Inside - MarketWatch

Nasdaq: MKTW
2001 Annual Report
THE SKY’S THE LIMIT
Investors, clients,
Web sites turn
to MarketWatch
for leadership
Inside
BY DAVID CALLAWAY
EXECUTIVE EDITOR
For MarketWatch.com, diversity never
mattered so much as in 2001.
Just as the company’s multi-pronged media strategy of Internet, television and radio
helped it stand out in covering the year’s top
story, the Sept. 11 terrorist attacks, its diversified revenue stream helped it through the
worst media recession in memory.
Drawing on the strength of its licensing
operation, the creativity of its advertising
unit and a major cost-cutting campaign,
MarketWatch.com was able to not only
adapt to the advertising
Promise
shakeout, but to improve.
kept
It even managed to keep
a year-old promise to be
Company
cash-flow positive by the
reports
fourth quarter of 2001, finits first
ishing December with $1.3
cash-flow
million more than it had at
positive
quarter.
the end of September.
Licensing, the pillar of
Page 4
strength during the recession’s darkest hours, came through the year
with higher-than-expected revenue, helping
offset a decline in advertising revenue.
Sticking to its tried-and-true strategy of
combining ever-improved products with top
service, the licensing operation landed several big-name clients, including The New
York Times Digital, PaineWebber Online
Services, USAToday.com and The Motley
Fool.
In advertising, the decline in traditional
online brokerage clients and Internet clients
was met with a full-thrust creative camContinued on Page 6
New face: Q&A session with
President and COO Kathy Yates.
Page 9
Nationwide:
TV show and radio
reports add dozens of stations. Page 10
Back by the Bay:
Thom
Calandra returns to San Francisco. Page 8
Plus:
Letter from CEO Larry Kramer
Advertising Sales
Licensing Sales
Destination Sites
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Page
Page
Page
2
3
5
7
LETTER FROM THE CEO
2 MKTW
Board of Directors
Larry Kramer
Chairman and Chief Executive Officer
MarketWatch.com, Inc.
--------------------------------
Peter Glusker3
Senior Vice President,
Viacom Interactive Ventures
--------------------------------
Christie Hefner1
Chairman and Chief Executive Officer
Playboy Enterprises, Inc.
--------------------------------
Barry Herstein
Senior Vice President and Chief Marketing Officer
Financial Times Group
--------------------------------
Andrew Heyward2
President
CBS News
--------------------------------
Stephen Hill2
Chief Executive Officer
Financial Times Group
--------------------------------
Robert Lessin
Chairman
SoundView Ventures
--------------------------------
John Makinson
Finance Director
Pearson plc
-------------------------------
Dan Mason
President
Infinity Radio Group
--------------------------------
Jonathan May1,3
Senior Vice President
Triarc Companies, Inc.
--------------------------------
Russell I. Pillar
President and Chief Executive Officer
Viacom Interactive Ventures
--------------------------------
Jeffrey F. Rayport1,2
Chief Executive Officer
Marketspace LLC (a Monitor Group company)
--------------------------------
Giles Spackman3
Finance Director
Financial Times Group
-------------------------------1 Member, Audit Committee
2 Member, Compensation Committee
3 Member, Mergers & Acquisitions Committee
Corporate Management
Larry Kramer
Chairman and Chief Executive Officer
--------------------------------
Kathy Yates
President and Chief Operating Officer
MARKETWATCH.COM
Positive end to a memorable year
It’s fair to say that 2001 was a historic
year for the stock markets, the Internet, and
MarketWatch.com.
In the fourth quarter of 2001, MarketWatch.com made history with our first positive cash flow, ending the quarter with $37.6
million, $1.3 million more cash than we had
at the start of the quarter.
We were hit with the worst advertising
environment in a decade and saw our advertising revenues drop from $35 million in
2000 to $18 million in 2001. We were able
to offset much of that loss, however, with
the growth of our licensing revenue from
$16 million in 2000 to $25 million in 2001.
I’m proudest of our many editorial
achievements during 2001. We have begun
to regularly produce popular in-depth stories and packages around major news events
and deep profiles of companies. Our Personal Finance section and offerings have expanded to serve the growing numbers of
users who are looking for ways to protect
and grow their nest eggs.
Seeing the economy deteriorate early in
the year, we immediately took action to contain costs. Through tight management of
costs all year, and a round of layoffs in May,
we were able to cut almost $18 million in
operating costs from 2000 to 2001. Despite
our revenue drop, we were able to reduce
our net loss by $15 million and become
cash-flow positive in the fourth quarter, a
goal established at the beginning of 2001.
There were several highlights in 2001
worth looking back on:
• Throughout the year, the company established itself as an online advertising industry innovator. In March, we began selling advertising in day-parts, with Budweiser
as an initial client. In July, we announced
that we would de-emphasize the clickthrough rate as a metric, causing healthy industry debate regarding the measurement of
online advertising campaigns. In August, we
debuted TV commercials on CBS MarketWatch.com with American Airlines’ ads airing on the Web site before they hit television
screens. In November, we rolled out the “Introductory Message,” a brief sponsorship
page that launches before the CBS Market-
Chairman and CEO Larry Kramer
Watch.com home page.
• In June, we became one of 13 founding
members of the Online Publishers Association (OPA), an industry trade group formed
to promote common interests on a variety of
fronts, including online advertising and intellectual-property rights.
• The “CBS MarketWatch Weekend” television show continued its national growth
throughout the year, airing weekly on stations capable of reaching 85 percent of the
United States by Dec. 31, 2001.
• The MarketWatch.com Radio Network
surpassed the 200-station milestone nationwide in less than three years. The network
had grown to 208 stations covering 88 percent of the U.S. by Dec. 31, 2001.
• In March, we launched the redesigned
flagship CBS MarketWatch.com Web site
with expanded content, more tools and new
advertising formats. Additional product
launches during the year included the premium content “Market Advisers” section
and a state-of-the-art “Alerts” product that
allows users to sign up for instant e-mail
messages tied to market-related events.
