DJ: Acquiring Online Businesses

Dow Jones & Company Inc. is a leading media Company engaged in providing global business and financial news across various media platforms that include newspapers, magazines, online content, radio and television. The Company aims to become the number one provider of high quality, easy accessible relevant business content. The Company has three operating segments Consumer Media, Enterprise Media and Local Media and has strategic alliances with SmartMoney, Vedomosti, STOXX Limited and Adicio, Inc. The Company publishes print and online versions of The Wall Street Journal, Barrons, Dow Jones Newswires, Dow Jones Indexes and MarketWatch.com.

The conventional media business has been facing stiff competition from the online media for the past few years, which has resulted in a steady decline in newspaper circulation and print advertising revenues. Dow Jones changed its organizational structure in early 2006 to cope with the changing market scenario. It reorganized its reporting structure from channels of distribution – print, electronic and community to a more market and customer oriented structure of consumer media, enterprise media and local media, which will allow the company to leverage its strong branding.

With the shift in advertising dollars and consumer interest from print media to online media, the Company has been focusing on reducing its dependence on conventional print revenues. Dow Jones is working on a strategy to grow its online media business rapidly and capture substantial market share of the online financial news, information, analytical tools, research and content business. The management of the Company plans to increase its online media business revenues from 30% in 2006 to 40% in 2007.

Keeping in line with its business strategy, the Company completed the acquisition of Factiva, a leading provider of finance related business content, research products and services in December 2006. Factiva has a paid subscriber base of over 1.6 million. The integration of Factiva with Dow Jones Newswires and Licensing Services under the company’s Enterprise Media Group will enable Dow Jones to provide the complete range of financial information, content, tools and analysis. The Factiva acquisition will boost revenue from the Enterprise Media segment and target subscribers of competitors like Thomson, Hoover’s and OneSource who also provide business information services.

Dow Jones had earlier acquired MarketWatch in January 2005 for approximately $520 million. The Marketwatch acquisition was of great strategic significance as it is among the top financial sites in the world with over five million unique visitors and 180 million monthly page views. Marketwatch covers the whole gamut of personal finance and is a strong established brand with a leadership position in business news and information, investment and analysis tools. The Marketwatch acquisition has added significantly to Dow Jones internet revenues and it will play a significant role in the company’s future growth because of its strong domain expertise and highly affluent customer base. [We have reviewed Marketwatch recently, along with its competitors Yahoo, AOL, and MSN.]

The Company exhibited decent growth in financial performance in 2006 with 7% increase in revenues over 2005 supported by 21% growth of Dow Jones Online. Revenues from the Enterprise Media segment contributed 21% of Total Revenues in 2006. The average monthly page views for The Wall Street Journal, MarketWatch.com and Dow Jones online have improved by 12.7%, 4.3% and 8.8% respectively over 2005 figures, but these sites have also experienced a decline in average unique visitors by 6.1%, 14.4% and 9.9% respectively, which in the short term is a bit of a worry.

In addition to strategic acquisitions, the Company has also initiated other steps to grow the Company’s existing portfolio of businesses. Dow Jones & Company has spent $30 million to improve its color printing capacity by 17% and is offering front-page advertising to its clients. The front-page advertising is estimated to garner $10 million incremental revenues annually. The Company sold off six Ottaway newspaper businesses for $282 million and the proceeds were utilized for the Factiva acquisition.

The Company has also put breaks on the cost side by eliminating 20 senior positions, removing 250 fulltime and 500 part-timers in technology support and administrative services. Dow Jones has outsourced its technology support and administrative services to third party providers to focus on its core business. Dow Jones seems to have got its strategy right (focus on online business) and with its two large acquisitions (Marketwatch & Factiva) it is well positioned to leverage the strong customer base and brands to grow revenues and increase shareholder value. It needs to strengthen its position wrt competition for Marketwatch, and also consider establishing other financially oriented online verticals such as Real Estate.