Tribune Company, Knight Ridder and CareerBuilder Conference
Call
August 24, 2001
Ruthellyn Musil, Vice President/Corporate
Relations, Tribune Company
On behalf of Knight Ridder and Tribune, good morning. Thank
you all for joining us on short notice to discuss this exciting
development in our recruitment advertising strategy. We'll
begin with some brief remarks from Rob McGovern, CEO of CareerBuilder
and then hear from Tony Ridder, Chairman and CEO of Knight
Ridder and Jack Fuller, President of Tribune Publishing. John
Madigan had hoped to join us this morning, but he was called
for jury duty.
For our question and answer session, we also
have with us several people who you know well: Dan Finnegan,
President of Knight Ridder Digital; David Hiller, President
of Tribune Interactive and Tim Landon, President of Classified
Services for Tribune. Polk Lafoon, VP of Corporate Relations
at Knight Ridder also is on the line with us.
Before turning the call over to Rob, let me
remind you that our comments and answers may include forward-looking
statements, which are subject to risks and uncertainties that
we discuss in greater detail in our SEC filings. Future results
could vary materially.
Now, having said that, here's Rob.
Rob McGovern, CEO, CareerBuilder
Good morning. On behalf of CareerBuilder, Tribune, and Knight
Ridder, I too would like to welcome you to today's call. There
are two areas I'd like to focus on this morning. First, today
we announced our acquisition of Headhunter.net, the third
largest player in the online recruitment space. Second, and
carrying the same level of significance, we announced several
key changes to the way that Tribune and Knight Ridder, brand,
sell, and leverage our newspaper employment products in the
online recruitment marketplace. I'll start by filling you
in on the Headhunter acquisition.
Almost exactly one year ago this week, Tribune
and Knight Ridder jointly acquired CareerBuilder. Our going
in strategy was to drive the market to a two horse race, between
CareerBuilder and Monster. Our plan was to do this by leveraging
our respective on and offline assets. Our mantra, which appeared
in nearly every strategy presentation and checkpoint meeting,
has been to create the Pepsi/Coke challenge in the online
recruitment market. I'm pleased to announce that today marks
the completion of phase one of our strategy, right on schedule.
It's now us and them, CareerBuilder and Monster, and the race
for leadership officially starts today.
With the completion of this acquisition, here's
how things will stack-up. When we combine CareerBuilder's
4 million monthly unique visitors, with the 2.4 Million that
visit Headhunter, we believe we'll be at near parity with
Monster. To put this into perspective, our next largest competitor
doesn't regularly meet Media Metrix' 200,000 minimum to be
listed in the careers category. Together we'll have over 25,000
customers, the power and leverage of Knight Ridder and Tribune's
newspapers, a sales and customer service force that has nearly
doubled in size, and some great new additions to our management
ranks.
Let me close my remarks by talking about how
we sell our products. Recently, we made a strategic decision
to unite Knight Ridder and Tribune's online recruitment sales
people with CareerBuilder's sales management team. This allows
us to gain greater leverage from CareerBuilder's aggressive
sales culture. Shortly, we'll welcome Headhunter's impressive
sales talent into this unified sales organization. Along with
our newspaper partners' print sales force we'll have the best
sales team, selling the best product in a two horse race.
Stay tuned for great marketplace theater
Let me next turn things over to Tony, who will
give you more of this exciting story.
Tony Ridder, Chairman and CEO, Knight
Ridder
Good morning, and thank you for joining us for this exciting
announcement. I think Rob has laid out the particulars well.
This is a watershed event for us. Very quickly, we are going
to see CareerBuilder's subscription base and revenues double;
its unique visitor count will climb from 4 million to nearly
6 million. Its market share will increase significantly.
But the acquisition of Headhunter is about
more than numbers. It is about the repositioning of CareerBuilder
as the distinct number two recruitment site on the Web, with
all the brand-building support it needs to start closing in
on number one.
Headhunter has been a respected competitor.
Now we will have its superb sales channel in our camp - and
its first-rate management team as well. In our release, we
talk about the redesign and re-labeling of our newspaper help-wanted
sections to "CareerBuilder" - to build the brand's
awareness. On top of that, we are looking to maximize the
effectiveness of our sales channel and looking for new ways
to involve the employment agencies. The combination - about
which we will have more to say as time goes on - will be a
powerful driver of the CareerBuilder franchise.'
Now, here's Jack Fuller
Jack Fuller, President, Tribune
Publishing
Thanks, Tony.
Recruitment is fundamentally a local proposition,
which is why newspapers have always been the place where job-seekers
start. As today's announcement demonstrates, we have no intention
of giving up that franchise.
Our share of the print and online recruitment
business is formidable. Together, the combined revenue in
this category of Tribune, Knight Ridder, CareerBuilder and
Headhunter will be nearly $1 billion. That's about 12% of
an 8 billion dollar market. Monster's share of this market
is about 5%.
We have a help-wanted resource unrivaled by
any national competitor because we are local. We have the
most jobs, we have real jobs and we have the freshest jobs.
In Chicago, our online reach exceeds Monster and if you add
in job seekers who use the Sunday Tribune, we outreach Monster
by a factor of 10.
That's a lot to build on. And we have a number
of pieces ready to put into place: the strengthened CareerBuilder
brand, the launch next month of our new CareerBuilder sections,
the promotional power of our newspapers and Tribune Television.
That said, we're ready to take your questions.
Q & A
Michael Beebe, Goldman Sachs: Hoping you could
give more details on how you will structure the sales force.
How much is outbound vs. inbound and how much is agency driven?
Rob McGovern: We look at sales challenge two-fold.