• New tools developed for licensing
clients during the year included interactive
Java charting, a much more dynamic tool
than our HTML charts, and international
charting products that cover markets in 16
countries. We announced several major media licensing partnerships during the year
including The New York Times Digital in
June, The Motley Fool in July and
USAToday.com in December.
I’m extremely happy to report the addition of Kathy Yates as our president and
COO in December. She is an experienced
media and Internet executive, and her arrival has already helped to enhance our procedures for planning and growth.
Now that we are on firmer financial footing, we look forward to building our company in 2002. We are prepared to weather difficult economic times, and at the same time,
well-situated to take advantage of the upturn
when it comes.
Thanks for your support.
--------------------------------
Joan P. Platt
Chief Financial Officer and Secretary
--------------------------------
William Bishop
Executive Vice President and General Manager
--------------------------------
Stockholder information
Legal counsel
Transfer agent
Form 10-K
Investor relations
Morrison & Foerster LLP
425 Market Street
San Francisco, Calif. 94105
Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, N.J. 07660
Stockholders of record will receive
a copy of MarketWatch.com’s Form
10-K, filed with the Securities and
Exchange Commission, which contains
additional information relating to the
company, along with the Proxy
Statement prepared in connection with
the 2002 Annual Meeting. Additionally,
a copy of the Form 10-K is available
without charge.
MarketWatch.com, Inc.
825 Battery Street
San Francisco, Calif. 94111
415-733-0500
[email protected]
Scot McLernon
Executive Vice President
of Advertising Sales and Marketing
--------------------------------
Scott L. Kinney
Executive Vice President of Licensing
--------------------------------
Jamie Thingelstad
Chief Technology Officer
--------------------------------
David Callaway
Vice President of News and Executive Editor
Photos by Erin Beach, Kenneth Yueh, Roger
Wallace, Frank Barnako and Lindsay Miller
Independent
accountants
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, Calif. 94105
Office locations
San Francisco
New York
Los Angeles
Boston
London
Minneapolis
Washington
Chicago
Dallas
Tokyo
Exchange
MarketWatch.com, Inc. is traded
on the Nasdaq/National Market
System under the symbol “MKTW.”
This Annual Report contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forwardlooking statements, including statements about Mr. Kramer and Ms. Platt’s goal of making MarketWatch.com cash-flow positive for year 2002; Mr. McLernon’s
statements about the continued commercial success of introductory messages and the potential advertising revenue derived from this product and predictions about the
continued viability and success of online advertising; and Ms. Yates’ statements about including a subscription-based business or branching out further the company’s
existing licensing business as approaches to expanding the company’s revenue stream, expanding opportunities to further leverage the company’s alliance with existing
partners and predictions about the comeback of advertising on the Web. Potential risk factors which could affect our business and financial results are discussed in our
Form 10-K for the year ended Dec. 31, 2001, as well as the other reports we filed with the SEC. We caution investors that our business and financial performance are
subject to substantial risks and uncertainties.
2001 ANNUAL REPORT
ADVERTISING SALES
MKTW 3
When the
going gets
tough, get
creative!
BY ANNE STANLEY
NEWS EDITOR
Take a tough advertising environment
and multiply it by 2001. What do you get?
For MarketWatch.com, an entirely new
creative solution was the right answer.
The combination of new ideas for advertising display, such as introductory messages and rich media windows, with strong
creative and an integrated offering across
the Web, television and radio, set the company on a pioneering path in Web advertising last year.
Along with kudos from existing financial
clients like Charles Schwab, Ameritrade and
Fidelity, MarketWatch.com’s offerings
helped lure a new type of client to the Web
for the first time: big-name brand clients
such as American Airlines, Cadillac, Saturn,
Lexus, Visa and Budweiser.
Media Magazine named MarketWatch.com No. 1 on its 2001 list of best online publishers in the category “Business
and Finance,” topping the Wall Street Journal’s online edition and Forbes.com, in large
part because of the company’s advertising
strategy.
“The financial news is always riveting,
“We only work with
the best. CBS MarketWatch.com has produced
consistently proven results
year after year. This can
be attributed to the quality
of content and in-depth
analysis on the site, but
also to the insight of our
account team.”
— What Invesco
says about its
MarketWatch.com
advertising campaign
Executive Vice President Scot McLernon (right) leads a team that includes Sandra Baez and Alan Deicas, who manage the
complex ad-placement systems that put the right ads on the right pages at the right times. Below, the rich media window
allows an advertiser’s interactive message to appear prominently in a story so that no reader can miss it.
and the same can be said for the site’s special-format ad campaigns,” the magazine
said in its report. The ranking was based in
part on the “extent to which each site has
been an innovator or leader in the evolution
of online advertising and the medium in
general.”
CBS MarketWatch.com was one of the
first sites to offer advertising positions that
moved beyond the banner ad. From the early content sidebar and animated headers,
MarketWatch.com continued to build on
past innovations in 2001, helping introduce
two major new advertising solutions.
The “rich media window” is an interactive ad unit embedded within the site content that allows users to view information,
submit e-mail addresses, navigate a “minisite,” view TV commercials, or even enter
contests, all without leaving the page. The
introductory message is an eight-second
presentation that delivers a compelling and
well-designed commercial to users as they
enter the site.
Scot McLernon, executive vice president
of sales and marketing, said both products
were big hits with potential ad buyers. He
predicted the two — especially the introductory messages — would continue to play a
big role in attracting advertising revenue for
the company in 2002 as they get more sophisticated and gain acceptance from users.
“As this medium evolves into something
closer to broadcast, we believe introductory
messages will become an industry standard
— as they are in our own television show,”
McLernon said.
Delivery technology continued to evolve
in 2001, and MarketWatch.com was able to
refine offerings that give advertisers the
ability to deliver their messages in a specific
region or country, at certain times of the day,
by Internet service provider and browser
software, and many other ways.
For example, it introduced a campaign
for Budweiser in March that used front-page
banners to promote the beer, running from
noon to 6 p.m. every Friday, just before happy hour, in each reader’s local time zone.
“MarketWatch.com hit the mother lode
of traditional advertisers in Budweiser,
owned by Anheuser-Busch and the source
of such cult-like advertising as the ‘Wassup’
beer campaign,” CNet News.com reported.
