Investors, clients, Web sites turn to MarketWatch for leadership BY DAVID CALLAWAY EXECUTIVE EDITOR For MarketWatch.com, diversity never mattered so much as in 2001. Just as the company’s multi-pronged me- dia strategy of Internet, television and radio helped it stand out in covering the year’s top story, the Sept. 11 terrorist attacks, its diver- sified revenue stream helped it through the worst media recession in memory. Drawing on the strength of its licensing operation, the creativity of its advertising unit and a major cost-cutting campaign, MarketWatch.com was able to not only adapt to the advertising shakeout, but to improve. It even managed to keep a year-old promise to be cash-flow positive by the fourth quarter of 2001, fin- ishing December with $1.3 million more than it had at the end of September. Licensing, the pillar of strength during the reces- sion’s darkest hours, came through the year with higher-than-expected revenue, helping offset a decline in advertising revenue. Sticking to its tried-and-true strategy of combining ever-improved products with top service, the licensing operation landed sev- eral big-name clients, including The New York Times Digital, PaineWebber Online Services, USAToday.com and The Motley Fool. In advertising, the decline in traditional online brokerage clients and Internet clients was met with a full-thrust creative cam- THE SKY’S THE LIMIT 2001 Annual Report Nasdaq: MKTW Continued on Page 6 Inside New face: Q&A session with President and COO Kathy Yates. Page 9 Nationwide: TV show and radio reports add dozens of stations. Page 10 Back by the Bay: Thom Calandra returns to San Francisco. Page 8 Plus: Letter from CEO Larry Kramer Page 2 Advertising Sales Page 3 Licensing Sales Page 5 Destination Sites Page 7 Promise kept Company reports its first cash-flow positive quarter. Page 4
For MarketWatch.com, diversity nevermattered so much as in 2001.
Just as the company’s multi-pronged me-dia strategy of Internet, television and radiohelped it stand out in covering the year’s topstory, the Sept. 11 terrorist attacks, its diver-sified revenue stream helped it through theworst media recession in memory.
Drawing on the strength of its licensingoperation, the creativity of its advertisingunit and a major cost-cutting campaign,MarketWatch.com was able to not only
adapt to the advertisingshakeout, but to improve.
It even managed to keepa year-old promise to becash-flow positive by thefourth quarter of 2001, fin-ishing December with $1.3million more than it had atthe end of September.
Licensing, the pillar ofstrength during the reces-
sion’s darkest hours, came through the yearwith higher-than-expected revenue, helpingoffset a decline in advertising revenue.Sticking to its tried-and-true strategy ofcombining ever-improved products with topservice, the licensing operation landed sev-eral big-name clients, including The NewYork Times Digital, PaineWebber OnlineServices, USAToday.com and The MotleyFool.
In advertising, the decline in traditionalonline brokerage clients and Internet clientswas met with a full-thrust creative cam-
THE SKY’S THE LIMIT
2001 Annual ReportNasdaq: MKTW
Continued on Page 6
Inside
New face: Q&A session withPresident and COO Kathy Yates. Page 9
Nationwide: TV show and radioreports add dozens of stations. Page 10
Back by the Bay: ThomCalandra returns to San Francisco. Page 8
Plus:Letter from CEO Larry Kramer Page 2Advertising Sales Page 3Licensing Sales Page 5Destination Sites Page 7
PromisekeptCompanyreports its firstcash-flowpositivequarter.
Transfer agentMellon Investor Services LLC85 Challenger RoadRidgefield Park, N.J. 07660
Office locationsSan Francisco MinneapolisNew York WashingtonLos Angeles ChicagoBoston DallasLondon Tokyo
Form 10-KStockholders of record will receive a copy of MarketWatch.com’s Form 10-K, filed with the Securities andExchange Commission, which containsadditional information relating to thecompany, along with the ProxyStatement prepared in connection withthe 2002 Annual Meeting. Additionally, a copy of the Form 10-K is availablewithout charge.
ExchangeMarketWatch.com, Inc. is traded on the Nasdaq/National Market System under the symbol “MKTW.”
It’s fair to say that 2001 was a historicyear for the stock markets, the Internet, andMarketWatch.com.
In the fourth quarter of 2001, Market-Watch.com made history with our first posi-tive cash flow, ending the quarter with $37.6million, $1.3 million more cash than we hadat the start of the quarter.
We were hit with the worst advertisingenvironment in a decade and saw our adver-tising revenues drop from $35 million in2000 to $18 million in 2001. We were ableto offset much of that loss, however, withthe growth of our licensing revenue from$16 million in 2000 to $25 million in 2001.
I’m proudest of our many editorialachievements during 2001. We have begunto regularly produce popular in-depth sto-ries and packages around major news eventsand deep profiles of companies. Our Per-sonal Finance section and offerings have ex-panded to serve the growing numbers ofusers who are looking for ways to protectand grow their nest eggs.
Seeing the economy deteriorate early inthe year, we immediately took action to con-tain costs. Through tight management ofcosts all year, and a round of layoffs in May,we were able to cut almost $18 million inoperating costs from 2000 to 2001. Despiteour revenue drop, we were able to reduceour net loss by $15 million and becomecash-flow positive in the fourth quarter, agoal established at the beginning of 2001.
There were several highlights in 2001worth looking back on:
• Throughout the year, the company es-tablished itself as an online advertising in-dustry innovator. In March, we began sell-ing advertising in day-parts, with Budweiseras an initial client. In July, we announcedthat we would de-emphasize the click-through rate as a metric, causing healthy in-dustry debate regarding the measurement ofonline advertising campaigns. In August, wedebuted TV commercials on CBS Market-Watch.com with American Airlines’ ads air-ing on the Web site before they hit televisionscreens. In November, we rolled out the “In-troductory Message,” a brief sponsorshippage that launches before the CBS Market-
Watch.com home page.• In June, we became one of 13 founding
members of the Online Publishers Associa-tion (OPA), an industry trade group formedto promote common interests on a variety offronts, including online advertising and in-tellectual-property rights.
• The “CBS MarketWatch Weekend” tel-evision show continued its national growththroughout the year, airing weekly on sta-tions capable of reaching 85 percent of theUnited States by Dec. 31, 2001.
