The short version is that unlike its broadcast peers, CBS (CBS) has been reluctant to make many of its shows available on the Web because it worries that doing so cuts into its core TV business.

So while GE’s (GE) NBC Universal and News Corp.’s (NWS) Fox put Hulu together, CBS stayed away. And when Disney (DIS) decided to join the joint venture earlier this year, CBS executives argued strenuously against the deal. Instead, CBS has been content to use the Web as a promotional tool for TV via outlets like Google’s (GOOG) YouTube.

The longer version is below, via the transcript of a brief chat I had with Smith this afternoon to discuss his plans and the network’s. This is stuff he’s talked about before–to reporters, in industry forums, and even via emails he wishes he hadn’t written–but I’m running it at length here.

Because 1) I think Smith does a good job of explaining the push-and-pull of Web viewership vs. Web economics that everyone in big media is grappling with, and 2) I want people to see just how difficult it is to keep up when Smith talks. He can get out a lot of words in a relatively short time.

I also had a quick chat with CBS CEO Les Moonves, who made many of the points Smith did, but with less verbiage: I’ll get you that transcript shortly, too.

Peter Kafka: Since you’re going to be advising CBS’s Web video strategy, why don’t you lay out, for the record, where things stand?

Quincy Smith:

We recognize that the Web is two things. It’s both a new medium…and there my example has always been, look at fantasy football: When you’re nice enough to watch the Jets just pound the snot out of the Raiders on Sunday, on a CBS channel…on fantasy football on CBSSports.com, you start on the Tuesday before and end the Wednesday after.

And what are you doing? You’re personalizing it, you’re becoming more of a fan of the game [Smith goes on to praise CBSSports.com's feature set]. All of those things are additive, so when Sunday comes in, you’re actually more of a fan, and you’ve even more convinced you’re going to watch that broadcast show.

Now, I realize that sports is reasonably bulletproof, and a good case study to begin with versus some of the other programming, but the fact is, the Web is a new medium. So what do I also mean? Tech reviews on CNET, Money Watch being watched on BNET. GameSpot videogame reviews.

Access to content that CBS didn’t already have, that are additive–both in their own right online, with the margins that the CNET business is used to, and where we’re getting just stronger and stronger from a margin perspective–and potential content that can also be applied to our [local TV stations owned by CBS], our affiliates, our broadcast news, as well as the radio. So that’s the side of our business that is $600 million revenue and $50 million-plus profit on the bottom line.

The other side of the Web, the side that is most thought of by many journalists, is the threat of an IP-deliverer of video. And how you turn that threat into an opportunity.

And so, from that perspective, as  you know, we didn’t go ahead and say, “Okay, we’re going to lock down and stream, with all of our other peers in broadcast, and come up with the same rules, and embed and right-click this and go away.” I’ve never had a beef with Hulu. Hulu’s always worked as a great service. That’s part of the problem.

As a network, we need to make sure that our content is being seen where the dollars matter. And right now that’s on air. Opportunities like TV Everywhere–we’re not putting all of our eggs in that basket, though we are big advocates of it–are ones where you can actually take and expand and extend the television market online, so it doesn’t matter what screen you watch “CSI” on; what matters is that you watched it, it counts and you saw the ads.

But until that happens, it’s crazy to just stream the shows for zero economics. When in fact you can make a lot more money doing things that are additive and complementary to the rest of the CBS line. That’s where CBS interactive comes in now.

Kafka: But TV viewers are showing an increasing interest in watching their programs on the Web, whether from legal services like the Web or illegal torrents and pirate sites. Don’t you need to reach them where they are?

Smith:

Now, if you really look at those numbers, what they’ll say is [online and offline video are] both growing, right? We’re having the best year ever as America’s largest broadcast network, and I think that 99.9 percent of that–this is the quote I’ve never been able to get in there–is that’s [because] of the great content that we have. There’s some infinitesimal basis point that’s relevant [to CBS ratings because] we are making sure that when people watch it, they’re more inclined to watch it on television. For now.

