Nasdaq: MKTW 2001 Annual Report

THE SKY’S THE LIMIT Investors, clients, Inside Web sites turn to MarketWatch for leadership

BY DAVID CALLAWAY EXECUTIVE EDITOR New face: Q&A session with For MarketWatch.com, diversity never President and COO Kathy Yates. Page 9 mattered so much as in 2001. Just as the company’s multi-pronged media strategy of Internet, television and radio helped it stand out in covering the year’s top story, the Sept. 11 terrorist attacks, its diversified 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 Promise shakeout, but to improve. kept It even managed to keep Nationwide: TV show and radio Company a year-old promise to be reports add dozens of stations. Page 10 reports cash-flow positive by the its first fourth quarter of 2001, fin- cash-flow ishing December with $1.3 positive million more than it had at quarter. the end of September. Page 4 Licensing, the pillar of strength during the recession’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 several big-name clients, including The New Back by the Bay: Thom York Times Digital, PaineWebber Online Calandra returns to San Francisco. Page 8 Services, USAToday.com and The Motley Fool. In advertising, the decline in traditional Plus: online brokerage clients and Internet clients Letter from CEO Larry Kramer Page 2 was met with a full-thrust creative cam- Advertising Sales Page 3 Licensing Sales Page 5 Continued on Page 6 Destination Sites Page 7 2 MKTW LETTER FROM THE CEO MARKETWATCH.COM

Board of Directors Larry Kramer Positive end to a memorable year Chairman and Chief Executive Officer MarketWatch.com, Inc. It’s fair to say that 2001 was a historic ------year for the stock markets, the Internet, and Peter Glusker3 MarketWatch.com. Senior Vice President, In the fourth quarter of 2001, Market- Viacom Interactive Ventures Watch.com made history with our first posi------Christie Hefner1 tive cash flow, ending the quarter with $37.6 Chairman and Chief Executive Officer million, $1.3 million more cash than we had Playboy Enterprises, Inc. at the start of the quarter. ------We were hit with the worst advertising Barry Herstein environment in a decade and saw our adver- Senior Vice President and Chief Marketing Officer Financial Times Group tising revenues drop from $35 million in ------2000 to $18 million in 2001. We were able Andrew Heyward2 to offset much of that loss, however, with President the growth of our licensing revenue from CBS News $16 million in 2000 to $25 million in 2001. ------I’m proudest of our many editorial Stephen Hill2 Chief Executive Officer achievements during 2001. We have begun Financial Times Group to regularly produce popular in-depth sto------ries and packages around major news events Robert Lessin and deep profiles of companies. Our Per- Chairman sonal Finance section and offerings have ex- SoundView Ventures ------panded to serve the growing numbers of John Makinson users who are looking for ways to protect Chairman and CEO Larry Kramer Finance Director and grow their nest eggs. Pearson plc Seeing the economy deteriorate early in Watch.com home page. clients during the year included interactive ------the year, we immediately took action to con- ¥ In June, we became one of 13 founding Java charting, a much more dynamic tool Dan Mason tain costs. Through tight management of members of the Online Publishers Associa- than our HTML charts, and international President Infinity Radio Group costs all year, and a round of layoffs in May, tion (OPA), an industry trade group formed charting products that cover markets in 16 ------we were able to cut almost $18 million in to promote common interests on a variety of countries. We announced several major me- Jonathan May1,3 operating costs from 2000 to 2001. Despite fronts, including online advertising and in- dia licensing partnerships during the year Senior Vice President our revenue drop, we were able to reduce tellectual-property rights. including The New York Times Digital in Triarc Companies, Inc. ------our net loss by $15 million and become ¥ The “CBS MarketWatch Weekend” tel- June, The Motley Fool in July and Russell I. Pillar cash-flow positive in the fourth quarter, a evision show continued its national growth USAToday.com in December. President and Chief Executive Officer goal established at the beginning of 2001. throughout the year, airing weekly on sta- I’m extremely happy to report the addi- Viacom Interactive Ventures There were several highlights in 2001 tions capable of reaching 85 percent of the tion of Kathy Yates as our president and ------worth looking back on: United States by Dec. 31, 2001. COO in December. She is an experienced Jeffrey F. Rayport1,2 ¥ Throughout the year, the company es- ¥ The MarketWatch.com Radio Network media and Internet executive, and her ar- Chief Executive Officer Marketspace LLC (a Monitor Group company) tablished itself as an online advertising in- surpassed the 200-station milestone nation- rival has already helped to enhance our pro------dustry innovator. In March, we began sell- wide in less than three years. The network cedures for planning and growth. Giles Spackman3 ing advertising in day-parts, with Budweiser had grown to 208 stations covering 88 per- Now that we are on firmer financial foot- Finance Director as an initial client. In July, we announced cent of the U.S. by Dec. 31, 2001. ing, we look forward to building our compa- Financial Times Group ------that we would de-emphasize the click- ¥ In March, we launched the redesigned ny in 2002. We are prepared to weather dif- 1 Member, Audit Committee through rate as a metric, causing healthy in- flagship CBS MarketWatch.com Web site ficult economic times, and at the same time, 2 Member, Compensation Committee 3 Member, Mergers & Acquisitions Committee dustry debate regarding the measurement of with expanded content, more tools and new well-situated to take advantage of the upturn online advertising campaigns. In August, we advertising formats. Additional product when it comes. Corporate Management debuted TV commercials on CBS Market- launches during the year included the pre- Thanks for your support. Watch.com with American Airlines’ ads air- mium content “Market Advisers” section Larry Kramer ing on the Web site before they hit television and a state-of-the-art “Alerts” product that Chairman and Chief Executive Officer screens. In November, we rolled out the “In- allows users to sign up for instant e-mail ------troductory Message,” a brief sponsorship messages tied to market-related events. Kathy Yates page that launches before the CBS Market- ¥ New tools developed for licensing President and Chief Operating Officer ------Joan P. Platt Stockholder information Chief Financial Officer and Secretary ------Legal counsel Transfer agent Form 10-K Investor relations William Bishop Morrison & Foerster LLP Mellon Investor Services LLC Stockholders of record will receive MarketWatch.com, Inc. Executive Vice President and General Manager 425 Market Street 85 Challenger Road a copy of MarketWatch.com’s Form 825 Battery Street ------San Francisco, Calif. 94105 Ridgefield Park, N.J. 07660 10-K, filed with the Securities and San Francisco, Calif. 94111 Scot McLernon Exchange Commission, which contains 415-733-0500 Office locations additional information relating to the investor_relations@marketwatch.com Executive Vice President Independent San Francisco Minneapolis company, along with the Proxy of Advertising Sales and Marketing accountants ------New York Washington Statement prepared in connection with Exchange Scott L. Kinney PricewaterhouseCoopers LLP Los Angeles Chicago the 2002 Annual Meeting. Additionally, MarketWatch.com, Inc. is traded 333 Market Street Boston Dallas a copy of the Form 10-K is available on the Nasdaq/National Market Executive Vice President of Licensing ------San Francisco, Calif. 94105 London Tokyo without charge. System under the symbol “MKTW.” Jamie Thingelstad This Annual Report contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward- Chief Technology Officer looking statements, including statements about Mr. Kramer and Ms. Platt’s goal of making MarketWatch.com cash-flow positive for year 2002; Mr. McLernon’s ------statements about the continued commercial success of introductory messages and the potential advertising revenue derived from this product and predictions about the David Callaway continued viability and success of online advertising; and Ms. Yates’ statements about including a subscription-based business or branching out further the company’s Vice President of News and Executive Editor existing licensing business as approaches to expanding the company’s revenue stream, expanding opportunities to further leverage the company’s alliance with existing partners and predictions about the comeback of advertising on the Web. Potential risk factors which could affect our business and financial results are discussed in our Photos by Erin Beach, Kenneth Yueh, Roger Form 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 are Wallace, Frank Barnako and Lindsay Miller subject to substantial risks and uncertainties. 2001 ANNUAL REPORT ADVERTISING SALES MKTW 3 When the going gets tough, get creative!