• The MarketWatch.com Radio Networksurpassed the 200-station milestone nation-wide in less than three years. The networkhad grown to 208 stations covering 88 per-cent of the U.S. by Dec. 31, 2001.
• In March, we launched the redesignedflagship CBS MarketWatch.com Web sitewith expanded content, more tools and newadvertising formats. Additional productlaunches during the year included the pre-mium content “Market Advisers” sectionand a state-of-the-art “Alerts” product thatallows users to sign up for instant e-mailmessages tied to market-related events.
• New tools developed for licensing
clients during the year included interactiveJava charting, a much more dynamic toolthan our HTML charts, and internationalcharting products that cover markets in 16countries. We announced several major me-dia licensing partnerships during the yearincluding The New York Times Digital inJune, The Motley Fool in July and USAToday.com in December.
I’m extremely happy to report the addi-tion of Kathy Yates as our president andCOO in December. She is an experiencedmedia and Internet executive, and her ar-rival has already helped to enhance our pro-cedures for planning and growth.
Now that we are on firmer financial foot-ing, we look forward to building our compa-ny in 2002. We are prepared to weather dif-ficult economic times, and at the same time,well-situated to take advantage of the upturnwhen it comes.
Thanks for your support.
Positive end to a memorable year
Chairman and CEO Larry Kramer
This Annual Report contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements, including statements about Mr. Kramer and Ms. Platt’s goal of making MarketWatch.com cash-flow positive for year 2002; Mr. McLernon’sstatements about the continued commercial success of introductory messages and the potential advertising revenue derived from this product and predictions about thecontinued viability and success of online advertising; and Ms. Yates’ statements about including a subscription-based business or branching out further the company’sexisting licensing business as approaches to expanding the company’s revenue stream, expanding opportunities to further leverage the company’s alliance with existingpartners and predictions about the comeback of advertising on the Web. Potential risk factors which could affect our business and financial results are discussed in ourForm 10-K for the year ended Dec. 31, 2001, as well as the other reports we filed with the SEC. We caution investors that our business and financial performance aresubject to substantial risks and uncertainties.
Stockholder information
Photos by Erin Beach, Kenneth Yueh, RogerWallace, Frank Barnako and Lindsay Miller
2001 ANNUAL REPORT ADVERTISING SALES MKTW 3
When thegoing getstough, getcreative!
BY ANNE STANLEYNEWS EDITOR
Take a tough advertising environmentand multiply it by 2001. What do you get?
For MarketWatch.com, an entirely newcreative solution was the right answer.
The combination of new ideas for adver-tising display, such as introductory mes-sages and rich media windows, with strongcreative and an integrated offering acrossthe Web, television and radio, set the com-pany on a pioneering path in Web advertis-ing last year.
Along with kudos from existing financialclients like Charles Schwab, Ameritrade andFidelity, MarketWatch.com’s offeringshelped lure a new type of client to the Webfor the first time: big-name brand clientssuch as American Airlines, Cadillac, Saturn,Lexus, Visa and Budweiser.
Media Magazine named Market-Watch.com No. 1 on its 2001 list of best on-line publishers in the category “Businessand Finance,” topping the Wall Street Jour-nal’s online edition and Forbes.com, in largepart because of the company’s advertisingstrategy.
“The financial news is always riveting,
and the same can be said for the site’s spe-cial-format ad campaigns,” the magazinesaid in its report. The ranking was based inpart on the “extent to which each site hasbeen an innovator or leader in the evolutionof online advertising and the medium ingeneral.”
CBS MarketWatch.com was one of thefirst sites to offer advertising positions thatmoved beyond the banner ad. From the ear-ly content sidebar and animated headers,MarketWatch.com continued to build onpast innovations in 2001, helping introducetwo major new advertising solutions.
The “rich media window” is an interac-tive ad unit embedded within the site con-tent that allows users to view information,submit e-mail addresses, navigate a “mini-site,” view TV commercials, or even entercontests, all without leaving the page. Theintroductory message is an eight-secondpresentation that delivers a compelling andwell-designed commercial to users as theyenter the site.
Scot McLernon, executive vice presidentof sales and marketing, said both productswere big hits with potential ad buyers. Hepredicted the two — especially the introduc-tory messages — would continue to play abig role in attracting advertising revenue forthe company in 2002 as they get more so-phisticated and gain acceptance from users.
“As this medium evolves into somethingcloser to broadcast, we believe introductorymessages will become an industry standard— as they are in our own television show,”McLernon said.
Delivery technology continued to evolvein 2001, and MarketWatch.com was able to
refine offerings that give advertisers theability to deliver their messages in a specificregion or country, at certain times of the day,by Internet service provider and browsersoftware, and many other ways.
For example, it introduced a campaignfor Budweiser in March that used front-pagebanners to promote the beer, running fromnoon to 6 p.m. every Friday, just before hap-py hour, in each reader’s local time zone.
“MarketWatch.com hit the mother lodeof traditional advertisers in Budweiser,owned by Anheuser-Busch and the sourceof such cult-like advertising as the ‘Wassup’beer campaign,” CNet News.com reported.
“Budweiser is one of the first traditional ad-vertisers to embrace a highly targeted Website as a medium to build its brand.”
Meeting clients’ needs in the most effi-cient and innovative ways possible becamea critical challenge in the past year — notjust because of financial constraints, butalso because of the importance of the mes-sage itself, particularly in the wake of theSept. 11 terrorist attacks.
“Online advertising is here to stay,”McLernon declared.
“I would suggest that more than any yearbefore, last year, with all of its tragic events,has proven that point.”
“We only work with
the best. CBS Market-
Watch.com has produced
consistently proven results
year after year. This can
be attributed to the quality
of content and in-depth
analysis on the site, but
also to the insight of our
account team.”
— What Invesco
says about its
MarketWatch.com
advertising campaign
Executive Vice President Scot McLernon (right) leads a team that includes Sandra Baez and Alan Deicas, who manage thecomplex ad-placement systems that put the right ads on the right pages at the right times. Below, the rich media windowallows an advertiser’s interactive message to appear prominently in a story so that no reader can miss it.
