This report contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. Further information about these forward-looking statements and risks associated with our business can be found in ITEM 1A. "Risk Factors."

OVERVIEW

CNET Networks is a worldwide media company and creator of authentic brand experiences in multiple categories. We operate industry leading websites, each with its own distinct brand, in four content categories: technology, entertainment, business and community.

Explanation of Key Management Metrics

We evaluate our financial performance primarily on the following key measurements:

• Revenues

• Operating income

• Net income and earnings per share

We evaluate our liquidity primarily on the following key measurements:

• Net cash provided by operating activities

• Operating income before depreciation, amortization, asset impairment and stock compensation expense

• Free cash flow

We had an average of 124.5 million unique users per month in the third quarter of 2006, compared to 110.0 million unique users in the third quarter of 2005, an increase of 13%. These users generated over 86.3 million Web page views per day during the third quarter 2006 compared to 99.4 million in the third quarter of 2005, a 13% decrease. The increase in unique users reflects growth from most of our properties. The decrease in page views for the quarter was primarily due to Webshots, which has experienced increasing competitive pressure. While increases or decreases in unique users and daily average page views are not necessarily indicative of increases or decreases in financial results, we believe that these statistics are helpful because they provide insight into the growth of the Internet as an advertising medium resulting from increased user adoption and into user demand for CNET Networks' properties in particular.

We believe that "operating income before depreciation, amortization, asset impairments and stock compensation expense" is useful to management and investors as a supplement to our U.S. GAAP (accounting principles generally accepted in the United States) financial measures for evaluating the ability of the business to generate cash from operations. Depreciation, amortization and asset impairments are non-cash items and include within them amounts related to past transactions and expenditures that are not necessarily reflective of the current cash or capital requirements of the business. Stock compensation expense is a non-cash item that does not impact out ability to generate cash from operations.

Management refers to "operating income before depreciation, amortization, asset impairments and stock compensation expense" in making operating decisions and for planning and compensation purposes. A limitation associated with this measure is that it does not reflect the costs of certain capitalized tangible and intangible assets used in generating revenue. Management compensates for these limitations by relying primarily on our U.S. GAAP financial measures, such as capital expenditures, and using "operating income before depreciation, amortization, asset impairments and stock compensation expense" only on a supplemental basis. Although depreciation and amortization are non-cash charges, the capitalized assets being depreciated and amortized will often have to be replaced in the future, and "operating income before depreciation, amortization and stock compensation expense" does not reflect any cash requirements for such replacements. This measure also does not take into account interest expense, or the cash requirements

Revenues

We have determined that our business segments are U.S. Media and International Media. U.S. Media consists of an online network focused on four content categories: technology, entertainment, business and community. International Media includes the delivery of online technology information and several technology and gaming print publications in non-U.S. markets. Within these business segments, we earn revenues from:

• Marketing Services: sales of advertisements on our Internet network through impression-based advertising (fees earned from the number of times an advertisement is viewed by users of our websites) and activity-based advertising (fees earned when our users click on an advertisement or text link to visit the websites of our merchant partners, or download a software application or a whitepaper); and sales of advertisements in our print publications.

• Licensing, Fees and Users: licensing our product database and online content, subscriptions to our online services and print publications, and other paid services.

Expenses

Our operating expenses primarily consist of cost of revenues, sales and marketing and general and administrative costs, which are primarily cash-related expense activities. The majority of our cash-related expenses are costs associated with employee compensation, benefits and facilities, which represented approximately 58% and 60% of our total cash operating expenses for the three months ended September 30, 2006 and 2005, respectively, and 60% and 59% of our total cash operating expenses for the nine months ended September 30, 2006 and 2005, respectively. Noncash-related expenses consist of depreciation, amortization of intangible assets, asset impairment and stock compensation expense and are included in our operating income (loss).

Cost of revenues includes costs associated with the production and delivery of our Internet sites, print publications and creation of our product database and related technology. The principal elements of cost of revenues for our operations are compensation and related expenses for the editorial, production and technology staff and related costs for facilities and equipment. A substantial portion of expenses included in our cost of revenues remain consistent from period to period and do not necessarily fluctuate proportionately with fluctuations in revenues.

Sales and marketing expenses consist primarily of compensation and related expenses, including associated costs for facilities and equipment, consulting fees and advertising expenses.

General and administrative expenses consist of compensation and related expenses for executive, finance, legal and administrative personnel, professional fees and other general corporate expenses and associated costs for facilities and equipment.