Once that solution moves, once those economics move–whether that’s more ads, [higher] CPMs, more ad buyers….You and I can say all day long, “We’re sold out on Web video. That’s going really well. It’s sold out.” Well, no kidding, it’s sold out. It’s a $700 million market. The television market is $120 billion. And of that, $700 million, half of those [ad buyers] are spending  90 percent of their time doing Google keywords, not buying online video.

The key is, how do you turn television buyers into video buyers? And that’s where a solution like TV Everywhere comes into play.

And by the way, looking at [Hulu CEO Jason] Kilar’s comments the other day, in Colorado [at an industry convention], he sees that too. He’s more sophisticated on this stuff than most anybody. From the perspective of, he understands that’s where the big dollars are. And so he probably went at it as, “I’m going to aggregate all the people first, so hopefully things like TV everywhere come to us.” From our perspective at CBS, we’ve got to go to them.

I don’t hate Hulu. Hulu’s world-class video viewing. What I don’t understand is, why license all that content to something that works that well, that seamlessly, yet–without the economic model around it?

CBS (CBS) will join previously announced partners Time Warner (TWX), which is offering up programming from its Turner channels and HBO; Liberty Media’s Starz; and smaller players like Scripps, Rainbow and A&E. The twist is that CBS is the only broadcaster to sign up for the trial.

I noted that this was in the works last month, and it makes plenty of sense: For one thing, CBS would like to tie up with Comcast (CMCSA) as a way to extract “retransmission fees” from the cable company for the rights to carry its programming, which it currently doesn’t get paid for. The broadcaster also needs a big ally, as its broadcast competitors at GE’s (GE) NBC, News Corp.’s (NWS) Fox and Disney’s (DIS) ABC have already tied up with Hulu.

Comcast’s trial program, which is supposed to start this month and which parallels plans being promoted throughout the cable industry, is in many ways a response to Hulu, which has unnerved the pay TV business. The industry is worried about the specter of “cable cutters” who dump their cable TV subscriptions and watch free Web TV instead. So it’s trying to convince subscribers that if they keep paying up, they’ll get to see whatever they want online, legally.

CBS, meanwhile, passed on the chance to join with Hulu early on, and has since been complaining that the joint venture’s business terms undermine broadcasters’ chances of making real money on the Web.

CBS and Comcast aren’t talking about what the economics of this tie-up look like, but given that it’s a trial, it’s likely there isn’t much to talk about yet. But ultimately, CBS imagines a world where cable companies pay it for the right to put its shows on the Web and where it can charge Internet advertisers the same rates it gets for on-air TV.

That’s a long way off, but this is a start. “This is about extending the economics of the television market to an already independent, healthy online market,” says CBS digital boss Quincy Smith.

UPDATE:  Comcast has a few more programmers on board. In addition to Scripps, A&E and Rainbow, which I’ve written about before, but which have not been formally announced, Comcast is bringing in BBC and MGM Impact, a VOD channel it runs with MGM.

Here’s the release.

CBS TO PARTICIPATE IN COMCAST’S ON DEMAND ONLINE 
NATIONWIDE TRIAL

As the First Broadcaster To Participate, CBS Agrees to Test Standards and Principles for
“TV Everywhere” Model

NEW YORK and PHILADELPHIA, July 14, 2009–CBS Corporation (NYSE:  CBS.A) and Comcast Corporation (Nasdaq: CMCSA, CMCSK) announced today that CBS is the first broadcast network to participate in Comcast’s technical trial of On Demand Online. The new service will significantly expand the number of top-rated TV shows available online and across platforms at no additional charge to Comcast’s cable customers while delivering increased advertising value to content owners. During the course of the trial, CBS plans to test various types of current and library content.