An early promise kept4 MKTW FINANCIAL RESULTS MARKETWATCH.COM
BY NEIL CHASEMANAGING EDITOR
Joan Platt and Larry Kramer had everyreason to fail. But they didn’t.
When the MarketWatch.com CFO andCEO promised positive cash flow for thefourth quarter of 2001 a year in advance,they could not have seen what was ahead.
“When we said it, people were still ex-pecting a better market,” Platt said.
“We weren’t in a recession, and it lookedlike revenues from advertising sales wouldpick up.”
They could not have foreseen a year-longadvertising slump, the disappearance ofsome dot-com advertising and licensingclients, or the terrorist attack that wouldcripple the economy of the United Statesright before the start of that crucial fourthquarter.
But they did deliver on the promise, withno excuses needed. And they did it convinc-ingly: The company had $37.6 million incash on Dec. 31, $1.3 million more than itdid on Sept. 30.
Shrinking loss
Overall numbers for the year were im-pressive in light of the tumultuous markets,with a pro forma loss of $23.1 million forthe year, a sharp improvement from a $33.9million loss for the year 2000.
That came in the face of revenue decreas-ing 15 percent from the prior year to $45.9million.
The promise of positive cash flow camein January as the company announcedfourth-quarter 2000 results.
“We believe our current cash reserves are
more than sufficient, and we expect to gen-erate positive cash flow from operations,which is currently anticipated by the end ofthis year,” Kramer said in the press release.
Throughout 2001, each time Market-
Watch.com reported quarterly results andeach time the question came up, Kramer andPlatt reiterated that they were on track toreach positive cash flow.
They never hesitated, never pulled back,never warned that it might not work.
But didn’t they have their doubts? Platt says no. She never once doubted that Market-
Watch.com would deliver positive cash flowin the fourth quarter. Not even after the ter-rorist attacks.
“Sept. 11 was a terrible catastrophe, butI’m a believer in the U.S. economy and cap-italism,” she said.
The company made it through 2001 be-cause “We had already managed well,” Plattsaid.
“We were building our infrastructure andorganization over the previous two years,but we were building carefully. We man-aged to build our cost structure only as wesaw the top-line revenue materialize.”
A changing economy
As the year progressed, so did the soft-ness in advertising. But the company adjust-ed well, exceeding its bottom-line targets ineach quarter.
When it became evident at midyear thatthe expected economic turnaround had notyet started, the company cut costs with a re-structuring that slowed down the effort togrow in areas that had not yet taken off,such as wireless and broadband. The moveincluded cutting about 15 percent of thestaff, or about 35 people.
Overall, the company managed to reduceits headcount from 259 at the end of 2000 to201 at the close of 2001.
With 2001 behind them, Kramer andPlatt aren’t done making promises.
Their goal for 2002: Positive cash flowfor the year, and they’re just as confidentabout making that target as they were allthrough 2001.
Chief Financial Officer Joan Platt
“We were building our infrastructure and organization over the previous two years, but we were building carefully. We managed to build our cost structure
only as we saw the top-line revenue materialize.”
MarketWatch.com 2001 usage statistics
Quarterly average
monthly page views
Quarterly average
unique users
676Million
Q1
684Million
Q2
665Million
Q3
739Million
Q4
8.5Million
Q1
9.0Million
Q2
9.5Million
Q3
9.2Million
Q4Sources: Internal server log data, DoubleClick, digiMine
Company reachespositive cash flowin fourth quarter
Diversification proves to bekey to successSale of charts, data, and newssustains revenue as business grows
2001 ANNUAL REPORT LICENSING SALES MKTW 5
BY NEIL CHASEMANAGING EDITOR
In a year when the advertising marketsstruggled to get out of a slump, Market-Watch.com’s licensing team was able to in-crease revenue by more than half and pro-vide a significant boost to the company’sbottom line.
An expanded line of products and astrong and continuous commitment toworld-class service helped highlight licens-ing as a growing part of the company’s di-versified revenue stream, with a broadenedlist of new clients as well as existing oneswho upgraded with suites of additional of-ferings.
“A lot of our success was in retainingand growing existing relationships with ourcore clients: the leading brokerages, theleading banks, the leading financial publish-ers,” said Scott Kinney, MarketWatch.com’sexecutive vice president of licensing.
“Financial services firms often strive toincrease market share in a down economy,and one way they cando that is to improvetheir online offerings.So in 2001, we focusedour efforts on thosefirms and doing morefor them,” he said.
In addition to charts,stock and fund quotes,and stories fromMarketWatch.com re-porters, licensing rolledout a number of new products during theyear, including new portfolios, company re-search, insider-trading data and a full suiteof mutual-fund data.
Major deals
One client that added many of the newproducts was Ameritrade, the popular onlinebrokerage.
“There’s been a trend among financialservices sites to consolidate suppliers andhave one or two providers of news and toolsinstead of eight or more,” Kinney said.
“We were able to help Ameritrade do thisby designing, building and launching forthem a full set of financial research tools.
We dramatically expanded the breadth anddepth of content we offer them while reduc-ing the number of vendors they have touse.”
For another high-profile client, The NewYork Times Digital, a key factor was Mar-ketWatch.com’s ability to deliver full pagesof Web content, including company pro-files, historical stock performance and mu-tual-fund data. The two companies alsohave an editorial partnership to share newsstories.
“The new data area is just so much betterthat it is flat-out in a different league thanthe old one,” said The Times’ Dan Bigmanafter the new features were unveiled. “Themore I look at this stuff, the more I love it,and realize what a huge upgrade it is to oursite as a whole.”
Another client for which Market-Watch.com provides online financial con-tent is UBS PaineWebber. “We deliversomething like 67 individual pieces of con-tent to their high-net-worth users,” Kinneysaid. “They rely on us to provide real-time
quotes, charts and toolsto their most valued ac-countholders.”
That account wasanother especially grat-ifying win in 2001 asMarketWatch.com wasable to replace one ofits prime competitorsas UBS PaineWebber’scontent provider.
Other major dealsclosed during 2001 included:
• A first-of-its-kind relationship with theFinancial Times under which Market-Watch.com provides not only content butalso Web editing and production tools forthe FT Investor site.