BY ANNE STANLEY NEWS EDITOR

Take a tough advertising environment and multiply it by 2001. What do you get? For MarketWatch.com, an entirely new creative solution was the right answer. The combination of new ideas for advertising display, such as introductory messages and rich media windows, with strong creative and an integrated offering across the Web, television and radio, set the company on a pioneering path in Web advertising last year. Along with kudos from existing financial clients like Charles Schwab, Ameritrade and Executive Vice President Scot McLernon (right) leads a team that includes Sandra Baez and Alan Deicas, who manage the Fidelity, MarketWatch.com’s offerings complex ad-placement systems that put the right ads on the right pages at the right times. Below, the rich media window helped lure a new type of client to the Web allows an advertiser’s interactive message to appear prominently in a story so that no reader can miss it. for the first time: big-name brand clients such as American Airlines, Cadillac, Saturn, and the same can be said for the site’s spe- Lexus, Visa and Budweiser. cial-format ad campaigns,” the magazine Media Magazine named Market- said in its report. The ranking was based in Watch.com No. 1 on its 2001 list of best on- part on the “extent to which each site has line publishers in the category “Business been an innovator or leader in the evolution and Finance,” topping the Wall Street Jour- of online advertising and the medium in nal’s online edition and Forbes.com, in large general.” part because of the company’s advertising CBS MarketWatch.com was one of the strategy. first sites to offer advertising positions that “The financial news is always riveting, moved beyond the banner ad. From the early content sidebar and animated headers, MarketWatch.com continued to build on “We only work with past innovations in 2001, helping introduce two major new advertising solutions. the best. CBS Market- The “rich media window” is an interactive ad unit embedded within the site con- Watch.com has produced tent that allows users to view information, consistently proven results submit e-mail addresses, navigate a “mini- site,” view TV commercials, or even enter year after year. This can contests, all without leaving the page. The introductory message is an eight-second be attributed to the quality presentation that delivers a compelling and well-designed commercial to users as they of content and in-depth enter the site. Scot McLernon, executive vice president refine offerings that give advertisers the “Budweiser is one of the first traditional ad- analysis on the site, but of sales and marketing, said both products ability to deliver their messages in a specific vertisers to embrace a highly targeted Web were big hits with potential ad buyers. He region or country, at certain times of the day, site as a medium to build its brand.” also to the insight of our predicted the two — especially the introduc- by Internet service provider and browser Meeting clients’ needs in the most effi- account team.” tory messages — would continue to play a software, and many other ways. cient and innovative ways possible became big role in attracting advertising revenue for For example, it introduced a campaign a critical challenge in the past year — not the company in 2002 as they get more so- for Budweiser in March that used front-page just because of financial constraints, but phisticated and gain acceptance from users. banners to promote the beer, running from also because of the importance of the mes- — What Invesco “As this medium evolves into something noon to 6 p.m. every Friday, just before hap- sage itself, particularly in the wake of the closer to broadcast, we believe introductory py hour, in each reader’s local time zone. Sept. 11 terrorist attacks. says about its messages will become an industry standard “MarketWatch.com hit the mother lode “Online advertising is here to stay,” — as they are in our own television show,” of traditional advertisers in Budweiser, McLernon declared. MarketWatch.com McLernon said. owned by Anheuser-Busch and the source “I would suggest that more than any year advertising campaign Delivery technology continued to evolve of such cult-like advertising as the ‘Wassup’ before, last year, with all of its tragic events, in 2001, and MarketWatch.com was able to beer campaign,” CNet News.com reported. has proven that point.” 4 MKTW FINANCIAL RESULTS MARKETWATCH.COM An early promise kept Company reaches positive cash flow in fourth quarter