“Budweiser is one of the first traditional advertisers to embrace a highly targeted Web
site as a medium to build its brand.”
Meeting clients’ needs in the most efficient and innovative ways possible became
a critical challenge in the past year — not
just because of financial constraints, but
also because of the importance of the message itself, particularly in the wake of the
Sept. 11 terrorist attacks.
“Online advertising is here to stay,”
McLernon declared.
“I would suggest that more than any year
before, last year, with all of its tragic events,
has proven that point.”
FINANCIAL RESULTS
4 MKTW
MARKETWATCH.COM
An early promise kept
Company reaches
positive cash flow
in fourth quarter
BY NEIL CHASE
MANAGING EDITOR
Joan Platt and Larry Kramer had every
reason to fail. But they didn’t.
When the MarketWatch.com CFO and
CEO promised positive cash flow for the
fourth quarter of 2001 a year in advance,
they could not have seen what was ahead.
“When we said it, people were still expecting a better market,” Platt said.
“We weren’t in a recession, and it looked
like revenues from advertising sales would
pick up.”
They could not have foreseen a year-long
advertising slump, the disappearance of
some dot-com advertising and licensing
clients, or the terrorist attack that would
cripple the economy of the United States
right before the start of that crucial fourth
quarter.
But they did deliver on the promise, with
no excuses needed. And they did it convincingly: The company had $37.6 million in
cash on Dec. 31, $1.3 million more than it
did on Sept. 30.
Chief Financial Officer Joan Platt
Shrinking loss
Overall numbers for the year were impressive in light of the tumultuous markets,
with a pro forma loss of $23.1 million for
the year, a sharp improvement from a $33.9
million loss for the year 2000.
That came in the face of revenue decreasing 15 percent from the prior year to $45.9
million.
The promise of positive cash flow came
in January as the company announced
fourth-quarter 2000 results.
“We believe our current cash reserves are
“We were building our infrastructure and organization over the previous two years,
but we were building carefully. We managed to build our cost structure
only as we saw the top-line revenue materialize.”
more than sufficient, and we expect to generate positive cash flow from operations,
which is currently anticipated by the end of
this year,” Kramer said in the press release.
Throughout 2001, each time Market-
MarketWatch.com 2001 usage statistics
Quarterly
average
monthly page views
676
Million
684
Million
665
Million
Q1
Q2
Q3
Quarterly
average
unique users
739
Million
Q4
8.5
Million
9.0
Million
9.5
Million
9.2
Million
Q1
Q2
Q3
Q4
Sources: Internal server log data, DoubleClick, digiMine
Watch.com reported quarterly results and
each time the question came up, Kramer and
Platt reiterated that they were on track to
reach positive cash flow.
They never hesitated, never pulled back,
never warned that it might not work.
But didn’t they have their doubts?
Platt says no.
She never once doubted that MarketWatch.com would deliver positive cash flow
in the fourth quarter. Not even after the terrorist attacks.
“Sept. 11 was a terrible catastrophe, but
I’m a believer in the U.S. economy and capitalism,” she said.
The company made it through 2001 because “We had already managed well,” Platt
said.
“We were building our infrastructure and
organization over the previous two years,
but we were building carefully. We managed to build our cost structure only as we
saw the top-line revenue materialize.”
A changing economy
As the year progressed, so did the softness in advertising. But the company adjusted well, exceeding its bottom-line targets in
each quarter.
When it became evident at midyear that
the expected economic turnaround had not
yet started, the company cut costs with a restructuring that slowed down the effort to
grow in areas that had not yet taken off,
such as wireless and broadband. The move
included cutting about 15 percent of the
staff, or about 35 people.
Overall, the company managed to reduce
its headcount from 259 at the end of 2000 to
201 at the close of 2001.
With 2001 behind them, Kramer and
Platt aren’t done making promises.
Their goal for 2002: Positive cash flow
for the year, and they’re just as confident
about making that target as they were all
through 2001.
2001 ANNUAL REPORT
LICENSING SALES
MKTW 5
Diversification
proves to be
key to success
Sale of charts, data, and news
sustains revenue as business grows
We dramatically expanded the breadth and
depth of content we offer them while reducing the number of vendors they have to
In a year when the advertising markets use.”
For another high-profile client, The New
struggled to get out of a slump, MarketWatch.com’s licensing team was able to in- York Times Digital, a key factor was Marcrease revenue by more than half and pro- ketWatch.com’s ability to deliver full pages
vide a significant boost to the company’s of Web content, including company profiles, historical stock performance and mubottom line.
An expanded line of products and a tual-fund data. The two companies also
strong and continuous commitment to have an editorial partnership to share news
world-class service helped highlight licens- stories.
“The new data area is just so much better
ing as a growing part of the company’s diversified revenue stream, with a broadened that it is flat-out in a different league than
list of new clients as well as existing ones the old one,” said The Times’ Dan Bigman
who upgraded with suites of additional of- after the new features were unveiled. “The
more I look at this stuff, the more I love it,
ferings.
“A lot of our success was in retaining and realize what a huge upgrade it is to our
and growing existing relationships with our site as a whole.”
Another client for which Marketcore clients: the leading brokerages, the
leading banks, the leading financial publish- Watch.com provides online financial coners,” said Scott Kinney, MarketWatch.com’s tent is UBS PaineWebber. “We deliver
something like 67 individual pieces of conexecutive vice president of licensing.
“Financial services firms often strive to tent to their high-net-worth users,” Kinney
increase market share in a down economy, said. “They rely on us to provide real-time
quotes, charts and tools
and one way they can
to their most valued acdo that is to improve
countholders.”
their online offerings.
That account was
So in 2001, we focused
another especially gratour efforts on those
ifying win in 2001 as
firms and doing more
IN THOUSANDS OF DOLLARS
MarketWatch.com was
for them,” he said.
1999
able to replace one of
In addition to charts,
5,262
its prime competitors
stock and fund quotes, 2000
15,809
as UBS PaineWebber’s
and
stories
from
2001
24,775
content provider.
