The following discussion should be read in conjunction with our unaudited consolidated condensed financial statements and the accompanying notes that appear elsewhere in this filing. Statements in this Form 10-Q that are not historical facts are "forward-looking statements" under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described. The potential risks and uncertainties address a variety of subjects including, for example: general economic conditions; the competitive environment in which WebMediaBrands competes; the unpredictability of WebMediaBrands's future revenues, expenses, cash flows and stock price; WebMediaBrands's ability to integrate acquired businesses, products and personnel into its existing businesses; WebMediaBrands's dependence on a limited number of advertisers; and WebMediaBrands's ability to protect its intellectual property. For a more detailed discussion of these risks and uncertainties, refer to WebMediaBrands's other reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. The forward-looking statements included herein are made as of the date of this Form 10-Q, and we are under no obligation to update the forward-looking statements after the date hereof, except as required by law.

Overview

WebMediaBrands is an Internet media company that provides content, education and career services to media and creative professionals through a portfolio of vertical online properties, communities and trade shows. Our online business includes:

· mediabistro.com, a blog network providing content, education, community and career resources about major media industry verticals including new media, social media, Facebook, TV news, advertising, public relations, publishing, design and mobile that includes the following:

10,000Words AppNewser GalleyCat SocialTimes AgencySpy FishbowlDC LostRemote TVNewser AllFacebook FishbowlLA MediaJobsDaily TVSpy AllTwitter FishbowlNY PRNewser UnBeige

Our mediabistro.com business also includes an industry-leading job board for media and business professionals focusing on job categories such as social media, online/new media, publishing, public relations/marketing, advertising, sales, design, web development, television and more;

· InsideNetwork.com, a network of online properties dedicated to providing original market research, data services, news, events and job listings on the Facebook platform, social gaming and mobile applications ecosystems that includes the following:

AppData Inside Social Games PageData Inside Facebook Inside Virtual Goods Social App Research Service Inside Mobile Apps Mobile App Research Service The Facebook Marketing Bible

· SemanticWeb.com, a blog providing content, education, community resources and career resources on the commercialization and application of Semantic Technologies, Linked Data and Big Data; and

· AllCreativeWorld.com, a network of online properties providing content, education, community, career and other resources for creative and design professionals that include the following:

AdsoftheWorld DynamicGraphics LiquidTreat BrandsoftheWorld Graphics.com StockLogos Creativebits GraphicsDesignForum

Our online business also includes community, membership and e-commerce offerings including a freelance listing service, a marketplace for designing and purchasing logos (stocklogos.com) and premium membership services.

Our education business features online and in-person courses and online conferences (including our Facebook Marketing and Social Media Marketing Boot Camps) for social media and traditional media professionals. Online education conferences combine the concepts of a large-scale event and a small group educational workshop that offers attendees the opportunity to learn in a dynamic online setting with live weekly instruction via webcast, discussion forums, homework assignments, and small group interaction where students receive one-on-one guidance and instruction from an advisor.

Our trade shows include, among others, the Semantic Tech and Business Conference, Inside Social Apps, Social Gaming Summit and the AllFacebook Marketing Conference.

Our businesses cross-leverage and cross-promote our content, product and service offerings. For example, users of our Websites read our content, search for jobs on our job boards, attend our trade shows, subscribe to and purchase products and services and take courses.

We generate our revenues from:

· fees charged for online job postings;

· advertising on our Websites and e-mail newsletters;

· attendee registration fees to our trade shows;

· attendee registration fees for our online and in-person courses and conferences;

· fees for social media-related market research and data services products;

· exhibition space fees and vendor sponsorships to our trade shows; and

· subscription sales from our paid membership services.

Customers generally post more job listings during the first calendar quarter and fewer job listings during the fourth calendar quarter. Also, advertisers generally place fewer advertisements during the first and third calendar quarters of each year, which, together with fluctuations in online job postings, directly affect our business. Our results will also be impacted by the number and type of education courses we offer and by the number and size of trade shows we hold in each quarter. In addition, there may be fluctuations as trade shows held in one period in the current year may be held in a different period in future years.

The principal costs of our business relate to: payroll and benefits costs for our personnel; technology-related costs; facilities and equipment; and venue, speaker and advertising expenses for our trade shows and courses.