BY NEIL CHASE MANAGING EDITOR Joan Platt and Larry Kramer had every reason to fail. But they didn’t. When the MarketWatch.com CFO and CEO promised positive cash flow for the fourth 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 looked like revenues from advertising sales would pick up.” They could not have foreseen a year-long advertising slump, the disappearance of some dot-com advertising and licensing clients, or the terrorist attack that would cripple the economy of the United States right before the start of that crucial fourth quarter. But they did deliver on the promise, with no excuses needed. And they did it convinc- ingly: The company had $37.6 million in cash on Dec. 31, $1.3 million more than it did on Sept. 30. Shrinking loss Chief Financial Officer Joan Platt Overall numbers for the year were im- pressive in light of the tumultuous markets, “We were building our infrastructure and organization over the previous two years, with a pro forma loss of $23.1 million for but we were building carefully. We managed to build our cost structure the year, a sharp improvement from a $33.9 only as we saw the top-line revenue materialize.” million loss for the year 2000. That came in the face of revenue decreas- ing 15 percent from the prior year to $45.9 million. more than sufficient, and we expect to gen- Watch.com reported quarterly results and A changing economy The promise of positive cash flow came erate positive cash flow from operations, each time the question came up, Kramer and in January as the company announced which is currently anticipated by the end of Platt reiterated that they were on track to As the year progressed, so did the soft- fourth-quarter 2000 results. this year,” Kramer said in the press release. reach positive cash flow. ness in advertising. But the company adjust- “We believe our current cash reserves are Throughout 2001, each time Market- They never hesitated, never pulled back, ed well, exceeding its bottom-line targets in never warned that it might not work. each quarter. But didn’t they have their doubts? When it became evident at midyear that MarketWatch.com 2001 usage statistics Platt says no. the expected economic turnaround had not She never once doubted that Market- yet started, the company cut costs with a re- Quarterly Quarterly Watch.com would deliver positive cash flow structuring that slowed down the effort to average average in the fourth quarter. Not even after the ter- grow in areas that had not yet taken off, monthly page views unique users rorist attacks. such as wireless and broadband. The move “Sept. 11 was a terrible catastrophe, but included cutting about 15 percent of the I’m a believer in the U.S. economy and cap- staff, or about 35 people. 739 9.0 9.5 9.2 italism,” she said. Overall, the company managed to reduce 676 684 665 8.5 Million Million Million Million The company made it through 2001 be- its headcount from 259 at the end of 2000 to Million Million Million Million cause “We had already managed well,” Platt 201 at the close of 2001. said. With 2001 behind them, Kramer and “We were building our infrastructure and Platt aren’t done making promises. organization over the previous two years, Their goal for 2002: Positive cash flow Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 but we were building carefully. We man- for the year, and they’re just as confident aged to build our cost structure only as we about making that target as they were all Sources: Internal server log data, DoubleClick, digiMine saw the top-line revenue materialize.” through 2001. 2001 ANNUAL REPORT LICENSING SALES MKTW 5 Diversification proves to be key to success Sale of charts, data, and news sustains revenue as business grows