MarketWatch.com reOther major deals
porters, licensing rolled
out a number of new products during the closed during 2001 included:
• A first-of-its-kind relationship with the
year, including new portfolios, company research, insider-trading data and a full suite Financial Times under which MarketWatch.com provides not only content but
of mutual-fund data.
also Web editing and production tools for
Major deals
the FT Investor site.
• The addition of a large news portal to
One client that added many of the new Datek’s site, allowing its customers to
products was Ameritrade, the popular online quickly dig into news about companies they
brokerage.
follow.
“There’s been a trend among financial
• A new portfolio product for users of
services sites to consolidate suppliers and The Motley Fool.
have one or two providers of news and tools
The best service
instead of eight or more,” Kinney said.
“We were able to help Ameritrade do this
by designing, building and launching for
While the product might be charts, data
them a full set of financial research tools. and news, what MarketWatch.com really
BY NEIL CHASE
MANAGING EDITOR
MarketWatch.com
licensing sales
Executive Vice President Scott Kinney
“A lot of our success was in retaining and growing existing
relationships with our core clients: the leading brokerages, the
leading banks, the leading financial publishers.”
sells is its service commitment, as outlined
in the licensing team’s mission statement. It
reads:
“MarketWatch.com is committed to do
whatever it takes to deliver world-class
services to our clients. We will be the
fastest, most reliable, most flexible and
most responsive partner you have ever
known.”
One testimonial to the quality of that
service is the longevity of the top clients. Of
the 10 largest MarketWatch.com licensing
customers, all but two have been active customers for at least three years.
Several of them go back four years, and
the longest-running relationship is the one
with Charles Schwab, which was the very
first licensing customer for Big Charts in
1997.
BigCharts became part of MarketWatch.com in 1999.
“Clients say price is important, especially in a time like this,” Kinney said. “But
they also emphasize that they very much appreciate that the content is fast and reliable
and that we not only respond to their needs
but proactively identify things we can do to
improve their sites.”
The company’s endless commitment to
service was also displayed immediately after the September terrorist attacks.
“Our first reaction was concern for our
clients, several of whom were in the World
Trade Center and buildings in the immediate
vicinity,” Kinney said.
“On Sept. 11 and the days and weeks following, we did a number of things to help
our licensing clients in any way we could.
We put special messages and contact information on their sites, hosted some displaced
clients in our midtown Manhattan office and
provided other technical services that
helped them bridge the disruption in their
Web site services.”
Looking forward, Kinney says existing
clients will be offered even more in the next
year, while the team continues to approach
new clients.
Among the improvements in mind for
2002 are increased efforts to market the stories written by CBS MarketWatch.com reporters around the globe.
“MarketWatch.com news has been gaining in popularity, and it’s becoming an increasingly attractive part of our licensing
operation,” he said.
6 MKTW
DESTINATION SITES
MARKETWATCH.COM
MarketWatch.com leads
with new advertising,
licensing solutions
CONTINUED FROM PAGE 1
paign that used several new display ideas to
attract a new type of client to help fill the
void: the big-name brand client, like Lexus
and Budweiser.
With new campaigns that featured “richmedia” windows within news stories, introductory messages that ran like TV commercials as the user came to the Web site, and
“day-parts” strategies that allowed a client
to advertise at specific times of day across
different time zones, MarketWatch.com
captured a host of new types of clients during the year and helped set several standards
for online advertising going forward.
“CBS MarketWatch has produced consistently proven results year after year,” said
one client, Invesco. “This can be attributed
to the quality of the content and in-depth
analysis on the site, but also to the insight of
the account team.”
New look, new tools
In the field
Reporter Bambi Francisco, who covers Internet companies, interviews Ravi Chiruvolu of Charter
Venture Capital (left), Philip Sanderson of WaldenVC (center) and Jin Byun of ABS Ventures at a conference.
The company transferred its stake in FTMarketWatch.com to the FT in exchange for
a licensing contract to provide news, charts,
tools and a publishing system.
As part of the deal, Thom Calandra, CBS
MarketWatch.com’s editor-in-chief, returned from his stint in London to the United States, where he became a full-time
columnist and television personality. Calandra carried the torch for stock-market bears
during the second half of the year, pointing
out that many stocks were overvalued and
helping readers spot trouble before the markets pulled back in the fourth quarter.
Broadcast relationships
In television and radio, market share
grew as more CBS affiliates — and nonCBS stations — signed up. By the end of the
year, MarketWatch.com radio reports were
heard on 208 stations, up from 145 at the
end of 2000, while the “CBS MarketWatch
Weekend” television show extended its
reach to 85 percent of the United States.
It was those crucial relationships, along
with links to MarketWatch.com’s shareholder and news partner CBS, a unit of Viacom, that allowed the company’s reporters
and editors to reach millions of people on
Sept. 11, via radio, television and Internet,
with breaking news minute-by-minute
throughout that day.
Over the week following the attacks, Calandra would appear on a special edition of
the “CBS Evening News With Dan Rather”
▲
In the office
From a San Francisco office adorned
with a poster that might have been a bit
ahead of its time, Executive Editor
David Callaway oversees an operation
that includes more than 70 journalists
in 9 bureaus worldwide.
▲
Part of the reason for advertising’s creative success was the ability to do more with
the CBS MarketWatch.com Web site because of a technological redesign and overhaul in the first quarter of 2001. The site’s
navigation was redesigned and its publishing systems replaced with two new proprietary editing and production tools.
Other changes throughout the year led to
a new tool to post headline bulletins, not just
on the front page but simultaneously across
the entire site and through e-mails to readers. A new portfolio product was introduced,
as were news alerts. And an aggressive campaign to register users yielded 400,000 new
members during the year, almost half of
whom signed up in the fourth quarter alone.
Internationally, MarketWatch.com restructured its deal with the Financial Times
to turn its year-old joint venture, FTMarketWatch.com, into a licensing opportunity.
On the set
MarketWatch.com reporter Trish Regan
(right) prepares for a business report
with news anchor April Cummings on
the KPIX-TV (Channel 5) morning
newscast in San Francisco. MarketWatch.com provides live television and
radio reports to stations throughout the
United States around the clock.
to discuss the impact of the attacks on the
U.S. financial markets. And television anchor Susan McGinnis would report to
Rather from Wall Street on the morning of
Sept. 17, when the financial markets opened
for the first time since the attacks.
