollars. And the truth is there isn't that much really good premium inventory right now on the web. I mean, there's in general there's a lot of inventory, but there's not a lot of great inventory. There are not a lot of great CNETs out there. And so I think one of the questions you have to ask is I think to its advantage, you're seeing very good research supporting it. This is a medium that's getting more and more measurable as compared to a lot of other mediums. So, when you, if you think kind of a downtime, can, how is that money going to get put to work, and if you can measure it and how does that compare? Third, you're going to have more and more dollars that are in the process of transferring, and if anything, there might not be in theory enough great inventory to put it to. And so I think you've got, unlike what you saw really in the 2001 and 2002 period, where you went into what was I think an advertising slowdown, but we very much had a headwind, my belief is that you would see somewhat of a tailwind going into it. And it's not to say you wouldn't be impacted, which I think you would be. But I think the degree to which you did have a tailwind I think it would somewhat mitigate the overall risks.

Thanks. Congrats on another first-rate quarter.

Great thank you.

Steve Weinstein, Pacific Crest.

Thank you. There's been a lot of discussion about I guess very strong demand, primarily in advertising, for the December quarter. So I'm wondering if you could put it in perspective relative to the first nine months of the year. How much visibility do you have to your targets for the December quarter, or how much is already sold versus what you still need to do? And I guess in connection with that, the difference between the high end and the low end of your expectations for December, how much of that is driven by real sales execution versus your ability to drive traffic and users and create inventory?

I would say from a visibility standpoint, it's, the business has gotten to a place where I think we have much more visibility than we would have in a comparable time two or three years ago. So if you look at how we've guided throughout the year, I think guidance has remained relatively consistent throughout the year. I think it's also consistent with what we saw kind of pattern-wise from last year. If you look at the first half of this year in places where we had numbers relative to what other people were doing in the space, we over performed the industry both in the first quarter and the second quarter. So I think overall, we've got a pretty good view of it. I think that there are a number of different factors. In the big scheme of things, I think it's relatively tight guidance ranges, but I think we're basing it on really kind of how we're seeing our business develop and kind of where we are overall, which I think is pretty good. We're very pleased with kind of how the year is progressing, where we've gotten in terms of our ability to penetrate accounts, our ability to grow revenues and our ability to continue to improve our product and increase user engagement. So I think overall, we're feeling pretty comfortable with where things are at.

Okay.

Operator, we have time for one more question. We're just about at the hour. Thanks.

Imran Khan, J.P. Morgan.

Shelby, a couple of questions. Actually, I totally agree with you that there's not a lot of great inventory on the websites. So in terms of as these traditional companies start spending more money online, how capable are you to create more inventory? And if you're not able to create inventory, if the CPM prices goes up further, what does that mean for ROI and what does that mean for future on that advertisement? And second question is in terms of if you look for Q4, which verticals are doing well, if you can give us some color about which part of those we should look for?

With respect to the first question, which is kind of traditional, kind of where do the dollars go? Part is that I think in many ways the easiest thing is to be, you kind of look from an overall industry perspective, then front-door takeovers and guess what, you can only sell a certain day once. And so a lot of it you've gone kind of low-hanging fruit, and you see in terms of how people are doing a smarter job of packaging, how you get smarter about taking inventory, whether it's using behavioral targeting or other types of targeting. I think there is an ability to be more thoughtful and strategic about how overall you package inventory. But I think, too, the overall question is why kind of going back two years ago, we said, look, in some respects, RPMs be damned, we're going to grow users and usage as quickly as we can because you can see dollars coming. The question is how are they going to get put to work? And so our thought for the last two or three years really has been that we believe it's going to be a lot cheaper to build inventory now and to build traffic and user experiences now than it will be going forward. And so it's something we've been very focused on, and I think it's something that's really over time going to pay a real premium for us. And I'm sorry, I didn't catch your second question.

Second question is that looking forward in Q4, as you look at your inventory sold out, like you said, that you feel much comfortable about Q4. Can you give us some color which verticals you're seeing the strength coming from?

It seems pretty consistent across the board. I think in a good way, we've gotten businesses in a place where I think each have really found their sea legs, and we're kind of very comfortable with what we're seeing among all of our different categories. Clearly, as we've said, we're much more dependent on kind of the, what we refer to as endemics or the in category advertisers who are buying contacts. And so those are clearly going to be your most, the really good contextual placeholders are going to be your most valuable. But I'd say we're seeing it across the board and I think are very encouraged kind of with what we're seeing this year as it kind of unfolds as we go and begins to look through the budgeting cycle in 2006. And so I think we're in a pretty good position. With that, I think that was our last question. I want to thank everyone for joining us this quarter. We look forward to talking to you next quarter.

This concludes today's CNET Networks' third-quarter financial results conference call. You may now disconnect.