We dramatically expanded the breadth and BY NEIL CHASE MANAGING EDITOR depth of content we offer them while reduc- ing the number of vendors they have to In a year when the advertising markets use.” struggled to get out of a slump, Market- For another high-profile client, The New Watch.com’s licensing team was able to in- York Times Digital, a key factor was Mar- crease revenue by more than half and pro- ketWatch.com’s ability to deliver full pages vide a significant boost to the company’s of Web content, including company pro- bottom line. files, historical stock performance and mu- An expanded line of products and a tual-fund data. The two companies also strong and continuous commitment to have an editorial partnership to share news world-class service helped highlight licens- stories. ing as a growing part of the company’s di- “The new data area is just so much better versified revenue stream, with a broadened that it is flat-out in a different league than list of new clients as well as existing ones the old one,” said The Times’ Dan Bigman who upgraded with suites of additional of- after the new features were unveiled. “The ferings. more I look at this stuff, the more I love it, “A lot of our success was in retaining and realize what a huge upgrade it is to our and growing existing relationships with our site as a whole.” Executive Vice President Scott Kinney core clients: the leading brokerages, the Another client for which Market- leading banks, the leading financial publish- Watch.com provides online financial con- “A lot of our success was in retaining and growing existing ers,” said Scott Kinney, MarketWatch.com’s tent is UBS PaineWebber. “We deliver relationships with our core clients: the leading brokerages, the executive vice president of licensing. something like 67 individual pieces of con- “Financial services firms often strive to tent to their high-net-worth users,” Kinney leading banks, the leading financial publishers.” increase market share in a down economy, said. “They rely on us to provide real-time and one way they can quotes, charts and tools do that is to improve to their most valued ac- sells is its service commitment, as outlined The company’s endless commitment to their online offerings. MarketWatch.com countholders.” in the licensing team’s mission statement. It service was also displayed immediately af- So in 2001, we focused That account was reads: ter the September terrorist attacks. our efforts on those licensing sales another especially grat- “MarketWatch.com is committed to do “Our first reaction was concern for our firms and doing more ifying win in 2001 as whatever it takes to deliver world-class clients, several of whom were in the World IN THOUSANDS OF DOLLARS for them,” he said. MarketWatch.com was services to our clients. We will be the Trade Center and buildings in the immediate In addition to charts, 1999 5,262 able to replace one of fastest, most reliable, most flexible and vicinity,” Kinney said. stock and fund quotes, 2000 15,809 its prime competitors most responsive partner you have ever “On Sept. 11 and the days and weeks fol- and stories from 2001 24,775 as UBS PaineWebber’s known.” lowing, we did a number of things to help MarketWatch.com re- content provider. One testimonial to the quality of that our licensing clients in any way we could. porters, licensing rolled Other major deals service is the longevity of the top clients. Of We put special messages and contact infor- out a number of new products during the closed during 2001 included: the 10 largest MarketWatch.com licensing mation on their sites, hosted some displaced year, including new portfolios, company re- • A first-of-its-kind relationship with the customers, all but two have been active cus- clients in our midtown Manhattan office and search, insider-trading data and a full suite Financial Times under which Market- tomers for at least three years. provided other technical services that of mutual-fund data. Watch.com provides not only content but Several of them go back four years, and helped them bridge the disruption in their also Web editing and production tools for the longest-running relationship is the one Web site services.” Major deals the FT Investor site. with Charles Schwab, which was the very Looking forward, Kinney says existing • The addition of a large news portal to first licensing customer for Big Charts in clients will be offered even more in the next One client that added many of the new Datek’s site, allowing its customers to 1997. year, while the team continues to approach products was Ameritrade, the popular online quickly dig into news about companies they BigCharts became part of Market- new clients. brokerage. follow. Watch.com in 1999. Among the improvements in mind for “There’s been a trend among financial • A new portfolio product for users of “Clients say price is important, especial- 2002 are increased efforts to market the sto- services sites to consolidate suppliers and The Motley Fool. ly in a time like this,” Kinney said. “But ries written by CBS MarketWatch.com re- have one or two providers of news and tools they also emphasize that they very much ap- porters around the globe. instead of eight or more,” Kinney said. The best service preciate that the content is fast and reliable “MarketWatch.com news has been gain- “We were able to help Ameritrade do this and that we not only respond to their needs ing in popularity, and it’s becoming an in- by designing, building and launching for While the product might be charts, data but proactively identify things we can do to creasingly attractive part of our licensing them a full set of financial research tools. and news, what MarketWatch.com really improve their sites.” operation,” he said. 6 MKTW DESTINATION SITES MARKETWATCH.COM MarketWatch.com leads with new advertising, licensing solutions

CONTINUED FROM PAGE 1 paign that used several new display ideas to attract a new type of client to help fill the void: the big-name brand client, like Lexus and Budweiser. With new campaigns that featured “rich- media” windows within news stories, introductory messages that ran like TV commercials as the user came to the Web site, and “day-parts” strategies that allowed a client to advertise at specific times of day across different time zones, MarketWatch.com captured a host of new types of clients during the year and helped set several standards for online advertising going forward. “CBS MarketWatch has produced consistently proven results year after year,” said one client, Invesco. “This can be attributed to the quality of the content and in-depth analysis on the site, but also to the insight of the account team.”

New look, new tools Reporter Bambi Francisco, who covers Internet companies, interviews Ravi Chiruvolu of Charter Part of the reason for advertising’s cre- In the field Venture Capital (left), Philip Sanderson of WaldenVC (center) and Jin Byun of ABS Ventures at a conference. ative success was the ability to do more with the CBS MarketWatch.com Web site because of a technological redesign and over- The company transferred its stake in FT- grew as more CBS affiliates — and non- to discuss the impact of the attacks on the haul in the first quarter of 2001. The site’s MarketWatch.com to the FT in exchange for CBS stations — signed up. By the end of the U.S. financial markets. And television an- navigation was redesigned and its publish- a licensing contract to provide news, charts, year, MarketWatch.com radio reports were chor Susan McGinnis would report to ing systems replaced with two new propri- tools and a publishing system. heard on 208 stations, up from 145 at the Rather from Wall Street on the morning of etary editing and production tools. As part of the deal, Thom Calandra, CBS end of 2000, while the “CBS MarketWatch Sept. 17, when the financial markets opened Other changes throughout the year led to MarketWatch.com’s editor-in-chief, re- Weekend” television show extended its for the first time since the attacks. a new tool to post headline bulletins, not just turned from his stint in London to the Unit- reach to 85 percent of the United States. It was a vote of confidence in Market- on the front page but simultaneously across ed States, where he became a full-time It was those crucial relationships, along Watch.com’s multimedia approach to news, the entire site and through e-mails to read- columnist and television personality. Calan- with links to MarketWatch.com’s share- both from partner CBS and from the hun- ers. A new portfolio product was introduced, dra carried the torch for stock-market bears holder and news partner CBS, a unit of Via- dreds of thousands of readers who came to as were news alerts. And an aggressive cam- during the second half of the year, pointing com, that allowed the company’s reporters CBS MarketWatch.com for their news in paign to register users yielded 400,000 new out that many stocks were overvalued and and editors to reach millions of people on those chaotic days. members during the year, almost half of helping readers spot trouble before the mar- Sept. 11, via radio, television and Internet, “I was at work, with no television, and I whom signed up in the fourth quarter alone. kets pulled back in the fourth quarter. with breaking news minute-by-minute got a phone call alerting me to what was go- Internationally, MarketWatch.com re- throughout that day. ing on,” one reader wrote. “I frantically structured its deal with the Financial Times Broadcast relationships Over the week following the attacks, Ca- searched the Internet at other news sites — to turn its year-old joint venture, FTMarket- landra would appear on a special edition of all down. Yours was our lifeline to the latest Watch.com, into a licensing opportunity. In television and radio, market share the “CBS Evening News With Dan Rather” developments, complete with video.”

