Dow Jones to Buy MarketWatch for $519M

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Dow Jones & Co.'s intention to pay $519 million in cash for business news publisher MarketWatch Inc. represents another step toward building its online news operation.


MarketWatch's acquisition yields the sites at www.marketwatch.com and www.bigcharts.com, both free, ad-supported news services that attract 7.6 million unique visitors monthly. Also in the deal is the MarketWatch Information Services group, a licenser of market news, data and investment tools to financial services firms, media and other companies.


"It'll significantly expand our online business," Peter Kann, chairman/CEO of Dow Jones, New York, said in a conference call Nov. 15.


The announcement comes a week after Dow Jones ran an Open House free trial for its paid subscription-based Online Journal at www.wsj.com. Visitors were invited to use the site for free for a week. An estimated 1 million people visited the site Nov. 8-12. The conversion to subscription total is unknown at this point, though ad packages sold covered the promotion's costs.


Dow Jones' Wall Street Journal Online network of sites includes the Online Journal, Barron's Online, CareerJournal.com, CollegeJournal.com, RealEstateJournal.com, StartUpJournal.com and OpinionJournal.com. About 2.8 million unique visitors monthly visit the properties. Those sites are free access and ad supported except Online Journal, whose 701,000 subscribers make it the world's largest paid subscription news site.


The acquisition of MarketWatch, San Francisco, is Dow Jones' third in four years, after the $144 million purchase in April 2003 of the Stockton (CA) Record newspaper and the $85 million buy of Alternative Investor in March 2004. MarketWatch also will be its largest purchase in the past five years.


Once Federal Trade Commission and shareholder approval are in by the first quarter of next year, MarketWatch will become part of the Dow Jones Consumer Electronic Publishing unit.


Dow Jones will use its news properties -- both online and in print, including The Wall Street Journal and Barron's -- and MarketWatch's marketing budget to get the word out on the deal and its benefits. It will rely largely on a bond issue to finance the deal.


According to news reports, The New York Times Co., Yahoo Inc. and current MarketWatch investor and CBS owner Viacom were said to be eyeing MarketWatch.


Dow Jones cited several reasons for its interest in MarketWatch. The purchase will extend the publisher's reach to a complementary, but larger, audience for online business and financial news. The Dow Jones sites serve the high end of the market with more business-to-business advertisers. MarketWatch occupies the more mass-consumer niche with like advertising.


Also, combining the traffic of the Wall Street Journal network of sites with MarketWatch will yield 9.3 million unduplicated, unique visitors monthly. About 11 percent of MarketWatch users also subscribe to the Online Journal. As was noted in the conference call, only Yahoo Finance and MSN Money in the online business and financial news category have more traffic than the combined Dow Jones online properties.


"This will allow us to catch a larger share of online advertising," said Rich Zannino, Dow Jones executive vice president and chief operating officer.


Dow Jones looks to apply interest-based targeting at MarketWatch. It is a formula in use at other company properties to better serve advertisers' needs.


Online ad revenue across industries is expected to reach $10 billion to $11 billion this year, albeit two-thirds from paid search. But online advertising's 30 percent growth clip in the past two years, matching the Online Journal's, is what entices Dow Jones.


"For Dow Jones, online publishing is a key growth segment," said L. Gordon Crovitz, senior vice president of Dow Jones and president of its electronic publishing division.


In a third benefit, Dow Jones gains proprietary MarketWatch content. Such news, data and information will be leveraged across all Dow Jones print, online and broadcast properties.


Finally, the MarketWatch Information Services business strengthens Dow Jones' licensing operations. This will help Dow Jones better meet the needs of corporate customers along with media and financial firms.


The MarketWatch merger also will result in $12 million of identified cost savings. This includes the elimination of royalty fees to CBS and the reduction of overhead costs associated with a publicly traded company. Duplicated operations will be eliminated, resulting in an unspecified number of layoffs.


MarketWatch's planned acquisition is not a repudiation of Dow Jones' preference for the paid subscription model, the company said. It always has pursued a strategy of free sites and the paid Online Journal for more specialized offerings.


"What this acquisition is about is it allows us to segment our products and the customers we serve," Kann said.


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