Online Recruitment - Post Crunch
thoughts from http://workhound.co.uk

There seems to be a broad macroeconomic consensus, that the deleveraging of carry trades, the tightening in credit markets, and the revaluing of broad basket of assets, will depress economic growth for the next several quarters. This speculation seems to be on solid footing and individuals/orgs like Fred Wilson, Jason Calacanis, and Sequoia have offered thoughts on the shifting economic landscape and how start-ups need to manage the downturn.

The advice given by Calacanis and Wilson on how to adjust a business in light of a downturn, I believe is just good advice for managing a start-up in any climate. (Frankly, for start-ups, it’s pretty much always nuclear winter - very few companies get funded and more companies go in to receivership or simply fold than ontohttp://www.personalloansmadeeasy.co.uk/loans-uk-info/credit_crunch.jpg a positive liquidity event).

In recruitment advertising, offline still sucks up at least half the revenues. They offer very little accountability, declining applicant volume, and high CPMs. They have strong brands which co’s might feel that there’s some transference through associating with (as advertised in the Financial Times) and some qualifying of leads (readers of CDS Swap Weekly are a self-selecting bunch). But, offline has the tougher case to make in a tougher economic environment, hence the recent wave of layoffs.

What’s important to remember, though, is that big market opportunities even with some contraction remain massive opportunities and recruitment is one such opportunity. Global recruitment in 2007 was nearly a $100 billion opportunity, in 09 even if topline drops 20% there’s still a lot of money to be made. The key is understanding how a contracting market alters the behavior of the key players. Wilson, in his piece, offers advice targeted for for advertising driven internet plays that is spot on for the online recruitment space. He notes that in past recessions, that media buyers have sought more accountability and been more focused on ROI.

It is for this reason, that Google had a great quarter while the NY Times is pushing towards junk status and its CEO is flying coach (a fun data point is the contribution to EBIT from about.com for NYTimes).

My belief is that even when global economic growth recovers, that there is enough inefficiency in the recruitment space that profits can increase but topline revenue will remain essentially flat. There is still a massive global competition to attract talent.

Online recruitment sites have an expense in drawing traffic and then have a path to make money from it. Whether unemployment rates go up (seems likely in the US and UK in Q4), or individuals are slightly more insecure about their current jobs, the demand for recruitment sites will increase which will take down traffic acquisition costs.

SocNets, blogs, and other non-recruitment focused sites will grab some recruitment advertising since their low cost of traffic and increasing ability to target advertising allows them to be a low cost provider but will be challenged to provide scale and quality leads.

Job boards will see their cost of traffic drop but will see pricing and accountability pressure from media buyers. Being able to provide more quality leads through superior screening/targeting will allow them to maintain a slight price premium.

As a job search engine, we are seeing, especially in the UK, a sharp drop in newly advertised jobs (down 27% in the last 2 months) and a sharp uptick in traffic. Job sites if positioned well, can be solid negative beta plays if they can manage to contain costs and grow their margins. This positioning will also serve them well when the business cycle inevitably turns favorable once again.

Wm
http://blog.workhound.co.uk