In the office From a San Francisco office adorned with a poster that might have been a bit ahead of its time, Executive Editor David Callaway oversees an operation that includes more than 70 journalists in 9 bureaus worldwide.

On the set MarketWatch.com reporter Trish Regan (right) prepares for a business report with news anchor April Cummings on the KPIX-TV (Channel 5) morning newscast in San Francisco. Market- Watch.com provides live television and radio reports to stations throughout the United States around the clock. 2001 ANNUAL REPORT DESTINATION SITES MKTW 7 Making the best even better BY ALEXANDER DAVIS “We were MANAGING EDITOR able to A wave of new enhancements and an ex- introduce panded menu of tools and features helped ourselves MarketWatch.com extend its position as the No. 1 online financial news source in 2001 to a lot of as the public’s demand for real-time finan- people, while also building cial information continued to grow. loyalty among readers who The destination sites — CBS Market- Watch.com and BigCharts.com — served already were frequent visitors more than 2.75 billion pages in 2001, aver- thanks to the tremendous aging in excess of 7.5 million pages per day. quality of MarketWatch.com’s The traffic kept MarketWatch.com on top of the Jupiter Media Metrix rankings for news, data and tools.” original financial news sites for the fourth — Executive Vice President year running and helped the company attract and General Manager Bill Bishop new types of advertisers looking to get into the financial space. MarketWatch.com also built upon its re- “Overall, the site took a giant leap for- lationships with partners like Yahoo! and ward and got smarter — all at once,” said AOL — both of which use CBS Market- Bill Bishop, executive vice president and Watch.com news feeds and are responsible general manager. “The improved infrastruc- for driving added viewers to the destination ture also allowed us to significantly grow sites. The news department made strides by the size of our registered-user database, in- making full-time hires in real estate, mutual creasing our membership by more than funds and other personal finance coverage 400,000 users in 2001.” “In terms of design changes, we’ve gone volume-related trading events. that finds a large audience among the AOL In February, the company overhauled its well beyond improving site navigation to MarketWatch.com’s news editors now and Yahoo! faithful. flagship CBS MarketWatch.com Web site. enhance the viewers’ experience both on the have a powerful way of disseminating “bul- “We were able to introduce ourselves to a The culmination of a four-month project front page of the site and on story pages,” letins” about urgent, top-tier developments. lot of people, while also building loyalty code-named “Odyssey,” the outcome was added David Callaway, executive editor. Headlines about news designated as a “bul- among readers who already were frequent an entirely new and improved look, with en- Leveraging MarketWatch.com’s broad letin” appear on every page on the flagship visitors thanks to the tremendous quality of riched tools, a crisper design and stronger suite of financial information and the power Web site. As of the end of the year, nearly MarketWatch.com’s news, data and tools,” site navigation. of the post-Odyssey news database, the site 100,000 subscribers had also signed up to Bishop said. One of the many design improvements also launched a new “Alerts” product that receive the reports through e-mail. “It’s also a testament to our ability to stay was increased capacity for photos, charts gives users the power to receive instant e- By offering these kinds of services, Mar- on people’s computer screens and our broad and other illustrations that made for more mails or wireless notices of news tied to ketWatch.com is taking steps to increase site distribution across major portals like AOL compelling and eye-appealing news pages. ticker symbols, key words, share prices and visits as well as expanding its readership. and Yahoo!”

BigCharts named best research site Top sites The BigCharts.com Web site was honored with two 2001 Readers’ Choice The leaders in Jupiter Media Metrix’s Awards in a competition run by Stocks & survey of Web sites in the Commodities magazine. BigCharts.com took first place in two Business/Finance:News/Research award categories: category as of December 31, 2001: • Subscription Internet Analytical Platforms recognizing “products that re- trieve and present data from remote servers Sites Unique Users (as well as the entire Internet) and offer MarketWatch.com sites 3,941,000 many of the analytical tools found in stand alone software.” CNNMoney 3,190,000 • Technical Analysis Web Sites recog- Quicken.com sites 2,478,000 nizing sites providing “a wealth of technical information, indicators, charts, sentiment Motley Fool 2,452,000 and opinion.” BankRate.com sites 2,319,000 “We’re honored to be recognized with TheStreet.com sites 1,458,000 two key first place awards by the readers of this important and respected trading strategy traders, as well as our status as the most latest detailed information on trading strate- Nasdaq Property 1,288,000 publication,” said Bill Bishop, executive comprehensive and easy-to-use investment gies and methods.” SmartMoney.com Property 1,217,000 vice president and general manager of Mar- research site on the Web.” “Our service is free,” he said, “and is the ketWatch.com. Bishop added: “The readers of Stocks & winner among a list of ‘for-pay’ software BizJournals 1,036,000 “They attest to the popularity of Commodities magazine are individuals who products and Web site solutions for which Wall Street Journal Interactive 1,023,000 BigCharts.com among the Internet’s serious invest in the markets and are looking for the people are willing to pay.” 8 MKTW OLD FACE: THOM CALANDRA MARKETWATCH.COM He’s back Company co-founder brings StockWatch home to MarketWatch