Outbound is comparable to Monster. We will have about 200
people calling on corporate accounts. We also have the ability
to get access to the newspaper call centers. This is mostly
an inbound channel-about 500 salespeople among us. About 80%
of the time that people call us, we can add an online component.
In terms of ad agencies, still less than 10% of overall revenues.
The agencies are still focused on the print side and are key
partners on the newspaper side.
Tim Landon: Less than 4% of TRB total recrui9tment
print revenue comes from TMP. 96% comes from other channels.
Look for much more proactive management of agency relationships.
Beebe: Comment on resume databases and how
they fit into the model.
McGovern: We'll be at about parity on a freshness
basis. The half-life of a resume is only a couple of weeks.
Monster figure of 14 million is since inception. When you
put out databases together, we'll be at about parity.
Dan Finnigan: For us, TMP% is roughly the same.
Lanny Baker, Salomon Smith Barney: Two questions.
At parity on freshness, give us a sense of what portion of
revenue is coming from the resume business. How important
is the resume business going forward. Given link with newspapers
and re-branding, what are the plans for Boston, Denver, Atlanta,
Dallas…the markets you're not in. Will we see partnerships?
McGovern: Currently about 1/3 is resume database
and about 2/3 job posting. We think it will stay about there.
These are complimentary products and we have both. We will
stay at about the same mix. In terms of adding new affiliates,
there's a careful balance that we're playing. Local is the
cornerstone of our strategy but we don't want to be a consortium.
We're up against a fierce competitor and we need to be agile.
We just signed a deal with Belo with the Dallas Morning News
as the chief property. We're not going to dilute our ability
to be an aggressive player in the game.
Steve Barlow, Prudential: Are you including
HotJobs in the Monster numbers? Project pro forma revenue
and EBITDA losses for 2001?
McGovern: I think the whole industry is waiting
with baited breath to see what happens there. The stats we're
looking at and I think their stats show about 60 to 70% overlap
on both customers and audience. Looks like there's going to
be a lot of melting when that deal comes together. Media Metrix
shows a 67% overlap. With HeadHunter, we've got 11% overlap
on customers, slightly less than 20% overlap on audience.
David Hiller: Combined (TRB/KRI/CB) online
revenues will be well over $100M in 2002 and be cash flow
positive in Q1. The addition of HeadHunter significantly enhances
our ability to become profitable.
Mandana Hormozi, Lazard Freres: At what point
do you expect sales forces to be integrated? Any costs associated
with that?
McGovern: Our watchword is we're taking the
heat up in the marketplace. Just came from a meeting where
I had employees chanting "we're # 1." We expect
to be up and running within 45 days of today, if the tender
goes as we expect it to go.
Hiller: Costs of integration are modest on
selling and marketing side.
Hormozi: With the battle with Monster, do you
expect to increase marketing spending?
McGovern: We're fortunate to have core assets
so that we don't have to spend the way Monster spends. We've
doubled our traffic. We don't need to spend on Super Bowls
and that kind of thing. We're going to use our newspapers
in kind and we're going to spend some money. We've got a great
deal with MSN. If it takes spending, we're going to spend
but right now we're feeling pretty good about our spending.
Ruthellyn Musil: I want to clarify that this
will be earnings neutral for TRB.
Tony Ridder: Maybe a penny or two dilutive
to KRI but were working to be neutral.
Bill Bird, Salomon Smith Barney: Can you provide
details on cross promotional plans? Discuss plans for positioning
or re-positioning the two distinct brands.
McGovern: We're going to put all the wood behind
one arrow. We're not going to do a two-brand strategy. The
brand is CareerBuilder and it will be that brand everywhere.
In terms of cross-promotion with the average newspaper, there's
very little crossover between paper ad readers and online
ad readers. We can offer customers unique buys that others
can't offer.
Hiller: The street value of promotional effort
is in the tens of millions. There's a serious promotional
effort against this. This builds on the fact that people naturally
come to newspapers when they're looking for jobs.
Finnigan: Rebranding effort is highly significant.
No one can replicate that branding.
Bird: Will CareerBuilder sections be weekly
and how long will effort last?
Landon: Yes, weekly, and permanent.
Michael Beebe, Goldman Sachs: Comment on the
status of your relationship with MSN. Can you give update
on whether the transaction will have impact on the relationship
between HeadHunter and Yahoo? What will be your pricing strategy?
How will you price relative to Monster or relative to your
pricing today?
McGovern: We've enjoyed a great relationship
with Microsoft. It started when Microsoft made a strategic
investment in CareerBuilder. It is a fact that that relationship
is up for renewal. The addition of Yahoo to our world does
add complexities. We love the position we're in and we think
all of the scenarios we run, we end up with a great portal
scenario when everything plays out. Regarding pricing, the
industry has been trying to work its way to a rational pricing
model. Unfortunately, we had the phenomenon of venture capitalists
funding irrational pricing structures. We offer outstanding
value to the customer.
Finnigan: About a ¼ of Headhunter's
revenues comes from staffing agencies, and the agencies will
be welcoming this news because they want a Pepsi to Monster's
Coke.
Beebe: How much traffic at CB comes from MSN?
McGovern: There's a lot of duplication that
has to be factored out. On de-duped basis, somewhere around
20%.
:: :: ::
This transcript contains certain comments
or forward-looking statements that are based largely on the
company's current expectations and are subject to certain
risks, trends and uncertainties. Such comments and statements
should be understood in the context of Tribune's publicly
available reports filed with the SEC, including the most current
annual report, 10-K and 10-Q, which contain a discussion of
various factors that may affect the company's business. These
factors could cause actual future performance to differ materially
from current expectations.
Tribune Company is not responsible for
updating the information contained in this document beyond
the published date, nor for changes made to this document
by wire services or Internet service providers.
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