• The addition of a large news portal toDatek’s site, allowing its customers toquickly dig into news about companies theyfollow.
• A new portfolio product for users ofThe Motley Fool.
The best service
While the product might be charts, dataand news, what MarketWatch.com really
sells is its service commitment, as outlinedin the licensing team’s mission statement. Itreads:
“MarketWatch.com is committed to dowhatever it takes to deliver world-classservices to our clients. We will be thefastest, most reliable, most flexible andmost responsive partner you have everknown.”
One testimonial to the quality of thatservice is the longevity of the top clients. Ofthe 10 largest MarketWatch.com licensingcustomers, all but two have been active cus-tomers for at least three years.
Several of them go back four years, andthe longest-running relationship is the onewith Charles Schwab, which was the veryfirst licensing customer for Big Charts in1997.
BigCharts became part of Market-Watch.com in 1999.
“Clients say price is important, especial-ly in a time like this,” Kinney said. “Butthey also emphasize that they very much ap-preciate that the content is fast and reliableand that we not only respond to their needsbut proactively identify things we can do toimprove their sites.”
The company’s endless commitment toservice was also displayed immediately af-ter the September terrorist attacks.
“Our first reaction was concern for ourclients, several of whom were in the WorldTrade Center and buildings in the immediatevicinity,” Kinney said.
“On Sept. 11 and the days and weeks fol-lowing, we did a number of things to helpour licensing clients in any way we could.We put special messages and contact infor-mation on their sites, hosted some displacedclients in our midtown Manhattan office andprovided other technical services thathelped them bridge the disruption in theirWeb site services.”
Looking forward, Kinney says existingclients will be offered even more in the nextyear, while the team continues to approachnew clients.
Among the improvements in mind for2002 are increased efforts to market the sto-ries written by CBS MarketWatch.com re-porters around the globe.
“MarketWatch.com news has been gain-ing in popularity, and it’s becoming an in-creasingly attractive part of our licensingoperation,” he said.
Executive Vice President Scott Kinney
“A lot of our success was in retaining and growing existingrelationships with our core clients: the leading brokerages, the
leading banks, the leading financial publishers.”
IN THOUSANDS OF DOLLARS
1999
2000
2001
MarketWatch.comlicensing sales
5,26215,80924,775
paign that used several new display ideas toattract a new type of client to help fill thevoid: the big-name brand client, like Lexusand Budweiser.
With new campaigns that featured “rich-media” windows within news stories, intro-ductory messages that ran like TV commer-cials as the user came to the Web site, and“day-parts” strategies that allowed a clientto advertise at specific times of day acrossdifferent time zones, MarketWatch.comcaptured a host of new types of clients dur-ing the year and helped set several standardsfor online advertising going forward.
“CBS MarketWatch has produced con-sistently proven results year after year,” saidone client, Invesco. “This can be attributedto the quality of the content and in-depthanalysis on the site, but also to the insight ofthe account team.”
New look, new tools
Part of the reason for advertising’s cre-ative success was the ability to do more withthe CBS MarketWatch.com Web site be-cause of a technological redesign and over-haul in the first quarter of 2001. The site’snavigation was redesigned and its publish-ing systems replaced with two new propri-etary editing and production tools.
Other changes throughout the year led toa new tool to post headline bulletins, not juston the front page but simultaneously acrossthe entire site and through e-mails to read-ers. A new portfolio product was introduced,as were news alerts. And an aggressive cam-paign to register users yielded 400,000 newmembers during the year, almost half ofwhom signed up in the fourth quarter alone.
Internationally, MarketWatch.com re-structured its deal with the Financial Timesto turn its year-old joint venture, FTMarket-Watch.com, into a licensing opportunity.
The company transferred its stake in FT-MarketWatch.com to the FT in exchange fora licensing contract to provide news, charts,tools and a publishing system.
As part of the deal, Thom Calandra, CBSMarketWatch.com’s editor-in-chief, re-turned from his stint in London to the Unit-ed States, where he became a full-timecolumnist and television personality. Calan-dra carried the torch for stock-market bearsduring the second half of the year, pointingout that many stocks were overvalued andhelping readers spot trouble before the mar-kets pulled back in the fourth quarter.
Broadcast relationships
In television and radio, market share
grew as more CBS affiliates — and non-CBS stations — signed up. By the end of theyear, MarketWatch.com radio reports wereheard on 208 stations, up from 145 at theend of 2000, while the “CBS MarketWatchWeekend” television show extended itsreach to 85 percent of the United States.
It was those crucial relationships, alongwith links to MarketWatch.com’s share-holder and news partner CBS, a unit of Via-com, that allowed the company’s reportersand editors to reach millions of people onSept. 11, via radio, television and Internet,with breaking news minute-by-minutethroughout that day.
Over the week following the attacks, Ca-landra would appear on a special edition ofthe “CBS Evening News With Dan Rather”
to discuss the impact of the attacks on theU.S. financial markets. And television an-chor Susan McGinnis would report toRather from Wall Street on the morning ofSept. 17, when the financial markets openedfor the first time since the attacks.
It was a vote of confidence in Market-Watch.com’s multimedia approach to news,both from partner CBS and from the hun-dreds of thousands of readers who came toCBS MarketWatch.com for their news inthose chaotic days.
“I was at work, with no television, and Igot a phone call alerting me to what was go-ing on,” one reader wrote. “I franticallysearched the Internet at other news sites —all down. Yours was our lifeline to the latestdevelopments, complete with video.”
6 MKTW DESTINATION SITES MARKETWATCH.COM
In the field Reporter Bambi Francisco, who covers Internet companies, interviews Ravi Chiruvolu of CharterVenture Capital (left), Philip Sanderson of WaldenVC (center) and Jin Byun of ABS Ventures at a conference.
In the officeFrom a San Francisco office adornedwith a poster that might have been a bitahead of its time, Executive EditorDavid Callaway oversees an operationthat includes more than 70 journalistsin 9 bureaus worldwide.
