When Microsoft’s Steve Ballmer recently said something about not wanting to acquire sites, such as social networks, solely on the basis of mass amounts of traffic, he had a pretty good point. Search advertising revenue, it turned out, was the real desire to land Yahoo! When Google alluded to the fact that they were disappointed in the lack of revenue driven by their MySpace deal, it was pretty telling too.
And therein may lie the answer to why seemingly successful sites in our industry such as Indeed, Simply Hired and, yes, even Jobster have yet to be gobbled up by a larger fish. Instead, they’re left fighting the good fight on content alone while sites like Trovix and their not-even-out-of-beta technology, are landing serious sugar daddies.
Surprise, surprise! It’s not the most traffic that wins. It’s the most money (or at least the expectation of driving the most money) that wins. And chances are, the vertical job search engine industry simply isn’t attractive enough.
No doubt all have been in talks acquisition to some degree and at some point in their histories (whether they admit it publicly or not). Unfortunately for them, serious talks turn into a serious looking under the hood. Yes, there may be other reasons to buy a job search engine, but it mostly comes down to money. And I think most shoppers are disappointed. Here’s why, on top of some other possibilities:
- It’s free. Yeah, all the verticals are making coin on their pay-per-click advertising models. But I doubt it’s the kind of dollar figure that would get real attention. Add the fact that most revenue is driven by job sites, and you get a house made of straw that could be blown away someday. If, however, revenue was driven largely by direct employers, it might be a different story. Unfortunately for them, most employers don’t grasp PPC advertising … and why should they when their jobs are on the site already, for free?
- Nothing proprietary. There’s really nothing in any of the players that’s truly theirs alone. With a little bit of money and know-how a vertical search engine can be replicated. And believe me, they are. Oddly enough, more well-established verticals are driving traffic to start-up verticals, some of which hope to game the system. It’s a vicious cycle that’s bound to get worse. Throw in the fact that anyone with a site is just an API away from millions of job postings, and having a vertical job search engine becomes a little less attractive.
- Current investors. Companies that haven’t gotten into bed with big money or big companies usually have an easier time giving up ownership. Established companies in the vertical job search space don’t have that luxury.
- History. Remember Edgeio? You’re not alone in saying no. Buyers, however, likely remember this all-things-classifieds site, associated with the PR power of Techcrunch’s Michael Arrington, which auctioned for a meager $280,000.
- Out of time. Social networking, matching technology and video have taken out a lot of the air verticals once enjoyed. Buyers are looking for something to get investors, customers and employees excited. Maybe the kids have simply moved on to other things.
There are likely other possibilities, but you get the point. Of course, as soon as I write this, Simply Hired will announce a deal … nah, I doubt it. Don’t get me wrong. I certainly think some vertical search engines are paying the bills and enjoying a decent lifestyle. Nothing wrong with a nice home in the suburbs, but the beachfront mansions are still nicer.
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August 18th, 2008 at 1:54 pm
Hi Joel
Just one correction. edgeio was auctioned in 2 parts. The total realized was $280k plus $160k, so $440k. Agreed, not a great payday for anybody. But also a sum that signifies that edgeio was really on to something. Were that not the case it is likely that the number would have been more like $50k.
I remain a huge believer in the need for a distributed classified ad network able to work with both advertisers and publishers.
Keith Teare
August 18th, 2008 at 5:48 pm
I agree that most employers don’t currently grasp PPC advertising. At Smuz, we have just created a new PPC service that we hope will make it much more attractive to most companies. It allows employers to buy a simple “off the shelf” campaign for their free job posting. For $95 including the cost of clicks, we will sponsor their jobs on Indeed, Simply Hired and others in our network.
While job posting on Smuz will always be free, we believe this new tool will deliver Big Board results for a fraction of the cost. By managing the details of cost-per-click bids and daily budgets over multiple sites, we think this service will make PPC a much simpler option for most employers.
Details are at…
http://smuz.com/ppc.html
Sincerely,
Paul Pickthorne
Smuz, Inc
paul@smuz.com
August 18th, 2008 at 6:52 pm
The issue with PPC in the employment vertical is that no matter what the economy, you’ve always got headwind. In a boom economy, there’s not enough candidates around to click on the ads so you don’t make a lot of money. In a down economy, clicks are two-a-penny but nobody’s there to pay for the clicks because they’re not hiring. There are simply much better models to monetise job content.
August 18th, 2008 at 7:56 pm
Whoa is us. We should just pack it in now that everyone is beginning to understand the benefit of the model. Careerbuilder wasn’t built in a day. HotJobs and Monster hit the .com jackpot in the late 90s, or they would’ve taken time to build their businesses as well. Blind contracts aren’t coming over the fax lines these days as they did in ‘99. Careerbuilder took years and the AOL and MSN deals to reach the level they are at now.
Sit back and watch what happens. We’ve only been at this a few years now. We haven’t sold, because we don’t want or need to. We’re trying to build something.
And here are a few rebuttals to your opinions.
1) Because you get more when you pay. Pretty easy concept to understand. Our growing number of advertisers certainly do.
2) You obviously aren’t aware of our non-PPC products, which currently exist. Maybe more research, or a call to us before writing the opinion, would help.
3) Nonsensical
4) Edgeio has no relevance to us.