“CBS and Comcast share the same vision of giving consumers more–more content, in more places,” said Matt Bond, Executive Vice President of Content Acquisition, Comcast Cable. “On Demand Online is a major step in extending consumers’ television experiences online, and ultimately across platforms by giving any television network, including top brands like CBS, the ability to make their content available on the Web.”

“CBS is very supportive of initiatives that help extend our content to new platforms in such a way that we gain new audiences and additional value for our advertisers,” said Quincy Smith, Chief Executive Officer, CBS Interactive. “Comcast is already a trusted platform to distribute CBS content on air as well as on demand; expanding this relationship online is a logical step. In addition, CBS’s strategy has always been about open, non-exclusive distribution of our content in a consumer friendly way, which is a core tenant of TV Everywhere and On Demand Online.”

CBS’s participation in Comcast’s technical trial comes on the heels of last month’s joint announcement between Time Warner Inc. and Comcast which introduced a set of principles called “TV Everywhere.” Developed by the two companies, the principles are designed to serve as a framework to facilitate deployment of online television content in a way that is consumer friendly and pro-competitive.

Comcast will begin its technical trial of On Demand Online with approximately 5,000 customers from across the U.S. in the coming weeks–the first national trial of its kind. A major focus of the trial is to test Comcast’s new “authentication” technology, which will allow Comcast customers to receive the same content online for free that they subscribe to on TV. The service will utilize a simple log-on system for streaming content and, in the future, will allow for download content to go. The On Demand Online service will roll-out in phases, adding new features, functionality and content over time to provide consumers with a new way to watch television.

On Demand Online is part of Comcast’s Project Infinity, the company’s long-term vision to give customers an ever growing amount of video content on multiple platforms, whenever they want.

UPDATE: I’m told the trio will stick around for a few months to help out with the transition. But to what? First priority is finding a replacement for CEO Miller.

Miller announced the deal in a short blog post today.

Last.fm, which provides free, ad-supported music streamed over the Web, was the first major acquisition the broadcaster made after bringing on digital M&A pro Quincy Smith, who is making plans to set up shop on his own. CBS (CBS) sends out a steady flow of press releases touting the site’s growth–the most recent one I have, from last month, pegs its audience at 30 million monthly users, while Miller’s post says they’re up to 37.3 million–but turning online eyeballs and ears into dollars has been hard for every Web music start-up, and Last.fm is no exception.

The unit saw its headcount cut significantly during CBS’s reorg of its interactive group late last year, and last month the company combined Last.fm with the online stations from its CBS radio unit.

Here’s text of the post announcing the founders’ departure:

After two years running Last.fm within CBS we feel the time is right to begin the process of handing over the reins. This is the latest stage in a long journey for us founders, which began in a living room in East London in 2002, and took us to the headquarters of one of the biggest media companies in the world.

It’s been a privilege working with the incredible team here in our London office, and we’re extremely proud of what we’ve achieved together. Last.fm’s users have more than doubled in the last 12 months (we are now at an all-time high of 37.3M monthly unique visitors), and we’re confident the site will continue to go from strength to strength. Being a part of CBS, and the recently formed CBSi music group, continues to open up many opportunities for Last.fm. Recent product releases such as the new visual radio, and the Last.fm on XBox announcement, are an indication of how much more Last.fm will achieve.

A huge “Thank You!” has to be said to all of you in front of your computers. With your contribution, enthusiasm and scrobbles you have helped to make Last.fm into what it is today: the best place for music online. Big up yourself for that, as we say here in East London.

That’s all folks, we are going to miss you!

Smith is still running the CBS Interactive unit, a job he took in November 2006. But he has been telling associates recently that he plans to start his own company, possibly as soon as this summer.

Other people close to Smith say that his departure isn’t imminent and doesn’t have a fixed date and that he’s still working closely with CBS CEO Les Moonves. Here’s a statement from CBS spokesman Dana McClintock: “We decline to comment on rumor and speculation.”