Changes in 2006

On January 1, 2006, CNET Networks adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123(R)") which requires the measurement and recognition of compensation expense for all share-based awards made to employees and directors, including employee stock options and employee stock purchases, based on estimated fair values. Prior to the adoption of SFAS 123(R), CNET Networks accounted for stock-based awards to employees and directors using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic value method, which had been allowed under the original provisions of Statement 123, no stock compensation expense was recognized in CNET Networks' statement of operations if the exercise price of CNET Networks' stock options granted to employees and directors equaled the fair market value of the underlying stock at the date of grant.

On September 12, 2006, we entered into a new one-year credit agreement. Under the terms of this agreement, we can borrow up to an aggregate principal amount of $60 million, which can be drawn down as revolving loans or term loans. Interest rates applicable to amounts outstanding under term loans or revolvers are at our option, either the base rate or the Eurodollar rate, where the base rate is the higher of the Federal Funds rate plus 0.5% or the lender's prime rate: the Eurodollar rate is LIBOR plus an applicable margin based on our leverage. The borrowings are secured by most of our assets, excluding goodwill and certain intangible assets. The credit agreement contains various restrictive covenants that include limitation of additional indebtedness and restrictions related to the payment of dividends and the prepayment of other indebtedness. Additionally, we are required to meet certain monthly and quarterly financial covenants, including minimum levels of consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA"), unrestricted net liquidity and a minimum liquid capital to total debt ratio. We were in compliance with all covenants at September 30, 2006.

On September 13, 2006, CNET Networks announced that it had commenced a solicitation of consents from holders of its outstanding $125.0 million principal, 0.75% Senior Convertible Notes due 2024 (the "Notes). The consents were to waive and amend certain obligations under the indenture governing the notes to timely file with the Securities and Exchange Commission any required reports or filings. On October 11, 2006, CNET Networks modified and extended its solicitation of consents. The consent solicitation was modified to offer holders a two-year extension of the call protection period so that such period would end on April 20, 2011 rather than April 20, 2009. The solicitation expired on October 18, 2006 and CNET Networks did not receive a sufficient number of consents from holders to satisfy the 70% requisite consent threshold. On October 25, 2006, CNET Networks received a notice of acceleration under the indenture from Wells Fargo Bank, National Association, the trustee for the holders of the Notes. The acceleration letter declared the principal amount outstanding under the Notes, together with any accrued and unpaid interest were immediately due and payable. CNET Networks retired all the Notes in response to the notice of acceleration with existing cash and available borrowings.

RESULTS OF OPERATIONS

Revenues

The following table sets forth our revenues for the three and nine months ended
September 30, 2006 and 2005:



                                       Three Months Ended           Nine Months Ended
                                          September 30,               September 30,
      (in thousands)
                                        2006          2005         2006          2005
      Revenues:
      Marketing services             $   80,652     $ 71,138     $ 231,680     $ 200,706
      Licensing, fees and user           12,643       11,125        37,642        33,655

                                     $   93,295     $ 82,263     $ 269,322     $ 234,361

      As a Percentage of Revenues:
      Marketing services                     86 %         86 %          86 %          86 %
      Licensing, fees and user               14 %         14 %          14 %          14 %

                                            100 %        100 %         100 %         100 %

• Licensing, Fees and User: licensing our product database and online content, subscriptions to online services and print publications, and other paid services.

Total Revenues. Total revenues were $93.3 million and $82.3 million for the three months ended September 30, 2006 and 2005, and were $269.3 million and $234.4 million for the nine months ended September 30, 2006 and 2005, respectively. Total revenues increased 13% and 15% for the three and nine months ended September 30, 2006 as compared to the corresponding periods in 2005 primarily due to growth in our marketing services revenues.

For the three and nine months ended September 30, 2006, approximately $4.1 million and $11.6 million, respectively, of our revenues were derived from barter transactions. For the three and nine months ended September 30, 2005, approximately $3.3 million and $9.4 million, respectively, of our revenues were derived from barter transactions. Barter transactions occur when we deliver marketing services for the marketing services of other companies. These revenues and marketing expenses were recognized at the fair value of the advertisements delivered.

Marketing Services Revenues. Marketing services revenues were $80.7 million and $71.2 million for the three months ended September 30, 2006 and 2005, respectively, and represented 86% of total revenues in both periods. Marketing services revenues were $231.7 million and $200.7 million for the nine months ended September 30, 2006 and 2005, respectively, and represented 86% of total revenues in both periods. The increase in marketing services revenues of $9.5 million, or 13%, and $31.0 million, or 15%, for the three and nine months ended September 30, 2006, respectively, as compared to the same periods of the prior year reflects growth in brand advertising in the categories where we have traditionally seen demand, such as computing, consumer electronics and games, and to a lesser extent from increased advertising from new categories, such as automobiles, consumer packaged goods, movies and music, reflecting the expansion of our content offerings and broadening user audiences. The growth in brand advertising revenue was partially offset by a decrease in transactional activity among our users, resulting in lower revenue from leads to merchants, as well as a decrease in advertising in our international print publications.

Although our marketing services revenues have increased in the current year periods as compared to the prior year periods, the rate of growth has been adversely impacted by certain product delays in the personal computing and gaming industries as these and other industries await a transition to a new version of Microsoft operating system. In March 2006, Microsoft announced a delay in this transition to 2007 resulting in deferred advertising spending anticipated with the release of the new operating system. Additionally, two video game hardware manufacturers were expected to launch new platforms toward the end of 2006. During hardware transitions, game publishers launch fewer games as they wait for new platform availability, resulting in a reduction in marketing expenditures and fewer video game sales. The slowdown in marketing spending associated with product delays and product transitions has adversely impacted our growth rates for revenues and operating income when comparing current year results with the corresponding periods of the prior year spending in the second half of this year.

Licensing, Fees and Users Revenues. Licensing, fees and user revenues were $12.6 million and $11.1 million for the three-month periods ended September 30, 2006 and 2005, respectively, and represented 14% of total revenues in both periods. Licensing, fees and user revenues were $37.6 million and $33.7 million and represented 14% of total revenues for both nine-month periods. The $1.5 million or 14% increase in the three months ended September 30, 2006, and the $3.9 million or 12% increase in the nine months ended September 30, 2006 as compared to the similar periods in 2005 reflect growth from existing operations.

Operating Expenses



                                                           Three Months Ended September 30,
                                                       2006                                2005
(in thousands)                           Operating    Noncash      Cash      Operating    Noncash      Cash
                                          Expense     Expense     Expense     Expense     Expense     Expense
Operating expenses:
Cost of revenues                         $   42,282   $  2,148   $  40,134   $   38,166   $    444   $  37,722
Sales and marketing                          23,290      1,003      22,287       19,535        206      19,329
General and administrative                   14,227      1,853      12,374       12,221      1,511      10,710
Stock option investigation                    5,825         -        5,825           -          -           -
Depreciation                                  5,880      5,880          -         4,493      4,493          -
Amortization                                  3,203      3,203          -         2,947      2,947          -
Impairments                                   1,418      1,418          -         1,613      1,613          -

Total operating expenses                 $   96,125   $ 15,505   $  80,620   $   78,975   $ 11,214   $  67,761


                                                            Nine Months Ended September 30,
                                                       2006                                2005
(in thousands)                           Operating    Noncash      Cash      Operating    Noncash      Cash
                                          Expense     Expense     Expense     Expense     Expense     Expense
Operating expenses:
Cost of revenues                         $  124,253   $  6,084   $ 118,169   $  112,727   $  1,491   $ 111,236
Sales and marketing                          70,942      2,775      68,167       57,777        651      57,126
General and administrative                   41,189      5,534      35,655       35,169      3,256      31,913
Stock option investigation                    7,226         -        7,226           -          -           -
Depreciation                                 15,967     15,967          -        12,782     12,782          -
Amortization                                  8,652      8,652          -         7,400      7,400          -
Impairments                                   1,418      1,418          -         1,613      1,613          -

Total operating expenses                 $  269,647   $ 40,430   $ 229,217   $  227,468   $ 27,193   $ 200,275

Cost of Revenues, Sales and Marketing, General and Administrative. We refer to cost of revenues, sales and marketing and general and administrative expenses (excluding non-cash stock compensation expense) as "cash-related expenses". We incurred cash-related expenses in aggregate of $80.6 million and $67.8 million for the three months ended September 30, 2006 and 2005, respectively, representing approximately 86% and 82% of total revenues, respectively. We incurred cash-related expenses in aggregate of $229.2 million and $200.3 million for the nine months ended September 30, 2006 and 2005, respectively, representing approximately 85% of total revenues in both periods. The majority of our cash-related expenses are costs associated with employee compensation, benefits and facilities, which represented approximately 58% and 60% of our total cash operating expenses during the three and nine months ended September 30, 2006, respectively. Total cash-related expenses increased approximately 19% and 14% for the three and nine months ended September 30, 2006 when compared to the prior year, respectively. The increase was due to higher compensation and benefits costs resulting from an approximate 10% increase in our headcount for the nine months ended September 30, 2006 as compared to the nine months ended September 30, 2005. Also, contributing to the increase were professional fees related to an investigation into our stock option practices and related accounting of $5.8 million and $7.2 million for the three and nine months ended September 30, 2006, respectively.