It was a vote of confidence in MarketWatch.com’s multimedia approach to news,
both from partner CBS and from the hundreds of thousands of readers who came to
CBS MarketWatch.com for their news in
those chaotic days.
“I was at work, with no television, and I
got a phone call alerting me to what was going on,” one reader wrote. “I frantically
searched the Internet at other news sites —
all down. Yours was our lifeline to the latest
developments, complete with video.”
2001 ANNUAL REPORT
DESTINATION SITES
MKTW 7
Making the best even better
“We were
able to
introduce
ourselves
to a lot of
people, while also building
loyalty among readers who
already were frequent visitors
thanks to the tremendous
quality of MarketWatch.com’s
news, data and tools.”
BY ALEXANDER DAVIS
MANAGING EDITOR
A wave of new enhancements and an expanded menu of tools and features helped
MarketWatch.com extend its position as the
No. 1 online financial news source in 2001
as the public’s demand for real-time financial information continued to grow.
The destination sites — CBS MarketWatch.com and BigCharts.com — served
more than 2.75 billion pages in 2001, averaging in excess of 7.5 million pages per day.
The traffic kept MarketWatch.com on
top of the Jupiter Media Metrix rankings for
original financial news sites for the fourth
year running and helped the company attract
new types of advertisers looking to get into
the financial space.
“Overall, the site took a giant leap forward and got smarter — all at once,” said
Bill Bishop, executive vice president and
general manager. “The improved infrastructure also allowed us to significantly grow
the size of our registered-user database, increasing our membership by more than
400,000 users in 2001.”
In February, the company overhauled its
flagship CBS MarketWatch.com Web site.
The culmination of a four-month project
code-named “Odyssey,” the outcome was
an entirely new and improved look, with enriched tools, a crisper design and stronger
site navigation.
One of the many design improvements
was increased capacity for photos, charts
and other illustrations that made for more
compelling and eye-appealing news pages.
— Executive Vice President
and General Manager Bill Bishop
“In terms of design changes, we’ve gone
well beyond improving site navigation to
enhance the viewers’ experience both on the
front page of the site and on story pages,”
added David Callaway, executive editor.
Leveraging MarketWatch.com’s broad
suite of financial information and the power
of the post-Odyssey news database, the site
also launched a new “Alerts” product that
gives users the power to receive instant emails or wireless notices of news tied to
ticker symbols, key words, share prices and
volume-related trading events.
MarketWatch.com’s news editors now
have a powerful way of disseminating “bulletins” about urgent, top-tier developments.
Headlines about news designated as a “bulletin” appear on every page on the flagship
Web site. As of the end of the year, nearly
100,000 subscribers had also signed up to
receive the reports through e-mail.
By offering these kinds of services, MarketWatch.com is taking steps to increase site
visits as well as expanding its readership.
BigCharts named best research site
The BigCharts.com Web site was honored with two 2001 Readers’ Choice
Awards in a competition run by Stocks &
Commodities magazine.
BigCharts.com took first place in two
award categories:
• Subscription Internet Analytical
Platforms recognizing “products that retrieve and present data from remote servers
(as well as the entire Internet) and offer
many of the analytical tools found in stand
alone software.”
• Technical Analysis Web Sites recognizing sites providing “a wealth of technical
information, indicators, charts, sentiment
and opinion.”
“We’re honored to be recognized with
two key first place awards by the readers of
this important and respected trading strategy
publication,” said Bill Bishop, executive
vice president and general manager of MarketWatch.com.
“They attest to the popularity of
BigCharts.com among the Internet’s serious
MarketWatch.com also built upon its relationships with partners like Yahoo! and
AOL — both of which use CBS MarketWatch.com news feeds and are responsible
for driving added viewers to the destination
sites. The news department made strides by
making full-time hires in real estate, mutual
funds and other personal finance coverage
that finds a large audience among the AOL
and Yahoo! faithful.
“We were able to introduce ourselves to a
lot of people, while also building loyalty
among readers who already were frequent
visitors thanks to the tremendous quality of
MarketWatch.com’s news, data and tools,”
Bishop said.
“It’s also a testament to our ability to stay
on people’s computer screens and our broad
distribution across major portals like AOL
and Yahoo!”
Top sites
The leaders in Jupiter Media Metrix’s
survey of Web sites in the
Business/Finance:News/Research
category as of December 31, 2001:
Sites
Unique Users
MarketWatch.com sites 3,941,000
traders, as well as our status as the most
comprehensive and easy-to-use investment
research site on the Web.”
Bishop added: “The readers of Stocks &
Commodities magazine are individuals who
invest in the markets and are looking for the
latest detailed information on trading strategies and methods.”
“Our service is free,” he said, “and is the
winner among a list of ‘for-pay’ software
products and Web site solutions for which
people are willing to pay.”
CNNMoney
3,190,000
Quicken.com sites
2,478,000
Motley Fool
2,452,000
BankRate.com sites
2,319,000
TheStreet.com sites
1,458,000
Nasdaq Property
1,288,000
SmartMoney.com Property
1,217,000
BizJournals
1,036,000
Wall Street Journal Interactive 1,023,000
8 MKTW
OLD FACE: THOM CALANDRA
MARKETWATCH.COM
He’s back
Company co-founder brings
StockWatch home to MarketWatch
BY CHRIS PUMMER
PERSONAL FINANCE EDITOR
Thom Calandra boasts a talent few financial journalists possess. Even when arguing
that the market’s future looks grim, he does
it with an infectious verve that leaves readers amused and enlightened.
MarketWatch.com’s founding editor returned in mid-2001 to the San Francisco
newsroom after 18 months in London,
where he built FTMarketWatch.com for
MarketWatch.com’s corporate partner the
Financial Times.
He came back to a far different U.S. market than he’d left, with the Nasdaq having
fallen from a peak of above 5,000 to below
2,000.
His perspective changed along the way.
Once a leading chronicler of “New Economy” stocks who wrote columns that moved
shares and made many investors wealthier,
Calandra turned bearish in mid-2000 and
sounded cautionary tones early in the market’s slide that spared those who heeded
them further losses.