If Smith does leave CBS (CBS) to put out his own shingle as a dealmaker, the move would make sense because that’s what he did prior to joining Moonves and co. His last job was at media banking heavyweight Allen & Co., where he put together a slew of Silicon Valley tie-ups, including Google’s (GOOG) $1.6 billion pickup of YouTube in 2006.

People close to Smith says he often talks of trying to emulate Dan Case, the late brother of AOL founder Steve Case and the former CEO of Hambrecht & Quist, the dominant Silicon Valley investment bank during the first Web boom.

Smith’s departure also make sense for another reason: CBS no longer needs a deal guy to run its digital operations. Like just about every other big media company, it is still trying to digest the deals it made during the last boom–most notably, online music service Last.fm, which it bought for $280 million in 2007, and CNET, which it bought for $1.8 billion last year.

In addition to M&A, Smith has also been overseeing the network’s online video strategy, which is different from its broadcast competitors: While GE’s (GE) NBC, News Corp.’s (NWS) Fox and now, Disney’s (DIS) ABC have all come together to offer their programming exclusively through the Hulu joint venture, CBS passed on a Hulu deal and has cut its own pacts with a variety of Web distributors.

Smith, backed by Moonves, has argued that CBS is better off selling ads for its online inventory instead of ceding it to the likes of Hulu. And with some notable exceptions–like the March Madness college basketball tournament–the network has been more reluctant than its peers to put much of its premier programming online. It’s still too early to tell which strategy will work best for the broadcasters, and it may take years to get a real answer.

At this point, I’m told, Disney (DIS) and Hulu, the joint venture between GE’s (GE) NBC and News Corp.’s (NWS) Fox, are haggling over the finer points in the tie-up: Details like which Disney shows and channels will be included in the pact and how many seats Disney will get on the company’s board. (News Corp. is the owner of Dow Jones, which owns this Web site.)

For instance, I’m told that Disney’s ESPN will not be a part of a deal, nor will ABC News, but big ABC shows like “Lost” will be. But it’s unclear, for instance, how much of Disney’s movie portfolio, including its hit Pixar films, will be included.

Whatever Disney does end up contributing to the partnership, its payment will be the same: An equity stake equal to those owned by NBC and Fox, plus a revenue share for advertising sold against its stuff.

There has been some speculation that Disney CEO Bob Iger might be set to announce a deal this morning when he appears at the cable industry’s annual convention in Washington, D.C. But I was cautioned by insiders yesterday not to expect anything quite that soon.

Still, at this point the other players that were trying to convince Iger not to do an exclusive deal with Hulu–including Comcast (CMCSA), CBS (CBS), and Google (GOOG), which was trying to strike its own deal with Disney–are now thinking about what they’ll do once it does happen.

“It’s not the end of the world, but it is big deal,” an executive at one of the soon-to-be disappointed rivals conceded to me yesterday.

Disney’s addition to Hulu won’t instantly turn the site into a financial juggernaut. Last year, Hulu was able to sell out all of its advertising inventory, but it no longer makes that claim. And it’s still unclear whether Hulu will ever able to turn a significant profit given its JV structure whereby its big media partners keep 70 percent of all ad revenue.

But the deal would help establish the site as the place for video watchers to watch “premium content”–that is, movies and full episodes of TV shows–on the Web.

That’s a problem for Google’s YouTube, which has lots of eyeballs but can’t sell ads against most of them. YouTube has been trying to fix that by wooing studios and networks to show their advertiser-friendly stuff on the site. But to date, it has only gotten a handful of movies, as well as clips from the likes of CBS and now Disney.

The deal will also put pressure on CBS to abandon its strategy, championed by digital boss Quincy Smith, of distributing its shows widely on the Web while selling the ads itself. CBS has always said it was willing to put its stuff on Hulu, though not exclusively. But people outside the company think that CEO Les Moonves won’t want to be the only broadcaster not working with Hulu and will eventually go over Smith’s head.