On the setMarketWatch.com reporter Trish Regan(right) prepares for a business reportwith news anchor April Cummings onthe KPIX-TV (Channel 5) morningnewscast in San Francisco. Market-Watch.com provides live television andradio reports to stations throughout theUnited States around the clock.
CONTINUED FROM PAGE 1
MarketWatch.com leadswith new advertising,licensing solutions
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The BigCharts.com Web site was hon-ored with two 2001 Readers’ ChoiceAwards in a competition run by Stocks &Commodities magazine.
BigCharts.com took first place in twoaward categories:
• Subscription Internet AnalyticalPlatforms recognizing “products that re-trieve and present data from remote servers(as well as the entire Internet) and offermany of the analytical tools found in standalone software.”
• Technical Analysis Web Sites recog-nizing sites providing “a wealth of technicalinformation, indicators, charts, sentimentand opinion.”
“We’re honored to be recognized withtwo key first place awards by the readers ofthis important and respected trading strategypublication,” said Bill Bishop, executivevice president and general manager of Mar-ketWatch.com.
“They attest to the popularity ofBigCharts.com among the Internet’s serious
traders, as well as our status as the mostcomprehensive and easy-to-use investmentresearch site on the Web.”
Bishop added: “The readers of Stocks &Commodities magazine are individuals whoinvest in the markets and are looking for the
latest detailed information on trading strate-gies and methods.”
“Our service is free,” he said, “and is thewinner among a list of ‘for-pay’ softwareproducts and Web site solutions for whichpeople are willing to pay.”
2001 ANNUAL REPORT DESTINATION SITES MKTW 7
BY ALEXANDER DAVISMANAGING EDITOR
A wave of new enhancements and an ex-panded menu of tools and features helpedMarketWatch.com extend its position as theNo. 1 online financial news source in 2001as the public’s demand for real-time finan-cial information continued to grow.
The destination sites — CBS Market-Watch.com and BigCharts.com — servedmore than 2.75 billion pages in 2001, aver-aging in excess of 7.5 million pages per day.
The traffic kept MarketWatch.com ontop of the Jupiter Media Metrix rankings fororiginal financial news sites for the fourthyear running and helped the company attractnew types of advertisers looking to get intothe financial space.
“Overall, the site took a giant leap for-ward and got smarter — all at once,” saidBill Bishop, executive vice president andgeneral manager. “The improved infrastruc-ture also allowed us to significantly growthe size of our registered-user database, in-creasing our membership by more than400,000 users in 2001.”
In February, the company overhauled itsflagship CBS MarketWatch.com Web site.The culmination of a four-month projectcode-named “Odyssey,” the outcome wasan entirely new and improved look, with en-riched tools, a crisper design and strongersite navigation.
One of the many design improvementswas increased capacity for photos, chartsand other illustrations that made for morecompelling and eye-appealing news pages.
“In terms of design changes, we’ve gonewell beyond improving site navigation toenhance the viewers’ experience both on thefront page of the site and on story pages,”added David Callaway, executive editor.
Leveraging MarketWatch.com’s broadsuite of financial information and the powerof the post-Odyssey news database, the sitealso launched a new “Alerts” product thatgives users the power to receive instant e-mails or wireless notices of news tied toticker symbols, key words, share prices and
volume-related trading events. MarketWatch.com’s news editors now
have a powerful way of disseminating “bul-letins” about urgent, top-tier developments.Headlines about news designated as a “bul-letin” appear on every page on the flagshipWeb site. As of the end of the year, nearly100,000 subscribers had also signed up toreceive the reports through e-mail.
By offering these kinds of services, Mar-ketWatch.com is taking steps to increase sitevisits as well as expanding its readership.
MarketWatch.com also built upon its re-lationships with partners like Yahoo! andAOL — both of which use CBS Market-Watch.com news feeds and are responsiblefor driving added viewers to the destinationsites. The news department made strides bymaking full-time hires in real estate, mutualfunds and other personal finance coveragethat finds a large audience among the AOLand Yahoo! faithful.
“We were able to introduce ourselves to alot of people, while also building loyaltyamong readers who already were frequentvisitors thanks to the tremendous quality ofMarketWatch.com’s news, data and tools,”Bishop said.
“It’s also a testament to our ability to stayon people’s computer screens and our broaddistribution across major portals like AOLand Yahoo!”
Making the best even better“We wereable tointroduceourselves to a lot ofpeople, while also buildingloyalty among readers whoalready were frequent visitorsthanks to the tremendousquality of MarketWatch.com’snews, data and tools.”
— Executive Vice President and General Manager Bill Bishop
BigCharts named best research site Top sitesThe leaders in Jupiter Media Metrix’s
survey of Web sites in the
Business/Finance:News/Research
category as of December 31, 2001:
Sites Unique Users
MarketWatch.com sites 3,941,000CNNMoney 3,190,000
Quicken.com sites 2,478,000
Motley Fool 2,452,000
BankRate.com sites 2,319,000
TheStreet.com sites 1,458,000
Nasdaq Property 1,288,000
SmartMoney.com Property 1,217,000
BizJournals 1,036,000
Wall Street Journal Interactive 1,023,000
8 MKTW OLD FACE: THOM CALANDRA MARKETWATCH.COM
BY CHRIS PUMMERPERSONAL FINANCE EDITOR
Thom Calandra boasts a talent few finan-cial journalists possess. Even when arguingthat the market’s future looks grim, he doesit with an infectious verve that leaves read-ers amused and enlightened.
MarketWatch.com’s founding editor re-turned in mid-2001 to the San Francisconewsroom after 18 months in London,where he built FTMarketWatch.com forMarketWatch.com’s corporate partner theFinancial Times.
He came back to a far different U.S. mar-ket than he’d left, with the Nasdaq havingfallen from a peak of above 5,000 to below2,000.
His perspective changed along the way.
Once a leading chronicler of “New Econ-omy” stocks who wrote columns that movedshares and made many investors wealthier,Calandra turned bearish in mid-2000 andsounded cautionary tones early in the mar-ket’s slide that spared those who heededthem further losses.
Affectionately referred to as being“smarter than the average bear,” Calandra isonce again wearing the hat of chief Market-Watch.com commentator. His column re-mains one of the best-read features on thecompany’s Web site, CBS Market-Watch.com, and one of the most popularmarket columns on the Web.
