Dueling Fools
July 28, 1999

Cramer v. Cramer
The Bull Rebuttal

by Brian Graney ([email protected])

As Dave mentioned, we are both financial newsmen. In fact, both of us started our careers working for separate wire services owned by the same old-line financial news company. That's why I'm amazed that Dave cannot see TheStreet.com's potential.

Of course, having a commentator like James Cramer has been a huge plus for TheStreet.com so far. Having him as part of the company's editorial voice from the get-go has given the site some much-needed early credibility, but I don't think his daily missives will be the underpinnings of the company in the future. Cramer's ongoing popularity gives TheStreet.com some maneuvering room to get its legs under itself as a business and complete the build-out of its core news operation. But at some point, the firm's reporting staff will play a larger role in drawing in advertiser and subscriber revenues.

Many reporters, seeing where financial news is ultimately going in this country, are making the jump to cyberspace. Heck, both Dave and I did this exact thing when we came on board here at The Motley Fool. If this trend continues (and I think it will), then TheStreet.com is arguably better positioned than anyone to snatch up the growing ranks of high-quality financial reporters looking to work online. Herb Greenberg (formerly of the San Francisco Chronicle) and Adam Lashinsky (formerly of the San Jose Mercury News) are the two most prominent examples of TheStreet.com's pull. Other veteran reporters will follow in their footsteps, no doubt.

Why? In a word, demographics.

The online delivery of financial services is becoming increasingly popular in this country. According to International Data Corp., the number of online brokerage accounts is expected to rise four-fold to 24 million between now and 2002. Total assets held in online accounts are expected to climb from $300 billion today to roughly $3 trillion over that same span.

These new online investors are going to want financial news, giving TheStreet.com some pretty fertile soil in which to grow its subscriber base. With more subscribers, more ad dollars will flow into the company. This value chain of subscriber growth leading to ad revenue growth will be the key value-generating engine for the company.

But perhaps the most compelling statistic supporting TheStreet.com's market opportunity comes from the Pew Research Center, which claims that more than one-half of all Americans online use the Internet to obtain financial information and/or execute trades in stocks or bonds. If that figure is anywhere close to being accurate, then the demographics are there for online financial news sites like TheStreet.com to flourish.

Simply, I like what TheStreet.com is doing. I like the quality of its products. I like that the company has major stakeholders such as Japan's SOFTBANK, The New York Times Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NYT)") else Response.Write("(NYSE: NYT)") end if %>, and News Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NWS)") else Response.Write("(NYSE: NWS)") end if %>. I like the company's strategy of extending its brand name through online partners such as Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> and E*Trade <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGRP)") else Response.Write("(Nasdaq: EGRP)") end if %>. I like the fact that it now has a highly valued currency -- its stock -- which it can use to acquire complimentary businesses and expand its product offerings, if it chooses to in the future.

In short, I like the company's future potential, and I think it can create a great deal of value in the world of financial news. Investors willing to look a little further down the road (or the Street, in this case) should come to the same conclusion.

Next: The Bear Responds