Recent Developments

On August 16, 2012 ("Effective Date"), we amended our Amended and Restated Certificate of Incorporation to reduce the number of shares of common stock we are authorized to issue and to effect a one-for-seven reverse stock split of issued common stock. On the Effective Date, the number of shares of common stock, par value $0.01 per share, we are authorized to issue decreased to 18,750,000 shares from 75,000,000 shares. As a result of the reverse stock split, each seven shares of common stock issued on the Effective Date were combined and converted into one share of common stock, par value $0.01 per share. Any stockholder who otherwise would have been entitled to receive a fractional share as a result of the reverse stock split became entitled to receive a cash payment in lieu of such fractional share. Each stockholder's percentage ownership in the Company and proportional voting power remained unchanged after the reverse stock split, except for minor changes and adjustments resulting from the treatment of fractional shares. Immediately prior to the effectiveness of the reverse stock split, 42,902,316 shares of common stock were issued. Immediately after the reverse stock split, 6,128,879 shares of common stock were issued. Trading of our common stock on The Nasdaq Capital Market began on a split-adjusted basis at the open of trading on August 17, 2012. The ticker symbol remains "WEBM".

Results of Operations

Revenues

Revenues were $2.9 million for the three months ended September 30, 2012 and $3.0 million for the three months ended September 30, 2011, representing a decrease of 3%. This change was primarily due to a decrease in online job postings offset by the growth of our research and advertising revenues. Research revenue related to Inside Network's original market research and data services, which includes AppData.

Revenues were $10.6 million for the nine months ended September 30, 2012 and $9.1 million for the nine months ended September 30, 2011, representing an increase of 18%. This change was primarily due to the full period impact of the acquisition of Inside Network, which we acquired in May 2011, along with continued organic growth of our advertising, trade show and education revenues. The acquisition of Inside Network contributed $2.4 million to our revenues during the nine months ended September 30, 2012 compared to $875,000 for the same period last year.

The following table sets forth, for the periods indicated, the components of our revenues (in thousands):

                             Three Months Ended                                   Nine Months Ended September
                                September 30,               2012 vs. 2011                     30,                     2012 vs. 2011
                           2012              2011           $           %            2012              2011           $           %

Online job postings      $     895         $   1,066     $   (171 )      (16 )%   $    3,057         $   3,334     $   (277 )       (8 )%
Advertising                    785               704           81         12           2,150             1,662          488         29
Trade shows                    112               159          (47 )      (30 )         1,798             1,288          510         40
Education                      404               447          (43 )      (10 )         1,491             1,443           48          3
Research                       421               371           50         13           1,314               565          749        133
Other                          300               261           39         15             832               762           70          9
Total                    $   2,917         $   3,008     $    (91 )       (3 )%   $   10,642         $   9,054     $  1,588        18%

Cost of revenues

Cost of revenues primarily consists of payroll and benefit costs for technology and editorial personnel, freelance costs, communications infrastructure and trade show and education operations. Cost of revenues excludes depreciation and amortization. Cost of revenues was $1.7 million for both the three months ended September 30, 2012 and September 30, 2011.

Cost of revenues was $5.8 million for the nine months ended September 30, 2012 and $5.3 million for the nine months ended September 30, 2011, representing an increase of 11%. This change was primarily due to the full period impact of the acquisition of Inside Network, which added $1.0 million to cost of revenues during the nine months ended September 30, 2012 compared to $382,000 for the same period last year.

We intend to make investments through internal development and, where appropriate opportunities arise, through acquisitions to continue to expand our content offerings. We might need to increase our spending in order to create additional content related to new topics or offerings.

Advertising, promotion and selling

Advertising, promotion and selling expenses primarily consist of payroll and benefit costs for sales and marketing personnel, sales commissions and promotion costs. Advertising, promotion and selling expenses were $614,000 for the three months ended September 30, 2012 and $472,000 for the three months ended September 30, 2011, representing an increase of 30%. The increase is primarily due to increases in employee-related costs of $91,000 and an increase in marketing-related expenses of $55,000.

Advertising, promotion and selling expenses were $1.9 million for the nine months ended September 30, 2012 and $1.5 million for the nine months ended September 30, 2012, representing an increase of 25%. This increase was primarily due to the full period impact of the acquisition of Inside Network, which added $578,000 to advertising, promotion and selling expenses during the nine months ended September 30, 2012 compared to $97,000 for the same period last year.

