The decline in Internet advertising revenue forced online financial news company Marketwatch to announce last week it was laying off over forty staff, amid concerns that the firm is facing legal action over its flotation.
Marketwatch, whose owners include Pearson and Viacom, operates both CBS.Marketwatch.com and FTMarketwatch.com. The job cuts represent 15 percent of the total workforce. The company blamed the redundancies on the difficult economic climate as well as a slowdown in advertising revenue. It revealed in April that it expected total revenue for 2001 to be at least five percent lower than the previous year.
The cuts show that the online news sector, which was booming only a year or so ago, is facing difficult times both in Europe and the US. CNN recently cut around 100 jobs from its online operations, while finance Web site TheStreet.com shut down its UK site late last year.
With ad revenue falling, some industry observers are wondering whether the free content model has a future online. Pearson denied back in February that it planned to introduce a subscription charge for readers of FT.com, but some analysts believe that eventually most news Web sites will charge for content. Access to FTMarketwatch and CBS.Marketwatch.com is currently free.
Marketwatch has also been hit by claims of irregularities in its flotation in 1999.
Five lawsuits, brought by investors who bought shares in Marketwatch, allege that underwriters had secretly received excessive payments from some investors. It is claimed that in order to be allocated shares in Marketwatch, customers had to agree to buy more shares once the flotation had taken place -- driving the share price upwards.
Such action would be in violation of America's federal securities laws. Marketwatch is denying the allegations, which it describes as being "without merit".
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