Calandra also appears each Sunday onthe nationally-distributed television show“CBS MarketWatch Weekend.” He exam-ines issues such as the bankruptcies of com-
panies like Kmart or Enron and the potentialfor shares of tiny companies left for dead af-ter the bursting of the Nasdaq bubble.
The feedback from MarketWatch.com’sInternet, television and radio viewers hasnever been stronger, Calandra notes — ormore pointed.
“Our audience is holding our feet to thefire a lot more than they did in the good olddays of 1997, ’98 and ’99. Back then, mostfolks were making money. Now, four-fifthsof American mutual funds are in the red, andretirement portfolios as a rule are down 50percent in value, maybe more.”
The biggest trend he sees out there is thelack of Wall Street coverage for about 3,500publicly traded companies, roughly a thirdof the entire U.S. stock market. “If that isnot an opportunity for us, tell me what is.”
As for the business of Market-Watch.com, Calandra says the world ofelectronic content will have its glory days,though just when is hard to say.
“Clearly, MarketWatch.com is a sur-vivor. We acheived positive cash flow in thefourth quarter of 2001. We have deep sup-port from our two partners — CBS andPearson, owner of the Financial Times. I’mone of those who believe the broadbandpipes will need filling, and the demand forinteractive, real-time financial content willexceed nearly all categories.”
The company also demonstrated it canmanage through dry advertising periodsthanks to a steady licensing business, Calan-dra says. “Who else gets to call companieslike American Express and Budweiser ma-jor customers, either for online ads or li-censed content?”
And its technology platform and publish-ing tools, he said, proved themselves timeand again in stormy market conditions asmillions turned to CBS MarketWatch.comfor their financial news.
Calandra stepped aside as an officer andexecutive of the company to focus on hisjournalism and to work on some new edito-rial products, which may include hourly
flash reports and e-mail newsletters. “All ofthem can be licensed to major corpora-tions,” he says.
And Calandra, a longtime gold bug, hasmade a bold promise to his readers for 2002:If the price of gold closes above $300 fivedays in a row, he’ll dye his hair yellow. Thereaders are watching.
He’s backCompany co-founder brings
StockWatch home to MarketWatch
With regular appearances on CBS television and radio stations and on theMarketWatch.com Web site, Thom Calandra makes the most of the uniquepartnership between CBS and MarketWatch.com.
And look whoelse is back
Jamie Thingelstad has returned toMarketWatch.com to again lead thecompany’s technology operations.
Thingelstad, founding chief tech-nology officer of BigCharts (whichwas acquired by MarketWatch.com in1999), led the development of the na-tionwide network that serves millionsof Web pages per day and connectsoffices around the world, along withthe database system that delivers sto-ries, charts and data to hundreds ofWeb sites.
He left the company in early 2001to pursue other ventures but agreed toreturn in early 2002.
2001 ANNUAL REPORT NEW FACE: KATHY YATES MKTW 9
Kathy Yates, a former seniorexecutive with Knight Ridder andWomen.com, joinedMarketWatch.com in December 2001 as chief operatingofficer and president. In an interview withEditor-in-Chief Thom Calandra, she talks about hergoals for the company and heroutlook for itsbusinesses.
On diverse revenue streams
Calandra: How do youlook at a company like this,where there are two rev-enue streams, licensing andadvertising, each responsi-ble for about half of therevenue pie?
Yates: One of thestrengths of Market-Watch.com is that we havetwo primary revenue lines,licensing and advertising.The fact that we have thoserevenue streams helps ussurvive some of the downturns in one mar-ket vs. another.
We are a more competitive company anda more stable company because the revenuestream is diversified.
On measuring our success
Calandra: What’s your read on how me-dia companies, and particularly media com-panies with large Internet operations, areevaluated in terms of success? Is it merelyrevenue growth, or is there something elsein the mix?
Yates: There is absolutely somethingmore in the mix. It used to be just about rev-enue growth. That’s how Internet companieswere evaluated two years ago.
Now clearly investors need to know thatwe can make a profitable business out ofthis.
MarketWatch.com made tremendousprogress in 2001 toward that goal, and we’llsee further progress in 2002.
On the economy
Calandra: Do you see a great rebound inthe economy this year?
Yates: I think we will see a rebound. Idon’t know that I’d call it great. This is thethird major economic cycle that I’ve man-aged through in a media company, and mypast experience is that we will see a reboundthis year. But it’s likely to take more than ayear before it returns to what we’d considera normal environment.
I want to add, though, that I don’t thinkwhat we experienced in 2000 was necessar-ily normal. I think it was well understood tobe an extraordinary convergence of unbe-lievably available capital for forming newcompanies and a lot of experimentation withthis new medium called the Web. I don’tthink the patterns that we saw there are like-ly to be repeated in the future.
But I do think that advertising on theWeb is going to come back in a very pro-nounced way.
On new revenue sources
Calandra: What type of revenue ideasare you looking at?
Yates: Some of the ideas we’ve talkedabout are a subscription-based business, orbranching out on the licensing side intoeven more services beyond those Web inte-gration services that we provide. But we arealso focused on growing the revenues of ourexisting business. I don’t think we should bethinking as a company that all our growth isgoing to come out of new business lines be-cause there is still an awful lot of growth tobe pursued both on the advertising side forthe Web site and on the licensing side withexisting products.
On our major shareholders
Calandra: How do we develop our rela-tionships with our two major shareholders,Pearson and CBS?
Yates: They’re both im-portant strategic partner-ships. The CBS presence isimportant in generatingname awareness in thegreater population aboutMarketWatch.com as wellas contributing to the senseof credibility that we have.
I think ultimately ourcredibility stands on the re-porting that we do, but ourassociation with CBS hasclearly been very valuableto us in the past. The Pear-son partnership is extreme-ly important to us, particu-larly in Europe, where theyreally are the premier me-dia company. Our associa-tion with them carries withit the same level of respectand credibility that extendsto us in the U.S. comingfrom CBS.