General and administrative

General and administrative expenses consist primarily of payroll and benefit costs for administrative personnel, office-related costs and professional fees. General and administrative expenses were $1.3 million for the three months ended September 30, 2012 and $1.4 million for the three months ended September 30, 2011, representing a decrease of 4%. This change was due to a decrease in professional fees of $116,000.

General and administrative expenses were $3.9 million for the nine months ended September 30, 2012 and $4.1 million for the nine months ended September 30, 2011, representing a decrease of 3%. This change was due to a decrease in professional fees of $315,000 that was partially offset by an increase in severance-related costs of $134,000.

Depreciation and amortization

Depreciation expense was $78,000 for the three months ended September 30, 2012 and $77,000 for the three months ended September 30, 2011, representing an increase of 1%. Depreciation expense was $238,000 for the nine months ended September 30, 2012 and $242,000 for the nine months ended September 30, 2011, representing a decrease of 2%. This decrease was due primarily to certain assets becoming fully depreciated.

Amortization expense was $137,000 for the three months ended September 30, 2012 and $160,000 for the three months ended September 30, 2011, representing a decrease of 14%. This decrease was due primarily to certain intangible assets becoming fully amortized. Amortization expense was $409,000 for the nine months ended September 30, 2012 and $371,000 for the nine months ended September 30, 2011, representing an increase of 10%. This increase was due primarily to the acquisition of Inside Network.

Our depreciation and amortization expenses might vary in future periods based upon a change in our capital expenditure levels or any future acquisitions.

Contingent acquisition consideration

During the fourth quarter of 2009, we entered into two asset purchase agreements. Both of the purchase agreements included a two year earn-out that could require us to pay additional cash consideration. We recorded a liability of $1.6 million as of December 31, 2009 for the estimated consideration to be paid. During the nine months ended September 30, 2011, we made our final earn-out payment related to these acquisitions. The total additional cash consideration we paid during the two year earn-out period was $1.9 million and resulted in $329,000 being recorded as contingent acquisition consideration during the nine months ended September 30, 2011.

Other loss, net

Other loss of $213,000 and $216,000 during the three and nine months ended September 30, 2012, respectively, relates primarily to the sale of our 33% investment in Social.Media.Tracking GmbH. Other loss was $4,000 and $7,000 for the three and nine months ended September 30, 2011, respectively.

Interest income and interest expense

The following table sets forth, for the periods indicated, a comparison of our interest income and interest expense (dollars in thousands):

                            Three Months Ended                                    Nine Months Ended
                               September 30,              2012 vs. 2011             September 30,             2012 vs. 2011
                           2012            2011           $            %          2012           2011         $           %
Interest income          $      1       $        1     $      -          -%     $       3       $   41     $   (38 )       (93 )%
Interest expense              (63 )           (178 )        115          65          (209 )       (535 )       326          61

Interest expense during the three and nine months ended September 30, 2012 and 2011 relates primarily to costs associated with our loans from a related party. The reduction in interest expense during the three and nine months ended September 30, 2012 was due to the 2ndNote Modification Agreement that we entered into on November 14, 2011. See "Related Party Transactions" for a description of the loans and 2nd Note Modification Agreement.

Provision (benefit) for income taxes

We recorded a provision for income taxes of $11,000 and $30,000 during the three and nine months ended September 30, 2012, respectively. We recorded an income tax benefit of $437,000 and $417,000 during the three and nine months ended September 30, 2011, respectively, which was primarily due to the release of valuation allowance against our deferred income tax assets as a result of additional deferred tax liabilities that we recorded as part of the acquisition of Inside Network.

Based on current projections, management believes that it is more likely than not that we will have insufficient taxable income to allow recognition of our deferred tax assets. Accordingly, we have established a valuation allowance against deferred tax assets to the extent that deductible temporary differences cannot be offset by taxable temporary differences. To the extent that the net book value of indefinite lived assets exceeds the net tax value of indefinite lived assets, we will incur an additional tax provision as the assets are amortized.

The total amount of unrecognized tax benefits was $85,000 as of September 30, 2012 and December 31, 2011, all of which would affect the effective tax rate, if recognized, as of September 30, 2012.