Affectionately referred to as being
“smarter than the average bear,” Calandra is
once again wearing the hat of chief MarketWatch.com commentator. His column remains one of the best-read features on the
company’s Web site, CBS MarketWatch.com, and one of the most popular
market columns on the Web.
Calandra also appears each Sunday on
the nationally-distributed television show
“CBS MarketWatch Weekend.” He examines issues such as the bankruptcies of com-
With regular appearances on CBS television and radio stations and on the
MarketWatch.com Web site, Thom Calandra makes the most of the unique
partnership between CBS and MarketWatch.com.
panies like Kmart or Enron and the potential
for shares of tiny companies left for dead after the bursting of the Nasdaq bubble.
The feedback from MarketWatch.com’s
Internet, television and radio viewers has
never been stronger, Calandra notes — or
more pointed.
“Our audience is holding our feet to the
fire a lot more than they did in the good old
days of 1997, ’98 and ’99. Back then, most
folks were making money. Now, four-fifths
of American mutual funds are in the red, and
retirement portfolios as a rule are down 50
percent in value, maybe more.”
The biggest trend he sees out there is the
lack of Wall Street coverage for about 3,500
publicly traded companies, roughly a third
of the entire U.S. stock market. “If that is
not an opportunity for us, tell me what is.”
As for the business of MarketWatch.com, Calandra says the world of
electronic content will have its glory days,
though just when is hard to say.
“Clearly, MarketWatch.com is a survivor. We acheived positive cash flow in the
fourth quarter of 2001. We have deep support from our two partners — CBS and
Pearson, owner of the Financial Times. I’m
one of those who believe the broadband
pipes will need filling, and the demand for
interactive, real-time financial content will
exceed nearly all categories.”
The company also demonstrated it can
manage through dry advertising periods
thanks to a steady licensing business, Calandra says. “Who else gets to call companies
like American Express and Budweiser major customers, either for online ads or licensed content?”
And its technology platform and publishing tools, he said, proved themselves time
and again in stormy market conditions as
millions turned to CBS MarketWatch.com
for their financial news.
Calandra stepped aside as an officer and
executive of the company to focus on his
journalism and to work on some new editorial products, which may include hourly
flash reports and e-mail newsletters. “All of
them can be licensed to major corporations,” he says.
And Calandra, a longtime gold bug, has
made a bold promise to his readers for 2002:
If the price of gold closes above $300 five
days in a row, he’ll dye his hair yellow. The
readers are watching.
And look who
else is back
Jamie Thingelstad has returned to
MarketWatch.com to again lead the
company’s technology operations.
Thingelstad, founding chief technology officer of BigCharts (which
was acquired by MarketWatch.com in
1999), led the development of the nationwide network that serves millions
of Web pages per day and connects
offices around the world, along with
the database system that delivers stories, charts and data to hundreds of
Web sites.
He left the company in early 2001
to pursue other ventures but agreed to
return in early 2002.
2001 ANNUAL REPORT
NEW FACE: KATHY YATES
MKTW 9
Q&A: MarketWatch’s new president
Veteran of old-media and new-media companies joins management team
Kathy Yates,
a former senior
executive with
Knight Ridder and
Women.com, joined
MarketWatch.com
in December 2001
as chief operating
officer and
president.
In an interview with
Editor-in-Chief
Thom Calandra,
she talks about her
goals for the
company and her
outlook for its
businesses.
On diverse
revenue streams
Calandra: How do you
look at a company like this,
where there are two revenue streams, licensing and
advertising, each responsible for about half of the
revenue pie?
President and Chief Operating Officer Kathy Yates
“We are a more competitive company and a more stable company
Yates: They’re both important strategic partnerships. The CBS presence is
important in generating
name awareness in the
greater population about
MarketWatch.com as well
as contributing to the sense
of credibility that we have.
I think ultimately our
credibility stands on the reporting that we do, but our
association with CBS has
clearly been very valuable
to us in the past. The Pearson partnership is extremely important to us, particularly in Europe, where they
really are the premier media company. Our association with them carries with
it the same level of respect
and credibility that extends
to us in the U.S. coming
from CBS.
But we don’t yet operate
MarketWatch.com as an integrated business with either of these partners. We
will continue to explore opportunities to, for example,
sell advertising across the
different media forms in an
integrated fashion. That
would make sense to advertisers. They may want to
have a presence on TV, on
the radio, on the Web and
potentially even in print in
one buy.
Yates: One of the
because the revenue stream is diversified.”
strengths
of
MarketWatch.com is that we have
“We are clearly perceived by a substantial audience as being credible, reliable
two primary revenue lines,
and a fast place to get their financial news. That is fundamental to our mission.”
licensing and advertising.
The fact that we have those
revenue streams helps us
On the
On new
survive some of the downturns in one marOn our news
ket vs. another.
economy
revenue sources
We are a more competitive company and
a more stable company because the revenue
Calandra: Do you see a great rebound in
Calandra: What type of revenue ideas
Calandra: How does the newsroom fit
stream is diversified.
the economy this year?
are you looking at?
into this company?
On measuring
our success
Calandra: What’s your read on how media companies, and particularly media companies with large Internet operations, are
evaluated in terms of success? Is it merely
revenue growth, or is there something else
in the mix?
Yates: There is absolutely something
more in the mix. It used to be just about revenue growth. That’s how Internet companies
were evaluated two years ago.
Now clearly investors need to know that
we can make a profitable business out of
this.
MarketWatch.com made tremendous
progress in 2001 toward that goal, and we’ll
see further progress in 2002.
Yates: I think we will see a rebound. I
don’t know that I’d call it great. This is the
third major economic cycle that I’ve managed through in a media company, and my
past experience is that we will see a rebound
this year. But it’s likely to take more than a
year before it returns to what we’d consider
a normal environment.
I want to add, though, that I don’t think
what we experienced in 2000 was necessarily normal. I think it was well understood to
be an extraordinary convergence of unbelievably available capital for forming new
companies and a lot of experimentation with
this new medium called the Web. I don’t
think the patterns that we saw there are likely to be repeated in the future.
But I do think that advertising on the
Web is going to come back in a very pronounced way.