5) SH is exclusively partnered w/ MySpace and LinkedIn…those are social networks. Also, video and matching technology haven’t proven anything yet, as opposed to SH and Indeed, which are producing results already.
August 19th, 2008 at 9:35 am
I think everyone is still missing a critical element…the value for an employer or recruiter is NOT in posting a job. They only post their job to find a qualified candidate. There is also NO value in having more traffic or clicks to an employment ad. Value is only attained when an employer has identified a qualified and interested candidate for their position. The other stuff is just a means to the end. So whether it’s pay-per-post or pay-per-click, those models still place all the risk on the employer with no guarantee of results.
August 19th, 2008 at 9:37 am
Great article Joel……spot on. Gautam and Dion have been promising the Board that they’d be bringing in XX million dollars per year, setting an unrealistic revenue goal for the sales group. Dion winds up scratching his head quarter after quarter and year after year when they fail to hit it. Paul, at least is turing a profit.
August 19th, 2008 at 12:11 pm
Somebody will buy indeed.com and pay a pretty penny.
Traffic matters.
August 19th, 2008 at 1:19 pm
1. Fact is that Traffic is King. Without traffic a board has no chance of applications! Yes, its the benefit to the end advertiser that counts, but it makes no differance if advertising on a site is sold on a click basis or a fixed cost basis it all equates to the same. A site like indeed can quickly calculate the true cost of ad space on their website and sell that space in any costing format they like – what counts is the ROI on the paying customers spend. Whilst employers may not yet fully understand PPC they may well in time but meanwhile many sites charging on a PPC basis can arrange fixed cost or fixed monthly cost if thats the clients prefered option.
2. As for your “Nothing proprietary” remark, that applies to ALL websites. Lets face it we are seeing generalist job boards, niche Job boards, vertical search, jobs/ social networks springing up like mushrooms on an amost daily basis – Technology is cheap. Gaining traction in the market with the said website is an entirely different matter!
3. Current Investors – Dont make me laugh, some big players out their want a big slice of the online recruitment market and fact is you dont get that overnight. If someone wants a slice of it and wants it now, the likes of Indeed will be looking very attractive! As for price, its all relevent to whos buying / selling!
4. History – You cant compare the fire sale of a business to the sale of a developing business in a take out situation. Thats a bit like saying RBI wont offload the totaljobs and other jobsites as part of the $2.5b sale because job site newninetofive.com (who) ended up going bust because it couldnt meet ongoing marketing costs! You are NOT comparing apples with apples. It was a flippant and stupid point you made!
5. Out of time – the market is just getting warmed up, these sites are evolving and improving their models to increase revenues. Its still very early days for them!
As for your point about the type of clients the site has, does it matter what the advertising mix is? If a site is selling adspace, its selling adspace, if that advertiser is a job board one week or an employer the next it matters not – what is important is that the site is of enough quality and has enough traction in the market to attract advertising spend. That business is of greater market value / becomes more attractive if it can show ongoing advertising revenues and revenues increasing as it moves forward.
IMO Indeed is a very attractive business thats still in its early days, carving out further market share and increasing its revenues in what is currently a difficult advertising sales environment.
August 19th, 2008 at 1:36 pm
First you say that Ballmer was only interested in search ad revenue and not traffic with respect to Yahoo. But then you acknowledge that the primary business model for these job search engines is, indeed (pun intended), search ad revenue.
Then you say there’s nothing proprietary about search engine technology. It makes one wonder why Microsoft would be interested in buying Yahoo when they, themselves, have msn.com. Why does Google still have majority market share?
Lastly, you bring up social networking and “matching technology” as have taken the air out of vertical search. Yet, your opening paragraph itself says that Google was disappointed by MySpace. And let’s not even start talking about Facebook (are they minting money yet?).
So which one is it?
This reminds me of the late 90s, early 2000s when Google was yet another search engine amidst 5+ major competitors. I think vertical search engines are at their infancy (kayak and other verticals included) and it will be a matter of time before we see winners and losers.
As far as I know, companies seem to catch the PPC concept pretty easily (which is why they advertise on Google and why their advertising budgets are bigger on some search engines than others).
August 19th, 2008 at 1:57 pm
Joel, good post and astute observations. Your point sums it up, “It’s the most money (or at least the expectation of driving the most money) that wins.”
Such is what a business valuation is comprised of. It’s why residual revenue is the panacea of the business world; it’s why contingency firms don’t have a business valuation – by definition, you can’t when all you work is 1-off deals.
Biz Valuations are all about current assets (plant/property/equipment) + NPV (net present value) of all anticipated future earnings + a small spiff for intangible assets (i.e. brand recognition) . . . X (multiplied by) the industry multiple-du-jour.
If you have zero revenue, you have no business valuation. Sure, you can be bought “on spec” (speculation) . . . meaning someone might say that if they synergize your capabilities with theirs, potential revenue will be XYZ. However, as we know, those utopian dreams are usually not recognized . . . and it’s no secret that most acquisitions destroy more value than they create over the long-term.
August 23rd, 2008 at 9:53 am
Indeed, Sh, Oodle, Vast, and the other aggregators are in store for rude awakening once publishers discover they are not gettng anything for free.
Remember, they have no revenue stream if publishers stop sending them content. Dollars to donuts most aggregators will not be in business two years from today. Indeed and Sh are desperate!!!