Murdoch Gets Dow Jones - Now What?

As expected, Rupert Murdoch has successfully negotiated for himself a position in the Business and Finance vertical with a crown jewel brand, The Wall Street Journal.
Here’s my previous analysis on why this deal is a good one.

I really like News Corp’s (NWS) verticalization strategy.

James Altucher asked Jim Cramer, “What’s the one thing the WSJ should do going forward?” They agreed that WSJ should not only have news, but also Opinions that can move stocks. Here’s my take on how that can be accomplished in a very Web 2.0 way.

Jim & James: The best way for the WSJ to introduce “dialogs” and “opinion” is by pulling together a blog network powered by a technology like Adify. There are hundreds of great business and finance writers out there with strong opinions, interesting insights. James, your Daily Blogwatch column links to many of them. These writers need to be woven into the Journal’s more News oriented coverage.

Now watch this.

Let’s say, the WSJ assembles 50 such cream-of-the-crop small publishers with good opinion and analysis content that can be nicely “networked” into the Journal’s anchor content. Over time, each of these publishers would be doing 4 Million Page Views a Month. The Journal’s Ad Sales force would be responsible for selling ads on these sites, and let’s say, they command a robust $150 CPM, given that it is a premium audience.

The revenue split could be as follows, to position effectively against Google (GOOG)’s AdSense, which pays publishers diddly nothing:

Publisher gets 70%

WSJ gets 20%

Adify gets 10%

With that, each publisher would make $5 Million a year, and the Journal would make over $70 Million a year of insanely profitable revenue. If the network can expand to 100 such publishers, the revenue doubles, obviously. The beauty is, there already are hundreds of such publishers. It is the Networks that are not ready yet. Once the twain shall meet, magic awaits!

I would be devastated if Murdoch doesn’t comprehend the magnitude of this opportunity.

Comments

[Ralph F:]

The current economics of financial content are nowhere near these assumptions:

1. "50 such cream-of-the-crop small publishers... Over time, each of these publishers would be doing 4 Million Page Views a Month" = 200MM page views per month.

"If the network can expand to 100 such publishers, the revenue doubles, obviously." = 400MM page views per month.

TheStreet.com (in its latest conference call transcript) said it did just over 100MM page views per month last quarter (307MM for the entire quarter), and it buys a ton of traffic from Yahoo! Finance.

2. "they command a robust $150 CPM"

TheStreet.com said: "our revenue per thousand page views in the second quarter was $17. 91".

<b>TSCM conference call transcript</b>

2007 Aug 01 01:09 PM

[Michael Eis...:]

Sramana -
$150 CPM? Who else do you know that gets $150 CPM? And check out this article www.techcrunch.com/200.../ on Techcrunch (who cast aspersions on the U of T numbers as well) where even the ridiculously high #s cited in the TC post are lower than yours. Not to mention that this would be fully sold inventory on the 200MM page views.

2007 Aug 01 02:17 PM

[Sramana:]

Ralph and Michael,

CNN Money has the CPM numbers in the 100-150$ range. I don't think Cramer has a good Ad Sales force, hence doesn't get the CPM numbers. But WSJ certainly does. And they have the brand. Cramer's brand is not as big as WSJ. In fact, if WSJ puts together a network like this, Cramer should just join it. I think, actually, he very much wants to.

In terms of traffic, CNN Money has 145M page views a month, and WSJ+Marketwatch also is in the same range. Remember, WSJ is not free. But the blog network would be free.

Finally, the International business / finance traffic will go up significantly over the next decade.

In summary, I think, perhaps only 2-3 players are capable of pulling this plan off, and WSJ and CNNMoney
are amongst them.

Sramana

2007 Aug 01 10:43 PM

[Ralph F:]

Sramana,

TheStreet.com said nothing on its conf call about needing to upgrade its sales force. If you're right and TSCM should be getting between 5x and 8x its current ad rates, that should have been the overwhelming focus of the call.

Moreover, there isn't a single analyst who covers TSCM who has written that there is 5-8x revenue upside from higher CPMs.

Look at your CNN-Money numbers. At 145MM monthly page views and a $125 CPM, CNN-Money would be making over $18MM per month in ad revenue, almost $55MM per quarter, and over $217MM in ad revenue per year. But Time Warner made no mention of that kind of revenue on its call (see the <b>TWX transcript</b>). What it did report was (admittedly lower quality) AOL CPM as follows: "Domestic ad revenue less TAC per 1,000 page views of $6.32 for the quarter".

Does the WSJ get a $150 CPM? Well, Gordon Crovitz said this on the DJ conference call (read the transcript!) in answer to an analyst's question:

<blockquote class="quote">But to put that performance in some perspective with over $20 million in advertising revenue in Q2 that's our second highest quarter ever for online ad revenue.</blockquot...

That's $6.6MM per month. Accepting your assertion (probably wrong) that WSJ.com, Barron's Online and MarketWatch get about 150MM page views per month, <b>that's a CPM of $44.50</b>.

If you read the transcripts for TWX, TSCM, CNET, DJ and the other media companies, you can gather a ton of data points about online ad rates. The info is there; it just takes a bit of work.

But if you're going to write about this stuff or invest in these stocks, there's no alternative to doing the work.

2007 Aug 02 03:10 AM