But we don’t yet operateMarketWatch.com as an in-tegrated business with ei-ther of these partners. Wewill continue to explore op-portunities to, for example,sell advertising across thedifferent media forms in anintegrated fashion. Thatwould make sense to adver-tisers. They may want tohave a presence on TV, onthe radio, on the Web andpotentially even in print inone buy.
On our news
Calandra: How does the newsroom fitinto this company?
Yates: The fact that MarketWatch.comhad a news operation was one of the thingsthat was very attractive to me as I was con-sidering whether or not to come here.
I grew up in Knight Ridder, where thenews culture was very strong. Although I’mnot a journalist and never had much operat-ing responsibility for the news side ofKnight Ridder’s operations, I came to caredeeply about the role of journalism in theway this country operates. In times likethese, the role of financial journalism iseven more poignant and more pointed.
I think it’s an extremely important part ofwho we are and what this company doesthat we have an editorial voice. We areclearly perceived by a substantial audienceas being credible, reliable and a fast place toget their financial news. That is fundamentalto our mission.
Q&A: MarketWatch’s new presidentVeteran of old-media and new-media companies joins management team
President and Chief Operating Officer Kathy Yates
“We are a more competitive company and a more stable company because the revenue stream is diversified.”
“We are clearly perceived by a substantial audience as being credible, reliable and a fast place to get their financial news. That is fundamental to our mission.”
BY CHRIS PUMMERPERSONAL FINANCE EDITOR
The MarketWatch Radio Network passeda milestone in 2001, topping 200 affiliatesacross the United States.
The division expanded to 208 affiliatestations from 145 at the start of the year andnow boasts twice as many stations as TheWall Street Journal’s radio network.
Westwood One, a leading syndicator thatdistributes MarketWatch.com’s radio pro-gramming, estimated the lineup’s listener-ship grew 40 percent in 2001, as stationstook advantage of its round-the-clock re-ports to meet growing consumer demand forfinancial expertise.
“The economy is on people’s minds, es-pecially since Sept. 11,” said James Starace,Westwood One’s vice president of affiliateinformation and compliance. “The radioproduct is very popular, not just with newsand talk shows now but with music stations,too.
“More and more music stations want tobe well-rounded and have some financialnews, particularly in the early morning and
after the bell,” Starace said. “The radioproduct is popular because it presents busi-ness news in a way that’s accessible toeveryone.”
“The catalyst for the growth is both theMarketWatch.com name and the quality ofreporting,” said Frank Barnako, Market-Watch.com’s vice president of radio.
“We have to give a lot of credit to West-wood One as our distributor and advertis-ing-sales partner,” Barnako said. “Theyhave existing relationships with thousandsof stations around the country and are a one-stop shop for all sorts of news and program-ming.”
Once a station signs up as an affiliate, itreceives the programming at no charge inexchange for giving MarketWatch.com theright to sell 18 minutes of commercials eachweek. The commercials are sold by West-wood One.
According to Arbitron, Market-Watch.com radio had a 0.3 national rating atclose of 2000 and a 0.4 rating at end of2001, which translates to about 650,000 lis-teners in an average quarter-hour.
“We’ve become super-focused on serv-
ing the affiliates,” Bar-nako said. “We’re do-ing virtually all thebusiness newscasts onWBZ in Boston, alegacy station that’sbeen around for 50years. We do customreports for them allday long, just as we dofor 1010 WINS inNew York and others.”
As it expanded itsaffiliations, the radionetwork established it-self in all of the top 25 U.S. markets.
MarketWatch.com also has helped affili-ates increase their business coverage tomeet growing demand, as KFWB in LosAngeles did when it added an hour of busi-ness news to its midday programming.
“Our newscasters will do as many as sixnewscasts an hour,” Barnako said.
“Ron Amadon will do newscasts custom-tailored for New York, Boston, Minneapolisand Los Angeles in the same hour, so he’sconstantly looking at local news for all
those markets.”The radio division also produces audio
for the CBS MarketWatch.com Web sitefrom corporate conference calls and analystreports and invites affiliates to do one-on-one interviews with MarketWatch.com re-porters on the latest breaking news andtrends.
“The radio network is as much about vis-ibility and marketing of the company as it isabout being a successful business division,”Barnako said.
10 MKTW ON THE AIR: TV AND RADIO MARKETWATCH.COM
BY CHRIS PUMMERPERSONAL FINANCE EDITOR
During a year in which almost every me-dia company struggled, MarketWatch.com’stelevision business expanded its audiencereach.
Snaring market share from competitorsas everybody suffered, the company in-creased the number of stations that carry itsreports, setting it up for a larger share of ad-vertising as the economy bounces back.
The TV division grew its potential audi-ence despite economic malaise and staffingcutbacks. It expanded local affiliates to 138from 120 and now reaches more than 85 per-cent of U.S. households.
Along with broadening its reach in 2001,the TV division expanded the focus of itsmain product, the “CBS MarketWatchWeekend” show. It now includes more per-sonal finance coverage to appeal to a wideraudience — especially during a marketslump.
The half-hour show, which affiliates airin their own chosen time slots, is seen in anestimated 1 million households, accordingto the Nielsen Metered Market ratings. Itsgrowing appeal became evident at the end of2001, when its ratings surpassed those of“Face the Nation” in the New York market
in some weeks.“We highlight news in business and the
financial markets, but we’re also featuringmore stories on where business meets popu-lar culture,” said Bob Leverone, vice presi-dent of television. “We’re doing more pack-ages that help consumers, which includes in-terviews with such personalities as FrancisFord Coppola, Ringo Starr and Tony Ben-nett. Having someone like Francis FordCoppola talking about being in debt and get-ting out of it is more significant to manypeople than news of a specific stock.
The TV operation also is an integral partof the CBS News team, providing businessand market segments to a variety of CBSprograms including “The Early Show,” “TheSaturday Early Show” and “The CBSEvening News” on the weekends.
MarketWatch.com provides market re-porting to CBS affiliates via CBS Newspath,a satellite service that delivers programmingto more than 220 stations. And it providescustomized daily reports on WCBS (Chan-nel 2) in New York and KPIX (Channel 5) inSan Francisco.