Sources within CBS say Moonves is committed to Smith’s strategy, which hinges on controlling the sales channel for CBS’s content. More practically, even if Moonves did want to tie up with Hulu, he wouldn’t strike an exclusive deal in the near future since CBS would have no bargaining power in the aftermath of a Disney pact.

Least perturbed will be cable giants like Comcast and Time Warner Cable (TWC), which lobbied against the deal but whose businesses are the least dependent, for now, on online eyeballs. But you may hear grumbling from the cable guys, as well as Google, that a deal that brings together three of the big four broadcast networks will raise antitrust issues. And yes, the irony here is obvious. But opponents of the deal are already pointing to the fate of Kangaroo, a similar plan to knit together British broadcasters on the Web, which was derailed by U.K. regulators earlier this year.

I’m not sure that example will be very useful on these shores, even in an Obama administration. But it will be fun to hear Iger talk about this this morning. At least I’m hoping he will: I’ll be covering his presentation, which is scheduled to start at 9:45 Eastern time.

The real news is that the company is trying to resolve a looming debt problem by slashing its dividend. CBS’s quarterly payout to investors is dropping from 27 cents to 5 cents.

What CBS didn’t announce–the now de rigueur massive write-down that so many of its big media peers have rolled out this quarter. Then again, CBS (CBS) took a $14 billion hit in the previous quarter, so that may have been sufficient.

Moonves on the dividend cut and his company’s debt issue: “By taking this step now, we will further strengthen our financial flexibility to meet our debt obligations even in difficult credit markets, and still provide our shareholders with an attractive dividend.”

Sumner Redstone’s “it’s got to get better” quote: “We are clearly in the midst of one of the most difficult financial environments in history, with very little visibility on how long these economic conditions will continue or if there is worse to come. But one thing that is clear to me is that Leslie and his team are managing our businesses superbly with an eye toward future growth. CBS’s strength as a content provider will continue to position it for success.”

The breakdown:

CBS recorded revenues of $3.53 billion, just below Wall Street’s $3.56 billion consensus. Earnings from continuing operations were 20 cents a share, but strip out impairment charges and CBS would have notched earnings of 34 cents per share. That’s well above the consensus of 26 cents. [Apologies for flubbing this the first time out.]

TV: Revenue down eight percent, Operating income (before depreciation, etc) down 35 percent

Radio: Revenue down 18 percent, OI down 53 percent

Billboards: Revenue down 15 percent, OI down 51 percent

Publishing: Revenue up one percent! But OI down four percent

Quincy Smith’s Interactive group posted a revenue increase of 218 percent, but that doesn’t mean much given that CBS didn’t own CNET a year ago. If you include CNET’s results from last year, revenue increased one percent–not bad, compared to its peers.

If you’d said a year ago that a Web ad business posting a one percent increase is a good thing, you’d have been laughed off the Internet. But here we are. For the record, the unit recorded operating income of $51.7 million on revenue of $186.3 million.

Are you one of the CNET or CBS Interactive employees who got laid off last fall? Your collective sacking cost your former employer $2.6 million in restructuring charges.

CBS paid $1.8 billion for CNET last summer, and today it is dealing with the consequences: A re-org and layoffs.

CBS execs won’t release specifics on the firings and won’t say how many people were let go altogether. So news will be coming out in piecemeal fashion for some time.

The best that I can tell, though, the cuts came throughout the company’s interactive group, from its London-based last.fm radio service through CBS (CBS) headquarters in New York to CNET’s homebase in San Francisco.

Based on the fact that CBS Interactive boss Quincy Smith flew to the west coast to quarterback the re-org this morning–and the fact that CNET was much, much bigger than the CBS Interactive group–I’m assuming that more CNET employees were let go than anyone else.

Quincy, if I’m wrong, please let me know. And CBS Interactive/CNET employees can reach me directly at peter@allthingsd.com.