Liquidity and Capital Resources



The following table sets forth, for the periods indicated, a comparison of the
key components of our liquidity and capital resources (dollars in thousands):



                       Nine Months Ended
                         September 30,         2012 vs. 2011
                       2012         2011         $         %
Operating cash flows $    (784 )  $ (2,125 ) $    1,341     63 %
Investing cash flows      (277 )    (9,059 )      8,782     97
Financing cash flows       102          94            8      9

                                       As of                  2012 vs. 2011
                           September 30,    December 31,
                               2012             2011            $         %
Cash and cash equivalents $         2,479   $       3,438   $    (959 )   (28 )%
Working capital                       889           1,794        (905 )   (50 )
Loan from related party             7,647           7,647           -       -

Since inception, we have funded operations through various means, including public offerings of our common stock, the sales of certain of our businesses, including our Online images and Internet.com businesses, as well as credit agreements and cash flows from operating activities.

Operating activities.Cash used by operating activities decreased during the nine months ended September 30, 2012 compared to the same period of 2011 due primarily to reduced losses from operations.

Investing activities. The amounts of cash used in investing activities vary in correlation to the number and cost of acquisitions we complete. Net cash used in investing activities during the nine months ended September 30, 2012 related primarily to the purchase of certain assets and website development costs. Net cash used in investing activities during the nine months ended September 30, 2011, related primarily to the acquisition of Inside Network.

Financing activities.Cash provided by financing activities during the nine months ended September 30, 2012 related to proceeds from stock option exercises partially offset by debt issuance costs incurred with the 3rd Note Modification Agreement entered into on July 27, 2012. See "Related Party Transactions" below. Cash provided by financing activities during the nine months ended September 30, 2011 related primarily to stock option exercises partially offset by a prepayment of borrowings from related parties.

We expect to continue our investing activities on a limited basis for the foreseeable future, which includes the potential to strategically acquire content that is complementary to our business. We expect to finance any near-term acquisitions with cash on hand.

Our existing cash balances might decline during the remainder of 2012 in the event of a downturn in the general economy or changes in our planned cash outlay. However, we believe the remaining cash flow together with our existing cash balances and our current business plan and revenue prospects will be sufficient to meet the working capital and operating resource expenditure requirements of our business for the next 12 months.

Off-Balance Sheet Arrangements

We have not entered into off-balance sheet arrangements or issued guarantees to third parties.

Recent Accounting Pronouncements

We are required to adopt certain new accounting pronouncements. See note 3 to the consolidated financial statements included in Item 1 of this Form 10-Q.

Related Party Transactions

On May 29, 2009, we entered into a loan agreement in the amount of $7.2 million with our Chief Executive Officer, Alan M. Meckler (the "2009 Meckler Loan").

In conjunction with the 2009 Meckler Loan, we (1) entered into a promissory note jointly and severally payable by us and our subsidiary, Mediabistro, to Mr. Meckler (the "2009 Note"), (2) entered into a Security Agreement with Mr. Meckler (the "Security Agreement") pursuant to which we granted to Mr. Meckler a security interest in the our assets, (3) entered into an Intellectual Property Security Agreement with Mr. Meckler (the "IP Security Agreement") pursuant to which the we granted to Mr. Meckler a security interest in the our intellectual property, (4) entered into a Pledge Agreement by us in favor of Mr. Meckler (the "Pledge Agreement") pursuant to which we granted to Mr. Meckler a security interest in and an assignment of all of the shares of stock or other equity interest of Mediabistro owned by us, and (5) agreed to enter into a Blocked Account Control Agreement with Mr. Meckler and a depositary bank, to further secure the Note (the "Control Agreement," and together with the 2009 Note, the Security Agreement, the IP Security Agreement and the Pledge Agreement, the "Company Loan Documents").

Simultaneously, Mediabistro (1) entered into a Security Agreement with Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro's assets (the "Mediabistro Security Agreement"), (2) entered into an Intellectual Property Security Agreement with Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro's intellectual property (the "Mediabistro IP Security Agreement"), and (3) agreed to enter into a Blocked Account Control Agreement with Mr. Meckler and a depositary bank, to further secure the 2009 Note (the "Mediabistro Control Agreement" and, together with the Mediabistro Security Agreement and the Mediabistro IP Security Agreement, the "Mediabistro Documents").

To fund the 2009 Meckler Loan, Mr. Meckler used a portion of the proceeds of a residential mortgage loan that Bank of America, N.A. ("BOA") granted to Mr. Meckler and Mrs. Ellen L. Meckler (the "BOA Loan"). Pursuant to a Collateral Assignment of the 2009 Note dated May 29, 2009, by Mr. Meckler to BOA, Mr. Meckler collaterally assigned the Note to BOA as additional collateral for the BOA Loan. Payment terms of the 2009 Meckler Loan reflect pass through of the BOA Loan payment terms (excluding those funds borrowed pursuant to the BOA Loan for Mr. Meckler's personal use). As a result, the interest rate, amortization schedule and maturity date of each loan are identical.