BY CHRIS PUMMER Once a leading chronicler of “New Econ- PERSONAL FINANCE EDITOR omy” stocks who wrote columns that moved shares and made many investors wealthier, Thom Calandra boasts a talent few finan- Calandra turned bearish in mid-2000 and cial journalists possess. Even when arguing sounded cautionary tones early in the mar- that the market’s future looks grim, he does ket’s slide that spared those who heeded it with an infectious verve that leaves read- them further losses. ers amused and enlightened. Affectionately referred to as being MarketWatch.com’s founding editor re- “smarter than the average bear,” Calandra is turned in mid-2001 to the San Francisco once again wearing the hat of chief Market- newsroom after 18 months in London, Watch.com commentator. His column re- where he built FTMarketWatch.com for mains one of the best-read features on the With regular appearances on CBS television and radio stations and on the MarketWatch.com’s corporate partner the company’s Web site, CBS Market- MarketWatch.com Web site, Thom Calandra makes the most of the unique Financial Times. Watch.com, and one of the most popular partnership between CBS and MarketWatch.com. He came back to a far different U.S. mar- market columns on the Web. ket than he’d left, with the Nasdaq having Calandra also appears each Sunday on panies like Kmart or Enron and the potential flash reports and e-mail newsletters. “All of fallen from a peak of above 5,000 to below the nationally-distributed television show for shares of tiny companies left for dead af- them can be licensed to major corpora- 2,000. “CBS MarketWatch Weekend.” He exam- ter the bursting of the Nasdaq bubble. tions,” he says. His perspective changed along the way. ines issues such as the bankruptcies of com- The feedback from MarketWatch.com’s And Calandra, a longtime gold bug, has Internet, television and radio viewers has made a bold promise to his readers for 2002: never been stronger, Calandra notes — or If the price of gold closes above $300 five more pointed. days in a row, he’ll dye his hair yellow. The “Our audience is holding our feet to the readers are watching. fire a lot more than they did in the good old days of 1997, ’98 and ’99. Back then, most folks were making money. Now, four-fifths of American mutual funds are in the red, and And look who retirement portfolios as a rule are down 50 else is back percent in value, maybe more.” The biggest trend he sees out there is the lack of Wall Street coverage for about 3,500 publicly traded companies, roughly a third of the entire U.S. stock market. “If that is not an opportunity for us, tell me what is.” As for the business of Market- Watch.com, Calandra says the world of electronic 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 the fourth quarter of 2001. We have deep support from our two partners — CBS and Pearson, owner of the Financial Times. I’m one of those who believe the broadband pipes will need filling, and the demand for interactive, real-time financial content will exceed nearly all categories.” Jamie Thingelstad has returned to The company also demonstrated it can MarketWatch.com to again lead the manage through dry advertising periods company’s technology operations. thanks to a steady licensing business, Calan- Thingelstad, founding chief tech- dra says. “Who else gets to call companies nology officer of BigCharts (which like American Express and Budweiser ma- was acquired by MarketWatch.com in jor customers, either for online ads or li- 1999), led the development of the na- censed content?” tionwide network that serves millions And its technology platform and publish- of Web pages per day and connects ing tools, he said, proved themselves time offices around the world, along with and again in stormy market conditions as the database system that delivers sto- millions turned to CBS MarketWatch.com ries, charts and data to hundreds of for their financial news. Web sites. Calandra stepped aside as an officer and He left the company in early 2001 executive of the company to focus on his to pursue other ventures but agreed to journalism and to work on some new edito- return in early 2002. rial products, which may include hourly 2001 ANNUAL REPORT NEW FACE: KATHY YATES MKTW 9 Q&A: MarketWatch’s new president Veteran of old-media and new-media companies joins management team

Kathy Yates, Yates: They’re both im- a former senior portant strategic partner- executive with ships. The CBS presence is important in generating Knight Ridder and name awareness in the Women.com, joined greater population about MarketWatch.com MarketWatch.com as well in December 2001 as contributing to the sense as chief operating of credibility that we have. officer and I think ultimately our credibility stands on the re- president. porting that we do, but our In an interview with association with CBS has Editor-in-Chief clearly been very valuable Thom Calandra, to us in the past. The Pear- she talks about her son partnership is extreme- goals for the ly important to us, particularly in Europe, where they company and her really are the premier me- outlook for its dia company. Our associa- businesses. tion with them carries with it the same level of respect On diverse and credibility that extends revenue streams to us in the U.S. coming from CBS. Calandra: How do you But we don’t yet operate look at a company like this, MarketWatch.com as an in- where there are two rev- tegrated business with ei- enue streams, licensing and ther of these partners. We advertising, each responsi- will continue to explore op- ble for about half of the President and Chief Operating Officer Kathy Yates portunities to, for example, revenue pie? sell advertising across the “We are a more competitive company and a more stable company different media forms in an Yates: One of the integrated fashion. That strengths of Market- because the revenue stream is diversified.” would make sense to adver- Watch.com is that we have tisers. They may want to two primary revenue lines, “We are clearly perceived by a substantial audience as being credible, reliable have a presence on TV, on licensing and advertising. and a fast place to get their financial news. That is fundamental to our mission.” the radio, on the Web and The fact that we have those potentially even in print in revenue streams helps us one buy. survive some of the downturns in one mar- On the On new ket vs. another. economy revenue sources On our news We are a more competitive company and a more stable company because the revenue Calandra: Do you see a great rebound in Calandra: What type of revenue ideas Calandra: How does the newsroom fit stream is diversified. the economy this year? are you looking at? into this company?

