Dueling Fools
July 28, 1999

Cramer v. Cramer
Bear Argument

by David Marino-Nachison ([email protected])

It's hard not to admire J.J. Cramer, the opinionated and outspoken hedge fund manager and columnist who is the public face and co-founder of the online financial news and information site TheStreet.com.

And as a newsman -- if anyone even uses that term anymore -- it's difficult not to appreciate the work of the entire TheStreet.com staff, a crew with a wide and impressive range of journalistic and financial experience.

So it should follow that I'd be a cheerleader for the stock, right? Wrong (note my restraint in not using Cramer's trademark exclamatory "WRONG!" there).

OK, my case: I'll start by addressing what is sure to be one of Brian's main arguments. TheStreet.com's got a fine brand. It's doing all the fine things an Internet company should do to get the word out with marketing agreements, portal tie-ins and so on and so forth. There's a television show on the hoof and Cramer is a CNBC regular. The site offers a nifty, if ubiquitous, suite of data offerings like earnings info, charting, and company financials.

To be sure, the company has spent massively to build its brand. Sales and marketing expenses were more than $9.2 million in 1998, nearly twice revenues and more than three times 1997's figure. Losses, naturally, are expected to continue into the next millennium.

That's not necessarily bad, so let's take a second and ask ourselves what that very expensive brand has come to mean.

The wrong answer is what the TheStreet.com calls itself, as per its description in the company's online investor relations area: "a leading Web-based provider of original, timely, comprehensive and trustworthy financial news, commentary and information aimed at helping readers make informed investment decisions."

The right answer is Cramer. His face and demeanor are unmistakable, his prose similarly, uh, distinctive. But the company has become so completely associated with its chief editorialist that I doubt many people give more than a moment's thought to the site's numerous other columns and resources. Hey, maybe that's why The Motley Fool decided to make its cartoonish mascot an actual cartoon instead of those goofy Gardner brothers.

The result is that over the last three months, users of TheStreet.com have, on average, visited the site less often, for less time, and generated fewer pages than most of its competitors (according to Media Metrix data). In some cases, the rift is pretty sizable: in June, an average "Streetwalker" viewed less than nine pages over the entire month, less than but comparable to users of Marketwatch.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MKTW)") else Response.Write("(Nasdaq: MKTW)") end if %>, Quicken.com, CNNfn.com, and Bloomberg.com and way, way off the Fool's 67 and Ragingbull.com's nearly 97. (Yes, most of that traffic is message-board driven, something TheStreet.com doesn't offer. Dismiss that if you want, but you'll notice that there are paid advertisements on message board pages.)

Now let's look at how their unique visitor numbers shaped up between February and June, conveniently the months for which I have data. In each of those months, TheStreet.com had fewer UVs than all of the above except Ragingbull.com, numbers for which only became available in June.

Just what investors should make of page view numbers and trends is, to be sure, still an inexact science. But they way I see it, TheStreet.com has readers who, even when they do come, don't stay long.

And that's not exactly the kind of thing you'd think would have advertisers -- you know, the group that accounted for 55% of TheStreet.com's revenues in 1998 and nearly 63% in the first quarter of this year -- dancing in the streets.

OK, then, what about TheStreet.com's base of subscribers, who pay between $10 and $100 annually for unlimited access to the company's offerings? Well, that base, while expanding in numbers, is becoming a smaller and smaller piece of the company's revenue pie as ad sales rise. Don't be surprised to see attrition set in as investors come to realize they can get J.J.'s missives with ease on Yahoo! Finance; with the preponderance of free investment information and other resources available online here and elsewhere, TheStreet.com seems unlikely to be a must-subscribe for any but industry professionals and junkies.

As of today, what most readers appear to be doing is saying, "Hi, J.J." and then "Bye, J.J.," like Dom DeLuise in Cannonball Run.

Should investors do the same?

I suppose there might be a place for TheStreet.com in a portfolio looking for exposure to the general boost in individual investing nationwide and the market's enthusiasm for Internet companies with recognizable brands.

But that's probably a better move if you're, as Cramer said TheStreet.com and its readers are in a recent column, a "stock-oriented" investor instead of a "company-oriented" one. (Good thing he's not the CEO!)

Not me. Until the -- dare I say it? -- company can demonstrate that its readers use the site for something more than occasional dispatches from the front, there are better things I can do with my money.

Next: The Bull Responds