Yates: Some of the ideas we’ve talked
about are a subscription-based business, or
branching out on the licensing side into
even more services beyond those Web integration services that we provide. But we are
also focused on growing the revenues of our
existing business. I don’t think we should be
thinking as a company that all our growth is
going to come out of new business lines because there is still an awful lot of growth to
be pursued both on the advertising side for
the Web site and on the licensing side with
existing products.
On our
major shareholders
Calandra: How do we develop our relationships with our two major shareholders,
Pearson and CBS?
Yates: The fact that MarketWatch.com
had a news operation was one of the things
that was very attractive to me as I was considering whether or not to come here.
I grew up in Knight Ridder, where the
news culture was very strong. Although I’m
not a journalist and never had much operating responsibility for the news side of
Knight Ridder’s operations, I came to care
deeply about the role of journalism in the
way this country operates. In times like
these, the role of financial journalism is
even more poignant and more pointed.
I think it’s an extremely important part of
who we are and what this company does
that we have an editorial voice. We are
clearly perceived by a substantial audience
as being credible, reliable and a fast place to
get their financial news. That is fundamental
to our mission.
10 MKTW
ON THE AIR: TV AND RADIO
MARKETWATCH.COM
TV: Changing topics as times change
BY CHRIS PUMMER
PERSONAL FINANCE EDITOR
During a year in which almost every media company struggled, MarketWatch.com’s
television business expanded its audience
reach.
Snaring market share from competitors
as everybody suffered, the company increased the number of stations that carry its
reports, setting it up for a larger share of advertising as the economy bounces back.
The TV division grew its potential audience despite economic malaise and staffing
cutbacks. It expanded local affiliates to 138
from 120 and now reaches more than 85 percent of U.S. households.
Along with broadening its reach in 2001,
the TV division expanded the focus of its
main product, the “CBS MarketWatch
Weekend” show. It now includes more personal finance coverage to appeal to a wider
audience — especially during a market
slump.
The half-hour show, which affiliates air
in their own chosen time slots, is seen in an
estimated 1 million households, according
to the Nielsen Metered Market ratings. Its
growing appeal became evident at the end of
2001, when its ratings surpassed those of
“Face the Nation” in the New York market
Executive Producer Bob Leverone
reviews a script with host Susan
McGinnis (center) and producer Ires
Wilbanks (right) before a taping. Kay
Gelbard completes McGinnis’ makeup.
in some weeks.
“We highlight news in business and the
financial markets, but we’re also featuring
more stories on where business meets popular culture,” said Bob Leverone, vice president of television. “We’re doing more packages that help consumers, which includes interviews with such personalities as Francis
Ford Coppola, Ringo Starr and Tony Bennett. Having someone like Francis Ford
Coppola talking about being in debt and getting out of it is more significant to many
people than news of a specific stock.
The TV operation also is an integral part
of the CBS News team, providing business
and market segments to a variety of CBS
programs including “The Early Show,” “The
Saturday Early Show” and “The CBS
Evening News” on the weekends.
MarketWatch.com provides market reporting to CBS affiliates via CBS Newspath,
a satellite service that delivers programming
to more than 220 stations. And it provides
customized daily reports on WCBS (Channel 2) in New York and KPIX (Channel 5) in
San Francisco.
“We’re accepted as part of CBS News,”
Leverone said. “If it’s a breaking story, these
stations will come to us, such as in the aftermath of Sept. 11 after the markets closed.
Thom Calandra was on with Dan Rather,
Susan McGinnis was reporting for the early
morning program, and we provided custom
reports for affiliates all over the country.”
The TV division also produces video reports for the Web site, both stand-alone
pieces and sidebars with written coverage.
Radio: Building market share
BY CHRIS PUMMER
PERSONAL FINANCE EDITOR
The MarketWatch Radio Network passed
a milestone in 2001, topping 200 affiliates
across the United States.
The division expanded to 208 affiliate
stations from 145 at the start of the year and
now boasts twice as many stations as The
Wall Street Journal’s radio network.
Westwood One, a leading syndicator that
distributes MarketWatch.com’s radio programming, estimated the lineup’s listenership grew 40 percent in 2001, as stations
took advantage of its round-the-clock reports to meet growing consumer demand for
financial expertise.
“The economy is on people’s minds, especially since Sept. 11,” said James Starace,
Westwood One’s vice president of affiliate
information and compliance. “The radio
product is very popular, not just with news
and talk shows now but with music stations,
too.
“More and more music stations want to
be well-rounded and have some financial
news, particularly in the early morning and
after the bell,” Starace said. “The radio
product is popular because it presents business news in a way that’s accessible to
everyone.”
“The catalyst for the growth is both the
MarketWatch.com name and the quality of
reporting,” said Frank Barnako, MarketWatch.com’s vice president of radio.
“We have to give a lot of credit to Westwood One as our distributor and advertising-sales partner,” Barnako said. “They
have existing relationships with thousands
of stations around the country and are a onestop shop for all sorts of news and programming.”
Once a station signs up as an affiliate, it
receives the programming at no charge in
exchange for giving MarketWatch.com the
right to sell 18 minutes of commercials each
week. The commercials are sold by Westwood One.
According to Arbitron, MarketWatch.com radio had a 0.3 national rating at
close of 2000 and a 0.4 rating at end of
2001, which translates to about 650,000 listeners in an average quarter-hour.
“We’ve become super-focused on serv-
ing the affiliates,” Barnako said. “We’re doing virtually all the
business newscasts on
WBZ in Boston, a
legacy station that’s
been around for 50
years. We do custom
reports for them all
day long, just as we do
for 1010 WINS in
New York and others.” Ann Cates takes a quick break from nonstop live radio
As it expanded its reports for stations around the nation to show off her
affiliations, the radio Washington studio in the National Press Building.
network established itself in all of the top 25 U.S. markets.
those markets.”
MarketWatch.com also has helped affiliThe radio division also produces audio
ates increase their business coverage to for the CBS MarketWatch.com Web site
meet growing demand, as KFWB in Los from corporate conference calls and analyst
Angeles did when it added an hour of busi- reports and invites affiliates to do one-onness news to its midday programming.
one interviews with MarketWatch.com re“Our newscasters will do as many as six porters on the latest breaking news and
trends.
newscasts an hour,” Barnako said.