“We’re accepted as part of CBS News,”Leverone said. “If it’s a breaking story, thesestations will come to us, such as in the after-math of Sept. 11 after the markets closed.Thom Calandra was on with Dan Rather,Susan McGinnis was reporting for the earlymorning program, and we provided customreports for affiliates all over the country.”
The TV division also produces video re-ports for the Web site, both stand-alonepieces and sidebars with written coverage.
TV: Changing topics as times change
Radio: Building market share
Executive Producer Bob Leveronereviews a script with host SusanMcGinnis (center) and producer IresWilbanks (right) before a taping. KayGelbard completes McGinnis’ makeup.
Ann Cates takes a quick break from nonstop live radioreports for stations around the nation to show off herWashington studio in the National Press Building.
Financial highlights Year Ended December 31 2001 2000 1999IN THOUSANDS, EXCEPT PER SHARE DATA
Operating expenses:Product development 8,308 8,725 4,762General and administrative 12,600 14,211 8,948Sales and marketing 18,521 29,717 19,434CBS in-kind advertising 11,454 17,413 13,996Purchased in-process research and development — — 200Amortization of goodwill and intangibles 51,542 51,382 29,984Restructuring costs 1,409 — —
Total operating expenses 103,834 121,448 77,324
Loss from operations (76,601) (88,553) (62,290)
Interest income, net 1,554 2,285 1,412Loss in joint venture (1,476) (4,995) —
Net loss $(76,523) $(91,263) $(60,878)
Share and Per Share Data
Basic and diluted net loss per share $(4.60) $(5.83) $(4.68)Shares used in the calculation of basic and diluted net loss per share 16,648 15,659 13,004
Balance Sheet Data
Cash, cash equivalents and short-term investments $37,637 $45,356 $14,479Goodwill, net $21,179 $72,010 $122,840Total assets $77,513 $144,240 $156,855
Total liabilities $8,462 $10,823 $7,707
Stockholders’ equity $69,051 $133,417 $149,148
Financial information: The financial information included in this Annual Report has been derived from audited financial statements for 2001, 2000 and 1999. The selectedconsolidated financial data set forth above is qualified in its entirety by, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and the company’s audited financial statements for the year ended December 31. 2001. The section on “Management’s Discussion and Analysisof Financial Condition and Results of Operations” and the company’s audited financial statements are included in its Annual Report on Form 10-K as filed with the Securitiesand Exchange Commission. Stockholders of record will receive a copy of the Form 10-K along with the Proxy Statement prepared in connection with the 2002 Annual Meeting.
2001 ANNUAL REPORT THE NUMBERS MKTW 11
“Thank you. Amidst horror anddisbelief this morning we all wereunited again as grieving Americans.Your site was the only site I couldaccess while at work to get bits andpieces of information on this terribletragedy. With your professionalismbeing at its best in this trying time,we thank you.” — R.G.
“Your coverage of the markets andthe attack on NYC has beenextraordinary. Not only was yourWeb site updating the contentfrequently, but it was also available,unlike a lot of the other Web sites.Keep up the good work.” — K.R.
“You continuously updated yoursite and provided me and my co-workers with the only news of whatwas going on in the world. You willnever know how much I appreciatedbeing able to maintain the linkthroughout the day and get updatedinformation, almost as it washappening. I also thought it wasthoughtful of you to remove the adsthat had been displayed on the sidesof your site. Few sites would havedone that, but it was both tasteful andrespectful.” — C.H.
“I want to thank all of you foryour great coverage of the eventsyesterday. Normally I look to you forfinancial news and to other sites fornon-financial issues, but yesterdaymost national and world news siteswere inaccessible. MarketWatchremained completely accessible anddid a fantastic job of presentingtimely coverage of yesterday’sevents. I was able to keep up onlybecause of you. Thanks for the greatjob you did.” — T.P.
“Thank you very much for theexcellent reporting of the recentevents. I am writing you fromGermany. Even yesterday in theafternoon your site worked very welland kept us informed about thesetremendous attacks. Furthermore Iwant you to know that we feel withthe American community and wishyou strength to cope with thesuffering.” — B.M.
“Your ‘Latest News’ coverage ofthe recent events has been the bestI’ve seen on the Web. Excellent,excellent work. Keep it up!” — T.B.
“Thanks for the most currentinformation as the tragic eventsunfolded today. Your informativeWeb site kept my co-workers and meglued to the computer for the latestdevelopments.” — L.V.
“I noticed that on Tuesday youpulled all your advertising from thehome page. You were the only majorWeb site I saw do this, and I believeyour organization needs to becommended for taking this approach.It shows a tremendous amount ofcharacter on the part of your seniormanagement to make this decisionand obviously forgo a significantamount of revenue. The thought wastremendous and I thought I wouldjust let you know it didn’t gounnoticed.” — D.D.
“Thank you for your excellentcoverage following the cowardly actsof terrorism today. Your site was theonly site I could access to see thelatest newswires, and your siteseemed to be accessible all daylong. Thanks to your hard-workingstaff for their dedication.” — H.G.
“Your Web site was the only sitemy entire office floor was able toaccess. My wife would call me from home and give me live news that your site had alreadyupdated.” — R.C.
“Thank you for your outstandingcoverage of the recent attacks onAmerica. Your site kept me and myentire office up to date when we didnot have access to a television orradio. Your content people should becommended.” — T.F.
“Your coverage has been excellentand far more informative than othersites. One of my accountant friendsshowed me your site. It was our onlyvalid accessible source ofinformation via the Web the day ofthe attack. I intend to become aregular. Thank you for the incrediblecoverage.” — A.W.
“Since Tuesday, I have been gluedto your site. You have done afabulous job. It’s great that the siteupdates itself every couple ofminutes. It has kept me informed,and I am sure many others. Just a great job and the bestcoverage.” — S.G.
12 MKTW READERS RESPOND MARKETWATCH.COM
The events of Sept. 11 had a profound effect on all of us at MarketWatch.com. Along with the shockand grief, we have a strong feeling of pride that we did what we do best when our readers needed usthe most. We removed ads from our site and designed a front page that would load quickly and workwell on one of the Internet’s busiest news days ever. Here’s what our readers said:
