24/7 Wall St.

In the last quarter, revenue at CNET (CNET) hit $97.2 million. That was only 5% better than the same quarter a year ago. Given that CNET is perhaps the premier provider of tech information on the web and had over 31 million unique visitors in the US during June, the lack of growth seems amazing.

The company has a market cap of $1.1 billion, so it trades well below 3x sales. TheStreet.com (TSCM), which has a similar business model, trades at nearly 6x.

CNET has options back-dating issues, but that does not appear to be an problem that will severely hurt the company’s business operations.

A fair amount of evidence points to blogs as the cuplrit for CNET’s troubles. A quick look at the largest blogs shows that most of them cover technology related subjects: Engadget, Boing Boing, Gizmodo, TechCrunch, O’Reilly’s Radar, and GigaOm. And, that is only a partial list.

While these technology blogs do not bring in a great deal of money now, they do siphon off readers, and, they are inexpensive to operate. CNET keeps large editorial and sales staffs. The company had a small operating loss of just under $1 million in its last quarter.

To counter the rising audiences at tech blogs, the company has set up The CNET Blog Network. It is hard to say how large an audience this draws, but it does not seem to be doing much for the company’s revenue. The next couple of quarters should tell.

In the meantime, CNET may have to get into the business of buying some of the larger tech blogs. It may be the best way for the company to stay relevant to its customers.

Wall St. might argue that tech blogs won’t fit into the larger company’s culture which could cause the key people to leave. But, AOL was able to take in Weblogsinc, and it appears that Engadget and JoyStiq are doing just fine.

For CNET, going it alone does not seem to be a very promising path.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.