Tribune Group Discusses its Internet Businesses and Online Job Site CareerBuilder (TRB, MNST, GCI, KRI)

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 |  Includes: GCI, KRI, MWW, TRBCQ
by: David Jackson

Here's Tribune's CEO Dennis J. FitzSimons and president Scott Smith discussing their company's digital media businesses on the conference call this morning, extracted from the prepared remarks and Q&A. Remember that CareerBuilder, which competes with Monster Worldwide (NASDAQ:MNST), is owned by Gannet (NYSE:GCI), Knight-Ridder (KRI) and Tribune (TRB).

Dennis J. FitzSimons

On the interactive front, we continue to show strong growth, with second quarter revenues up 27% over last year. In addition, TI’s online traffic was up 24% year over year during the second quarter. Our network of more than 50 websites averaged over 14 million average monthly unique visitors during the quarter.

CareerBuilder had a great second quarter, with network and affiliate revenues up 42% over last year. CB reached 22 million unique visitors in June, and it had a 40% share of total listings, compared to Monster’s 37%. We continue to have positive discussions with McClatchy about their newspapers participating in CareerBuilder.

...We intend to redeploy resources to reinvest for growth in interactive, as well as in our newspapers and targeted print products. Our Internet strategy is to build a portfolio of rapidly growing successful online business using a proven national network, local affiliate model. We have a track record of success in this, as demonstrated by CareerBuilder.

Lauren Fine - Merrill Lynch

Can you talk about the relative pricing between print and online for help wanted?

Scott Smith

Sure. What we’ve done is aggressively raise online prices, keep print prices relatively stable. If you looked at a big market today, you’d see an average print ad costs about what an average online ad costs.

You also asked about print ad growth versus online. What you see is we’re flat year-to-date in terms of overall ad revenue. We’ve said online is up in the high 20% range. That means print revenue alone is down about 2% -- again, mostly driven by the decline in preprint and Newsday.

Christa Quarles - Thomas Weisel Partners

I just have some follow-ups on your online help wanted. I was wondering if you could give us the mix between I guess online and -- only if you still allow that, I’m not sure if you do -- combo sales and just pure online. Also, I was curious as to why CareerBuilder would be at 42% but your online help wanted was only at 19%. If you could discuss if that’s just a market-by-market difference or if there’s something else that I should be thinking about? Thank you.

Dennis J. FitzSimons

Well, essentially the revenue we booked that’s up 19% continues to be primarily print-online bundles. There is some online only in that, but a relatively modest fraction, driven largely by the newspaper sales forces.

CareerBuilder would be up more because they are booking online only sales and they have a very effective direct sales force that operates nationwide, including in our markets. So in effect, our share of online revenue is higher than plus 19%, but the rest is reflected in that CareerBuilder revenue growth, where we only show you the equity line but describe the growth in terms of the network and affiliates in total.

Christa Quarles - Thomas Weisel Partners

Could I just get you -- could you describe what your CareerBuilder online, for your markets, I guess, would be up?

Dennis J. FitzSimons

I don’t have that exactly, but it would be up more than 19%, what is sold directly through CareerBuilder.

Christa Quarles - Thomas Weisel Partners

Okay, thank you.

James Goss - Barrington Research

Thank you. I have several questions. To begin with, at the mid-year media review sessions recently, if I’m not mistaken Dean Singleton made a comment related to the greater relative profitability of the online portion of the business, and that while the percentage of the revenue mix was modest right now, he thought within say half-a-dozen years, they could be up to perhaps 20% of revenues and perhaps 40% to 50% of cash flow from the online sources. I’m wondering if that’s correct, if you think that’s a realistic target, and if not, what you think in terms of your own publishing operations? You might also relate that to the potential increasing share of online revenues that relate to non-classified categories.

Dennis J. FitzSimons

Let me take the first one. We still think that the print business will be a good business. It is lots of advertising migrating to online. Our view is that we, through launching additional verticals and making sure we’re positioned to get a good percentage, a good market share online, we’ll capitalize on that trend.

In terms of relative profitability, online does have very good margins. Scott, you may have a comment to add.

Scott Smith

Well, again, you can clearly identify revenue by media channel, and we do our cost structure essentially allocating incremental costs online. But you have to keep in mind that to a large extent, our online businesses are leveraging the print infrastructure, whether it’s content, sales, brand, you name it. So it’s great that Dean can talk about this, but we don’t see as easy a way as he might in terms of looking at what fundamentally are the profit drivers.

Our strategy is largely one based on the integration of print online, but we’re also building online only businesses that we expect will have good margins over time as well.

A key part of that, as you touched on, is building non-classified revenue streams. That revenue so far this year is up like 40% -- still too small a percentage of the total, but we see a lot of the upside in the non-classified area.