On measuring Yates: I think we will see a rebound. I Yates: Some of the ideas we’ve talked Yates: The fact that MarketWatch.com our success don’t know that I’d call it great. This is the about are a subscription-based business, or had a news operation was one of the things third major economic cycle that I’ve man- branching out on the licensing side into that was very attractive to me as I was con- Calandra: What’s your read on how me- aged through in a media company, and my even more services beyond those Web inte- sidering whether or not to come here. dia companies, and particularly media com- past experience is that we will see a rebound gration services that we provide. But we are I grew up in Knight Ridder, where the panies with large Internet operations, are this year. But it’s likely to take more than a also focused on growing the revenues of our news culture was very strong. Although I’m evaluated in terms of success? Is it merely year before it returns to what we’d consider existing business. I don’t think we should be not a journalist and never had much operat- revenue growth, or is there something else a normal environment. thinking as a company that all our growth is ing responsibility for the news side of in the mix? I want to add, though, that I don’t think going to come out of new business lines be- Knight Ridder’s operations, I came to care what we experienced in 2000 was necessar- cause there is still an awful lot of growth to deeply about the role of journalism in the Yates: There is absolutely something ily normal. I think it was well understood to be pursued both on the advertising side for way this country operates. In times like more in the mix. It used to be just about rev- be an extraordinary convergence of unbe- the Web site and on the licensing side with these, the role of financial journalism is enue growth. That’s how Internet companies lievably available capital for forming new existing products. even more poignant and more pointed. were evaluated two years ago. companies and a lot of experimentation with I think it’s an extremely important part of Now clearly investors need to know that this new medium called the Web. I don’t On our who we are and what this company does we can make a profitable business out of think the patterns that we saw there are like- major shareholders that we have an editorial voice. We are this. ly to be repeated in the future. clearly perceived by a substantial audience MarketWatch.com made tremendous But I do think that advertising on the Calandra: How do we develop our rela- as being credible, reliable and a fast place to progress in 2001 toward that goal, and we’ll Web is going to come back in a very pro- tionships with our two major shareholders, get their financial news. That is fundamental see further progress in 2002. nounced way. Pearson and CBS? to our mission. 10 MKTW ON THE AIR: TV AND RADIO MARKETWATCH.COM TV: Changing topics as times change

BY CHRIS PUMMER in some weeks. PERSONAL FINANCE EDITOR “We highlight news in business and the financial markets, but we’re also featuring During a year in which almost every me- more stories on where business meets popu- dia company struggled, MarketWatch.com’s lar culture,” said Bob Leverone, vice presi- television business expanded its audience dent of television. “We’re doing more pack- reach. ages that help consumers, which includes in- Snaring market share from competitors terviews with such personalities as Francis as everybody suffered, the company in- Ford Coppola, Ringo Starr and Tony Ben- creased the number of stations that carry its nett. Having someone like Francis Ford reports, setting it up for a larger share of ad- Coppola talking about being in debt and get- vertising as the economy bounces back. ting out of it is more significant to many The TV division grew its potential audi- people than news of a specific stock. ence despite economic malaise and staffing The TV operation also is an integral part cutbacks. It expanded local affiliates to 138 of the CBS News team, providing business from 120 and now reaches more than 85 per- and market segments to a variety of CBS cent of U.S. households. programs including “The Early Show,” “The Along with broadening its reach in 2001, Saturday Early Show” and “The CBS the TV division expanded the focus of its Evening News” on the weekends. main product, the “CBS MarketWatch MarketWatch.com provides market re- Weekend” show. It now includes more per- porting to CBS affiliates via CBS Newspath, sonal finance coverage to appeal to a wider a satellite service that delivers programming audience — especially during a market to more than 220 stations. And it provides slump. customized daily reports on WCBS (Chan- The half-hour show, which affiliates air nel 2) in New York and KPIX (Channel 5) in in their own chosen time slots, is seen in an San Francisco. estimated 1 million households, according “We’re accepted as part of CBS News,” to the Nielsen Metered Market ratings. Its Leverone said. “If it’s a breaking story, these growing appeal became evident at the end of stations will come to us, such as in the after- 2001, when its ratings surpassed those of math of Sept. 11 after the markets closed. “Face the Nation” in the New York market Thom Calandra was on with Dan Rather, Susan McGinnis was reporting for the early Executive Producer Bob Leverone morning program, and we provided custom reviews a script with host Susan reports for affiliates all over the country.” McGinnis (center) and producer Ires The TV division also produces video re- Wilbanks (right) before a taping. Kay ports for the Web site, both stand-alone Gelbard completes McGinnis’ makeup. pieces and sidebars with written coverage. Radio: Building market share BY CHRIS PUMMER after the bell,” Starace said. “The radio ing the affiliates,” Bar- PERSONAL FINANCE EDITOR product is popular because it presents busi- nako said. “We’re do- ness news in a way that’s accessible to ing virtually all the The MarketWatch Radio Network passed everyone.” business newscasts on a milestone in 2001, topping 200 affiliates “The catalyst for the growth is both the WBZ in Boston, a across the United States. MarketWatch.com name and the quality of legacy station that’s The division expanded to 208 affiliate reporting,” said Frank Barnako, Market- been around for 50 stations from 145 at the start of the year and Watch.com’s vice president of radio. years. We do custom now boasts twice as many stations as The “We have to give a lot of credit to West- reports for them all Wall Street Journal’s radio network. wood One as our distributor and advertis- day long, just as we do Westwood One, a leading syndicator that ing-sales partner,” Barnako said. “They for 1010 WINS in distributes MarketWatch.com’s radio pro- have existing relationships with thousands New York and others.” Ann Cates takes a quick break from nonstop live radio gramming, estimated the lineup’s listener- of stations around the country and are a one- As it expanded its reports for stations around the nation to show off her ship grew 40 percent in 2001, as stations stop shop for all sorts of news and program- affiliations, the radio Washington studio in the National Press Building. took advantage of its round-the-clock re- ming.” network established it- ports to meet growing consumer demand for Once a station signs up as an affiliate, it self in all of the top 25 U.S. markets. those markets.” financial expertise. receives the programming at no charge in MarketWatch.com also has helped affili- The radio division also produces audio “The economy is on people’s minds, es- exchange for giving MarketWatch.com the ates increase their business coverage to for the CBS MarketWatch.com Web site pecially since Sept. 11,” said James Starace, right to sell 18 minutes of commercials each meet growing demand, as KFWB in Los from corporate conference calls and analyst Westwood One’s vice president of affiliate week. The commercials are sold by West- Angeles did when it added an hour of busi- reports and invites affiliates to do one-on- information and compliance. “The radio wood One. ness news to its midday programming. one interviews with MarketWatch.com re- product is very popular, not just with news According to Arbitron, Market- “Our newscasters will do as many as six porters on the latest breaking news and and talk shows now but with music stations, Watch.com radio had a 0.3 national rating at newscasts an hour,” Barnako said. trends. too. close of 2000 and a 0.4 rating at end of “Ron Amadon will do newscasts custom- “The radio network is as much about vis- “More and more music stations want to 2001, which translates to about 650,000 lis- tailored for New York, Boston, Minneapolis ibility and marketing of the company as it is be well-rounded and have some financial teners in an average quarter-hour. and Los Angeles in the same hour, so he’s about being a successful business division,” news, particularly in the early morning and “We’ve become super-focused on serv- constantly looking at local news for all Barnako said. 2001 ANNUAL REPORT THE NUMBERS MKTW 11

