Blog Post

Earnings: DJ's Zannino Uses Likely Last Call To Outline Progress; Hybrid Online Model Still In Play

One sure sign that life is winding down for Dow Jones (NYSE: DJ) as a standalone public company: an uncharacteristically brief Q3 earnings call with very little q-and-a from analysts. (The pending acquisition by News Corp. (NYSE: NWS) probably also brings to an end the detailed reports we’ve been getting throughout the life of the Online Journal and other digital businesses.) Beyond the usual financials we’ve detailed here, the event was one of the last major chances for CEO Rich Zannino to defend his own efforts, and those of his team, to “transform” the company over the last 20 or so months. His tone was even but his words showed some frustration with DJ’s portrayal as a company in need of saving. An excerpt:

“Our growth this year proves that we are no longer solely dependent on print advertising at the Journal to drive our total company growth. … We are not the wounded and malnourished media dinosaur that many in the press have recently portrayed us to be. On the contrary, our financial, operating and journalistic performance over the past 20 months is proof that, today, we are a fast-growing, thriving and vibrant company, one positioned for a very bright future. … News Corp. sought us out for these reasons.”

Hybrid model under review: An analyst mentioning the suggestion that Rupert Murdoch will make free, asked for an explanation of the current hybrid strategy, the factors that made DJ conclude “this was the right strategy” so “we can contrast going forward.” Zannino took the first stab, arguing that the WSJ Digital Network already gets high traffic from non-paying subs: “What Rupert Murdoch has said is that he wants to take a hard look at our online business model; that’s what we’ve done consistently over the years. … We have roughly 17 million uniques (visiting the WSJ Digital Network) … we have roughly 1 million paid subs so you can see how much traffic we’re getting from ‘free’ visitors on a monthly basis. … Even when you strip out MarketWatch, the Online Journal in the third quarter had about 10 million unique visitors, again we have 1 million paying, so you can see people are taking advantage of the free features.”

But Zannino left room for a shift:

“As we’ve looked at the model over the years … we have felt that — for this moment in time — we’ve had the right model. Times change, things change and the online space is rapidly evolving … people’s consumption on the web is rapidly changing and evolving .. it’s up to us to continue to evolve ourselves, to keep pace and stay ahead and continue to be the #1 business news and financial information source on the web. Our interests are totally aligned with News Corp.’s interest on that score. We’re going to spend some time here digging even deeper perhaps than we have in the past into the model.” That will be done with News Corp.”

Gordon Crovitz, the senior executive most responsible for online over the past few years, added: “We’ve known with the Online Journal we’ve had the best business site and we think we’ve had the best business model for it. The opportunity and the challenge now is to be both the best and the largest. At 10 million uniques for the Online Journal … we’re on our way but we’re not the biggest so is there a way to continue to expand our audience while maximizing the profitability? … We think there are some interesting opportunities to do that.” Crovitz emphasized that “outsider” need to be aware the model has been hybrid, that most unique visits even before MarketWatch went to open content.

The entire call is less than 30 minutes. You can listen here; the 8-minute q-and-a with the extended response on hybrid models is here. The full text of Zannino’s prepared remarks has now been posted here.