On September 1, 2010, we entered into a note modification agreement with Mr. Meckler. The Note Modification Agreement reduced the interest rate of the 2009 Note from 4.7% to 3.4% per annum. Interest on the outstanding principal amount is due and payable on the first day of each calendar month through June 2014. Thereafter, principal and interest is due and payable in equal monthly payments in an amount sufficient to pay the loan in full based on an amortization term of 15 years. In addition to the interest rate reduction noted above, the note modification agreement also reduced the required minimum monthly principal and interest payments that commence on July 1, 2014. Although there are no future minimum principal payments due under the 2009 Meckler Loan for the years ended December 31, 2012 through December 31, 2013, we had repaid approximately $1.3 million of the 2009 Meckler Loan as of September 30, 2012. The 2009 Note is due and payable in full on May 29, 2016, and may be prepaid at any time without penalty or premium. We made no principal payments during the nine months ended September 30, 2012 and one principal payment on the 2009 Meckler Loan totaling $50,000 during the nine months ended September 30, 2011.

On November 14, 2011, we along with Mediabistro, entered into a 2nd Note Modification Agreement with Mr. Meckler. The 2nd Note Modification Agreement amends the 2009 Note, which is described above. Under the 2nd Note Modification Agreement, the parties agreed to terminate our obligation to make a monthly accommodation fee of $40,000 to Mr. Meckler. As a result, the 2nd Note Modification Agreement reduces the effective interest payable on the 2009 Meckler Loan by $480,000 per year. We granted Mr. Meckler a fully vested stock option to purchase 142,857 shares of our common stock (after giving effect to the August 16, 2012 one-for-seven reverse stock split) pursuant to the terms of the 2008 WebMediaBrands Stock Option Plan. All other terms of the 2009 Meckler Loan remain unchanged.

Also on November 14, 2011, we, along with our wholly owned subsidiaries, Mediabistro and Inside Network: (1) entered into a promissory note jointly and severally payable by the Company, Mediabistro and Inside Network to Mr. Meckler (the "2011 Note"); (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the "WEBM Security Agreement") pursuant to which the Company granted to Mr. Meckler a security interest in the Company's assets; (3) entered into an Intellectual Property Security Agreement by and between the Company and Mr. Meckler (the "2nd IP Security Agreement") pursuant to which the Company granted to Mr. Meckler a security interest in the Company's intellectual property; and (4) entered into a Pledge Agreement by the Company in favor of Mr. Meckler (the "2nd Pledge Agreement"), and together with the 2011 Note, the WEBM Security Agreement and the 2nd IP Security Agreement, the "2011 Company Loan Documents") pursuant to which the Company granted to Mr. Meckler a security interest in and assignment of all of the shares of stock or other equity interest of Mediabistro and Inside Network owned by the Company.

In the 2011 Note, Mr. Meckler loaned us $1,750,000 (the "2011 Meckler Loan"). The interest rate of the 2011 Note is 3.10% per annum. Interest on the outstanding principal amount is due and payable monthly until August 2014. Thereafter, principal and interest is due and payable in equal monthly installments, with the outstanding principal amount, together with all accrued interest thereon, due and payable on August 18, 2016. The 2011 Note may be prepaid at any time without penalty or premium.

In partial consideration of the 2011 Note and the 2nd Note Modification Agreement, Inside Network entered into a Security Agreement by and between Inside Network and Mr. Meckler pursuant to which Inside Network granted to Mr. Meckler a security interest in Inside Network's assets (the "Inside Network Security Agreement") to secure Inside Network's obligations under the 2011 Note and the 2009 Note.

The 2011 Company Loan Documents and Inside Network Security Agreement contain customary terms for a loan transaction of this type. In an Event of Default (as defined in the 2011 Note) occurs and is continuing beyond a specified cure period, Mr. Meckler may declare the 2011 Meckler Loan immediately due and payable. The 2011 Meckler Loan also will become immediately due and payable upon certain events of bankruptcy or insolvency or in the event of a Change of Control (as defined in the 2011 Note) of Mediabistro, Inside Network, or the Company.

. . .