Financial highlights

Year Ended December 31 2001 2000 1999 IN THOUSANDS, EXCEPT PER SHARE DATA

Income Statement Data

Net revenues: Advertising $17,988 $34,952 $18,033 Licensing 24,775 15,809 5,262 Other 3,093 3,146 1,640 Total net revenues 45,856 53,907 24,935

Cost of net revenues 18,623 21,012 9,901

Gross profit 27,233 32,895 15,034

Operating expenses: Product development 8,308 8,725 4,762 General and administrative 12,600 14,211 8,948 Sales and marketing 18,521 29,717 19,434 CBS in-kind advertising 11,454 17,413 13,996 Purchased in-process research and development — — 200 Amortization of goodwill and intangibles 51,542 51,382 29,984 Restructuring 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 1,412 Loss 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 $14,479 Goodwill, net $21,179 $72,010 $122,840 Total 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 selected consolidated 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 Condition and Results of Operations” and the company’s audited financial statements for the year ended December 31. 2001. The section on “Management’s Discussion and Analysis of 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 Securities and 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. 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 shock and grief, we have a strong feeling of pride that we did what we do best when our readers needed us the most. We removed ads from our site and designed a front page that would load quickly and work well on one of the Internet’s busiest news days ever. Here’s what our readers said:

“Thank you. Amidst horror and “Thanks for the most current disbelief this morning we all were information as the tragic events united again as grieving Americans. unfolded today. Your informative Your site was the only site I could Web site kept my co-workers and me access while at work to get bits and glued to the computer for the latest pieces of information on this terrible developments.” — L.V. tragedy. With your professionalism being at its best in this trying time, “I noticed that on Tuesday you we thank you.” — R.G. pulled all your advertising from the home page. You were the only major “Your coverage of the markets and Web site I saw do this, and I believe the attack on NYC has been your organization needs to be extraordinary. Not only was your commended for taking this approach. Web site updating the content It shows a tremendous amount of frequently, but it was also available, character on the part of your senior unlike a lot of the other Web sites. management to make this decision Keep up the good work.” — K.R. and obviously forgo a significant amount of revenue. The thought was “You continuously updated your tremendous and I thought I would site and provided me and my co- just let you know it didn’t go workers with the only news of what unnoticed.” — D.D. was going on in the world. You will never know how much I appreciated “Thank you for your excellent being able to maintain the link coverage following the cowardly acts throughout the day and get updated of terrorism today. Your site was the information, almost as it was only site I could access to see the happening. I also thought it was latest newswires, and your site thoughtful of you to remove the ads seemed to be accessible all day that had been displayed on the sides long. Thanks to your hard-working staff for their dedication.” — H.G. of your site. Few sites would have done that, but it was both tasteful and “Your Web site was the only site respectful.” — C.H. my entire office floor was able to access. My wife would call me “I want to thank all of you for from home and give me live your great coverage of the events news that your site had already yesterday. Normally I look to you for updated.” — R.C. financial news and to other sites for non-financial issues, but yesterday “Thank you for your outstanding most national and world news sites coverage of the recent attacks on were inaccessible. MarketWatch America. Your site kept me and my remained completely accessible and entire office up to date when we did did a fantastic job of presenting not have access to a television or timely coverage of yesterday’s radio. Your content people should be events. I was able to keep up only commended.” — T.F. because of you. Thanks for the great job you did.” — T.P. “Your coverage has been excellent and far more informative than other “Thank you very much for the sites. One of my accountant friends excellent reporting of the recent showed me your site. It was our only events. I am writing you from valid accessible source of Germany. Even yesterday in the information via the Web the day of afternoon your site worked very well the attack. I intend to become a and kept us informed about these regular. Thank you for the incredible tremendous attacks. Furthermore I coverage.” — A.W. want you to know that we feel with the American community and wish “Since Tuesday, I have been glued you strength to cope with the to your site. You have done a suffering.” — B.M. fabulous job. It’s great that the site updates itself every couple of “Your ‘Latest News’ coverage of minutes. It has kept me informed, the recent events has been the best and I am sure many others. I’ve seen on the Web. Excellent, Just a great job and the best excellent work. Keep it up!” — T.B. coverage.” — S.G.