Non-cash stock compensation expense was $5.0 million and $2.2 million for the three months ended September 30, 2006 and 2005, respectively and was $14.4 million and $5.4 million for the nine months ended September 30, 2006 and 2005, respectively. Non-cash stock compensation expense included in cost of revenues was $2.1 million and $0.5 million, in sales and marketing was $1.0 million and $0.2 million, and in general and administrative was $1.9 million and $1.5 million for the three months ended September 30, 2006 and 2005, respectively. Non-cash stock compensation expense included in cost of revenues was $6.1 million and $1.5 million, in sales and marketing was $2.8 million and $0.7 million, and in general and administrative was $5.5 million and $3.2 million for the nine months ended September 30, 2006 and 2005, respectively.

Depreciation and Amortization. Depreciation expense was $5.9 million and $4.5 million for the three months ended September 30, 2006 and 2005, and was $16.0 million and $12.8 million for the nine months ended September 30, 2006 and 2005, respectively. The increase in depreciation expense is due to increased capital expenditures as we continue to the launch of new products and accommodate growth in users and usage.

Amortization expense of intangible assets was $3.2 million and $2.9 million for the three months ended September 30, 2006 and 2005, and $8.7 million and $7.4 million for the nine months ended September 30, 2006 and 2005, respectively. Our amortization expense has increased due to the amortization of intangible assets that were acquired in 2006.

Impairments. We performed our annual evaluation of the carrying value of goodwill and other intangibles compared to the fair value of each of our reporting units under the provisions of Statement of Financial Accounting Standards No. 142 as of August 31, 2006. The evaluation was prepared based on our current and projected performance for the identified reporting units. The fair value of our reporting units was determined using a combination of the income and market approaches. Based on this evaluation, we determined that the implied fair value exceeded the carrying value of goodwill and other intangible assets for each of our reporting units as of August 31, 2006. In the application of these methodologies, we were required to make estimates of future operating trends and judgments on discount rates and other variables. Actual future results and other assumed variables could differ from these estimates, including changes in the economy, the business environment in which we operate, and/or our own relative performance. Any differences in actual results compared to our estimates could result in further future impairments.

During the third quarter of 2006, a decision was made to cease operations of our U.S. Media events business. In connection with this decision, an impairment charge of $1.4 million was recorded for the goodwill associated with these operations.

During the third quarter of 2005, a charge of $1.6 million was taken related to an asset held for sale, which consists of a building we own in Switzerland. This asset was written down to its estimated fair value based on current market data.

Operating Income (Loss)

Operating loss for the three and nine months ended September 30, 2006 was $2.8 million and $0.3 million, respectively, compared to operating income of $3.3 million and $6.9 million for the three and nine months ended September 30, 2005, respectively. The decrease in operating income was due primarily to an increase in operating costs of $17.2 million and $42.2 million, which included $5.0 million and $14.4 million of non-cash stock compensation expense, partially offset by an increase in revenues of $11.0 million and $34.9 million for the three and nine months ended September 30, 2006, respectively, as compared to the prior year.

The following table reconciles operating income before depreciation, amortization, asset impairments and stock compensation expense to operating income (loss) as calculated in accordance with GAAP for the three and nine months ended September 30, 2006 and 2005:

                                                       Three Months Ended        Nine Months Ended
                                                          September 30,            September 30,
(in thousands)
                                                        2006          2005       2006          2005
Operating income (loss)                              $   (2,830 )   $  3,288   $    (325 )   $  6,893
Stock compensation expense                                5,004        2,161      14,393        5,398
Depreciation                                              5,880        4,493      15,967       12,782
Amortization                                              3,203        2,947       8,652        7,400
Impairments                                               1,418        1,613       1,418        1,613

Operating income before depreciation,
amortization, impairments and stock compensation
expense                                              $   12,675     $ 14,502   $  40,105     $ 34,086

For the nine months ended September 30, 2006, our operating income before depreciation, amortization, impairments and stock compensation has increased as a result of increased revenue, resulting in incremental profit margin of 31%. We expect the lower revenue growth rates in 2006 compared to 2005, combined with our continued focus on investing in the business and adding new products, services and content categories in order to

Nonoperating Income and Expense . . .