In the meantime, here’s the new structure of Smith’s group, via an internal memo that comes from him and Neil Ashe, his CNET counterpart:

Team,

As we come to the end of 2008, we have a lot to be proud of. CBS Interactive is the best online content network for information and entertainment. Our properties are expanding, advertisers are capitalizing on our properties and their scale, and we are positioned well to continue to grow. As we prepare for 2009 and beyond, we’d like to update you on this progress, announce some organizational changes and comment on the broader market environment and how it impacts CBS Interactive.

Progress

CBS Interactive is the 8th largest Internet network in the world. Our combined traffic is up nearly 30% since we closed the merger this summer. CNET, CBSSports.com, BNET, GameSpot, TV.com, CBS.com, last.fm, and CHOW have each had record traffic within the past three months. Our commitment to our users is paying off.

Advertisers have noticed. We have recently signed and announced deals across several of our properties with Microsoft, AT&T, Intel, Bertolli, EA, and GM. In these challenging economic times, marketers are consolidating their efforts with their best partners. Our properties, our audiences, our ideas and our insights will continue to differentiate us in the marketplace.

Finally, we have contributed to and benefited from the TV and Radio divisions of CBS. We’ve done nearly 1,500 purpose-driven promotions to our properties on Broadcast TV, Radio and local TV Stations; CHOW and GameSpot content is running on the CBS Outernet; and CNET ran a major consumer campaign in markets like New York and San Francisco through CBS Outdoor. CBS Interactive is also a key partner to CBS Television Network for major broadcast events. In just the last week, we featured complementary content for events including The Victoria’s Secret Fashion Show, the Grammy Nominations and the SEC Championship.

Moving forward, we have a lot to look forward to. Events like CES, The Grammys, and March Madness on Demand are all just around the corner. Each represent huge cross-platform opportunities where CBS Interactive will again help complete the experience with coverage on air, online, and on mobile for our audiences.

Organizational Promotions and Changes

As we enter 2009, we are making some changes to our organizational structure to capitalize on audience and advertiser overlaps. We are also making some changes to key functions so that we can realize the benefits of our position in the marketplace. These changes mark another significant milestone in our integration, as we fine-tune our organization to best take advantage of the power of our entire network.

Sports, Games and Music

We are combining our Sports, Games and Music properties into a single group led by Steve Snyder. Steve has tremendous product and leadership experience and an enthusiasm for each of these categories. In addition, Tom Jones will be moving over from CNET to head-up the sales efforts for this group. Within the group, our talented senior leaders including Jason Kint, Rich Calacci, Jaci Hays, Kevin Menard, Felix Miller, Doug Schmidt and others will report to Steve and to Tom.

Entertainment & Lifestyle

We are also moving our Lifestyle properties, CHOW and UrbanBaby, to the Entertainment group (TV.com, CBS.com, The CBS Audience Network and TheInsider.com) to capitalize on the similarities in audience and advertisers. This group will continue to be led by Anthony Soohoo with sales led by Ken Lagana. We’re excited to see the innovation that will come from this group in 2009.

Technology & News

Under the continued leadership of Joe Gillespie, our Technology & News division will bring CBSNews.com and CNET News.com into a single CBS Interactive News Group. Each site will maintain its own brand identity, while benefiting from shared resources in design, product and engineering to deliver deeper and more comprehensive coverage of major stories and events. Led by Mark Larkin, with Dan Farber as Editor-in-Chief, CBS News.com and CNET News.com will also have the opportunity to share content and collaborate on stories for the benefit of their unique audiences.

CBS Interactive Marketing

We are bringing together our key marketing functions into a new group called CBS Interactive Marketing led by Mickey Wilson. The group brings together expertise from across the organization so that we can capitalize on our biggest opportunities, and elevate the company to be a strategic marketing partner whose products, consumer insights, and ad innovations are critical to our clients’ long-term success. They will establish the company as the standard for premium content online, and define and evolve brand strategies to capture the biggest opportunities for audience and revenue growth through market planning, insights and execution.