“The radio network is as much about vis“Ron Amadon will do newscasts customtailored for New York, Boston, Minneapolis ibility and marketing of the company as it is
and Los Angeles in the same hour, so he’s about being a successful business division,”
constantly looking at local news for all Barnako said.
2001 ANNUAL REPORT
THE NUMBERS
MKTW 11
Financial highlights
Year Ended December 31
2001
2000
1999
$17,988
24,775
3,093
45,856
$34,952
15,809
3,146
53,907
$18,033
5,262
1,640
24,935
Cost of net revenues
18,623
21,012
9,901
Gross profit
27,233
32,895
15,034
Operating expenses:
Product development
General and administrative
Sales and marketing
CBS in-kind advertising
Purchased in-process research and development
Amortization of goodwill and intangibles
Restructuring costs
8,308
12,600
18,521
11,454
—
51,542
1,409
8,725
14,211
29,717
17,413
—
51,382
—
4,762
8,948
19,434
13,996
200
29,984
—
Total operating expenses
103,834
121,448
77,324
Loss from operations
(76,601)
(88,553)
(62,290)
Interest income, net
Loss in joint venture
1,554
(1,476)
2,285
(4,995)
1,412
—
$(76,523)
$(91,263)
$(60,878)
$(4.60)
16,648
$(5.83)
15,659
$(4.68)
13,004
$37,637
$21,179
$77,513
$45,356
$72,010
$144,240
$14,479
$122,840
$156,855
IN THOUSANDS, EXCEPT PER SHARE DATA
Income Statement Data
Net revenues:
Advertising
Licensing
Other
Total net revenues
Net loss
Share and Per Share Data
Basic and diluted net loss per share
Shares used in the calculation of basic and diluted net loss per share
Balance Sheet Data
Cash, cash equivalents and short-term investments
Goodwill, net
Total assets
Total liabilities
Stockholders’ equity
$8,462
$10,823
$7,707
$69,051
$133,417
$149,148
Financial information: The financial information included in this Annual Report has been derived from audited financial statements for 2001, 2000 and 1999. The selected
consolidated financial data set forth above is qualified in its entirety by, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and the company’s audited financial statements for the year ended December 31. 2001. The section on “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and the company’s audited financial statements are included in its Annual Report on Form 10-K as filed with the Securities
and Exchange Commission. Stockholders of record will receive a copy of the Form 10-K along with the Proxy Statement prepared in connection with the 2002 Annual Meeting.
READERS RESPOND
12 MKTW
MARKETWATCH.COM
The events of Sept. 11 had a profound effect on all of us at MarketWatch.com. Along with the shock
and grief, we have a strong feeling of pride that we did what we do best when our readers needed us
the most. We removed ads from our site and designed a front page that would load quickly and work
well on one of the Internet’s busiest news days ever. Here’s what our readers said:
“Thank you. Amidst horror and
disbelief this morning we all were
united again as grieving Americans.
Your site was the only site I could
access while at work to get bits and
pieces of information on this terrible
tragedy. With your professionalism
being at its best in this trying time,
we thank you.” — R.G.
“Your coverage of the markets and
the attack on NYC has been
extraordinary. Not only was your
Web site updating the content
frequently, but it was also available,
unlike a lot of the other Web sites.
Keep up the good work.” — K.R.
“You continuously updated your
site and provided me and my coworkers with the only news of what
was going on in the world. You will
never know how much I appreciated
being able to maintain the link
throughout the day and get updated
information, almost as it was
happening. I also thought it was
thoughtful of you to remove the ads
that had been displayed on the sides
of your site. Few sites would have
done that, but it was both tasteful and
respectful.” — C.H.
“I want to thank all of you for
your great coverage of the events
yesterday. Normally I look to you for
financial news and to other sites for
non-financial issues, but yesterday
most national and world news sites
were inaccessible. MarketWatch
remained completely accessible and
did a fantastic job of presenting
timely coverage of yesterday’s
events. I was able to keep up only
because of you. Thanks for the great
job you did.” — T.P.
“Thank you very much for the
excellent reporting of the recent
events. I am writing you from
Germany. Even yesterday in the
afternoon your site worked very well
and kept us informed about these
tremendous attacks. Furthermore I
want you to know that we feel with
the American community and wish
you strength to cope with the
suffering.” — B.M.
“Your ‘Latest News’ coverage of
the recent events has been the best
I’ve seen on the Web. Excellent,
excellent work. Keep it up!” — T.B.
“Thanks for the most current
information as the tragic events
unfolded today. Your informative
Web site kept my co-workers and me
glued to the computer for the latest
developments.” — L.V.
“I noticed that on Tuesday you
pulled all your advertising from the
home page. You were the only major
Web site I saw do this, and I believe
your organization needs to be
commended for taking this approach.
It shows a tremendous amount of
character on the part of your senior
management to make this decision
and obviously forgo a significant
amount of revenue. The thought was
tremendous and I thought I would
just let you know it didn’t go
unnoticed.” — D.D.
“Thank you for your excellent
coverage following the cowardly acts
of terrorism today. Your site was the
only site I could access to see the
latest newswires, and your site
seemed to be accessible all day
long. Thanks to your hard-working
staff for their dedication.” — H.G.
“Your Web site was the only site
my entire office floor was able to
access. My wife would call me
from home and give me live
news that your site had already
updated.” — R.C.
“Thank you for your outstanding
coverage of the recent attacks on
America. Your site kept me and my
entire office up to date when we did
not have access to a television or
radio. Your content people should be
commended.” — T.F.
“Your coverage has been excellent
and far more informative than other
sites. One of my accountant friends
showed me your site. It was our only
valid accessible source of
information via the Web the day of
the attack. I intend to become a
regular. Thank you for the incredible
coverage.” — A.W.
“Since Tuesday, I have been glued
to your site. You have done a
fabulous job. It’s great that the site
updates itself every couple of
minutes. It has kept me informed,
and I am sure many others.
Just a great job and the best
coverage.” — S.G.