Dow Jones: Maybe Our Online Business is Part of Yahoo's Problem

 |  Includes: DJ, YHOO
by: David Jackson

Dow Jones, which owns The Wall Street Journal and, reported Q3 revenue growth of only 4%. But like most traditional media companies, revenue growth from its online properties far outpaced revenue from its print properties (though from a much smaller base). Here are CEO Rich Zannino and CFO Bill Plummer discussing the performance of Dow Jones's online properties on its conference call this morning; note in particular the comment about financial advertising revenue relative to Yahoo's:

At Dow Jones Online, which includes The Online Journal, its vertical websites, Barron’s Online and MarketWatch, total revenue grew 13%. Ad revenue was up 12% on growth at both MarketWatch and the Online Journal. Ad growth in the quarter was adversely affected by a flat July, which dragged down strong performance in August and September. We expect online ad revenues to be back in the 20% range in the fourth quarter. Circulation revenue was up 27% as we continue to benefit from our paid online model at the Journal and Barron’s. This gain was driven by last year’s price increase and 3% growth – to 788,000 - in subscriptions to the Online Journal, as well as 70,000 paying subs at Barron’s Online which launched as a separate site in January 2006.

And later in the Q&A:

Debra Schwartz - Credit Suisse

I have a quick question on your online revenues. Can you just give us a sense of in the third quarter, what percent of the consumer media group came from online? Then if you can just give us a little bit more color on what drove the softness, I think you said it was in July and what gives you more confidence that you can get back to 20% growth there for Q4?

Bill Plummer

For Q3, online was about 14% of CMG revenues. By the way, if you're comparing us to other media companies do keep in mind that we don't book licensing revenues or archive revenues, obviously, or some of the other revenues that most other media companies book into this group. That's in our enterprise media group. So we're very pleased by the percentage of our revenues that are coming from online.

What we said about advertising essentially, the best way to understand the advertising in Q3 was that while it was up by 12% for the quarter, it was flat in July. July was really a very tough month, it was up double digits in August, it was up over 20% in September, for the first three quarters of the year, online ad revenues were up in the 20% range, we expect to finish the year in that range as well. We think this compares pretty favorably to others in their display online advertising segment.

Just one final note I think there has been questions in earlier calls about MarketWatch growth rates and while we don't break out advertising across the different properties I would note that MarketWatch ad revenues actually grew faster than the online Journal in the first quarter and we expect they will again in the fourth quarter.

...Christa Quarles - Thomas Weisel Partners

I just had a couple of follow-ups on the online revenue growth. I think you guys said 7% page view growth. I was wondering if that volume growth was sort of uniform across The Wall Street Journal and MarketWatch.

In terms of the weakness in July as well as just specific categories clearly Yahoo! had mentioned that finance and autos were weak for them. I was wondering if you could highlight the relative importance of those categories in the online side and whether or not you saw any weakness. Thanks.

Gordon Crovitz

Yes. Christa, on profit, our monthly page views for the quarter were up 7%, we were down a bit in terms of monthly unique visitors of Dow Jones overall. That partly reflects the summer months of July and August which tend to be traditionally slower for us.

Another factor I would just point to if you really get into the details of this is when we relaunched the MarketWatch home page we significantly increased the use of Ajax technology. I think as you may understand that automatically updates quotes and news headlines and allows a greater personalization, it delivers a lot of value to users but we think it probably did negatively impact page view's per visitor.

We have ways, over time, we are going to use this technology to drive more usage, but that was an issue for us. I would also just give you a little bit of insight that we have got a big project going on on search engine optimization especially around MarketWatch.

In terms of advertising revenues, we paid some attention to what Yahoo! had to say also and I think they really focused their comments on the financial category. In Q3, our financial category was up over 26% in revenue. So maybe we're part of their problem.

Christa Quarles - Thomas Weisel Partners

And autos, any comment there or is that not a big category for you guys?

Gordon Crovitz

It is not as big of a category for us online as it is in print. It is a significant category. We did see some softness during the third quarter. And I think online even more than in print, there is a lot of swinging quarter to quarter in terms of autos.

Christa Quarles - Thomas Weisel Partners

That's helpful. Thanks.

For more, see the entire conference call transcript (free). A full list of the most recent conference call transcripts on Seeking Alpha is here.