CBS Interactive Business Development

We are also bringing together all of our business development activities. This group will be led by Mike Marquez. Mike and his team will be responsible for the development of all new partnerships, investments, and acquisitions. They will be charged with taking advantage of knowledge sharing across the whole company to ensure that we are the strategic partner of choice for the industry.

Market Conditions

As you know the general economic environment continues to be a challenge. We have always been very aggressive about managing our costs, and that requirement is even more critical now than it has ever been. We believe this new, more efficient organizational structure will produce better results for CBS Interactive, and also result in lower operating costs. It is always very difficult to make these kinds of reductions, but they come after a thorough review of how we are organized and how we operate, and what best serves our many users, advertisers and employees.

CBS Interactive is a special place because of you, and we thank each of you for what you have done, are doing, and will do to exceed the expectations of the tens of millions of people who come to our properties every day.

Today, we sit in a great position. People seek out our brands because we provide them with the information and entertainment they want and need, and marketers seek us out because of the powerful audiences we attract. We are positioned to grow in 2009 and beyond.

Best,
-q, NA

Here’s one: Patrick Keane, the former Google exec hired as executive vice president and chief marketing officer in February 2007, is out. In his place is Mickey Wilson, who was SVP of marketing at CNET.

CBS execs wouldn’t come out and say that Wilson has replaced Keane, and it’s not clear whether Keane is still a CBS employee or not. Keane’s LinkedIn profile still says he works at CBS, while his office voice mail says that he has “limited access to voice mail.” But it’s a matter of semantics–CBS employees say that Keane hasn’t been working there for weeks. Keane couldn’t be reached for comment.

Keane’s departure has been quiet, but prior to that he held a high-profile position at CBS: His Google (GOOG) pedigree helped boss Quincy Smith convince people that the network was serious about a digital strategy, and he frequently represented the company at conferences and the like.

This isn’t quite the same as canceling the show, in the traditional TV sense: The MobLogic.TV site still exists, and the team behind the series still puts up an episode up on their own from time to time. Below, for instance, is a clip filmed last week about about a pro-gay marriage/anti-Mormon rally in New York.

The other, more substantial difference: CBS is still employing the show’s talent. Host Lindsay Campbell is under contract with the network, which intends to put her to work on something else, CBS says (Campbell disclosed her employment status to Beet.TV yesterday). And producers Adam Elend and Jeff Marks are now spending their time on “Novel Adventures,” a soap opera/book club hybrid (really) for CBS.com.

The company insists that the show’s (mostly) demise isn’t a product of cost-cutting at CBS, which is still integrating its $1.8 billion acquisition of CNET.

MobLogic was a sequel of sorts to WallStrip, a quirky stocks show that CBS bought for about $4 million in 1997. That show is still up and running.

CBS’s Interactive division, run by M&A maven Quincy Smith (pictured), posted revenues of $140.7 million, up from $35.9 million last year. That year-to-year comparison doesn’t mean much, since the CNET numbers aren’t included in the 2007 numbers. But CBS (CBS) says that if CNET had been around last year, the division would be recording a six percent increase in revenue, pushed up by a 12 percent increase in display ads.

Back in the good ol’ days, like earlier this year, a big Web publisher would be flayed for posting six percent revenue increases. And in fact, that’s just what happened to CNET’s old managers, who were hounded by a group of activist investors for delivering single-digit growth while the rest of the Web was booming.

But given the cratering economy, six percent doesn’t look that crappy, especially compared to the results posted by the likes of Time Warner’s AOL (TWX) and Yahoo (YHOO). And the display ad boost should be heartening for CBS, which would very much like to be able to tell investors that it has a growth engine.

Next up: Getting Interactive to contribute a profit. It recorded an operating loss of $15.2 million this quarter.