Web 3.0 & McClatchy (Part 5)

Conclusion

McClatchy is in the business of publishing newspapers, which is in turmoil due to the falling advertising and circulation revenues, and McClatchy is a victim of that trend. Falling real estate, auto, jobs and personal advertisements have resulted in the sharp fall in vertical classified revenues. McClatchy is trying to recover.

The key reasons for this fall include the tough times faced by the auto and real estate industries, but primarily stem from the growing popularity of the online media and vertical portals.

The successful acquisition of Knight Ridder has resulted in McClatchy taking over Knight Ridder’s interactive media business, which it is utilizing to boost its online revenues. McClatchy Interactive and Real Cities Network have also been doing well.

McClatchy needs to leverage its knowledge of the local markets and its strength in local content. It has already entered into an alliance with Yahoo.

Though McClatchy is expected to see a fall in revenues in 3Q07, it is expected to improve its advertising revenue slightly. Online advertising revenues of the Company are expected to grow by 25-30% in 2007 and constitute 10% of the total ad revenues. The Company expects to earn interactive revenues of approximately $200 million in 2007, with a higher profit margin than its newspapers.

McClatchy is positioning itself as a diverse media company having robust presence in print and online media. In doing so, the smartest thing may be to use its subsidiaries like CareerBuilder and Classified Ventures to roll-up verticals like Jobs, Real Estate and Auto. In new verticals where it has less of a presence at the moment, it can participate through similar investment vehicles in collaboration with other compatriots who are in a similar dire situation, Gannett being the #1 example. In both CareerBuilder and Classified Ventures, the two companies have joined hands, and Yahoo has been a very willing partner in many cases.

In fact, the combination of Yahoo, Gannett and McClatchy doing vertical roll-ups together is not a bad idea, although, as it appears, Yahoo is still focusing more on a horizontal, technology oriented strategy, and not a vertical roll-up strategy. That leaves a lot of opportunities open for Gannett and McClatchy. I had discussed the portfolio / holding company approach in my series on IAC, and these newspaper conglomerates also need to follow a similar structure. Otherwise, they are going to end up with a plethora of not-very-well-monetized assets that are all over the place.

[Part 1]
[Part 2]
[Part 3]
[Part 4]

This segment is part 5 in the series : Web 3.0 & McClatchy
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