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Over the years, we've plowed through the emerging businesses and approaches with persistence and enthusiasm. We've tried and failed at a number of ancillary businesses; that's a critical component of figuring out the Internet as a business medium. We've been quite careful to only recommend approaches that we are sure will work. That usually means that we've screwed it up in the process of getting our recommendations in place.

At the core, interbiznet is a laboratory.

We experiment, evaluate, analyze, forecast, review, advise, criticize and inform. The object of our efforts is to accelerate the development of the Electronic Recruiting Industry. Our opinions are strong in order to provoke independent thought. We have no powerful need to be right, just a driving desire to be instrumental.

We believe that having "dirt under our fingernails" is central to our success. Unlike other analysts, we take a passionate, informed and activist position in the industry. We work to ensure that our view is created by the "real" world rather than an intellectual view.

In late 1998, we left the technical training business. The decision, made at Internet speed, was to optimize our energies where we are most effective...industry analysis, editorial perspective and consulting. It was a surprising return to our roots. When we began the business, the idea was that a regular newsletter would drive a consulting business. We were more than mildly surprised to see advertising revenues emerge as the central source of income in the middle years. The Seminar business caused the money to roll in. But, it was a distraction from the central objective.

The transition back to our roots brought some interesting consequences. During 1999, among other things, we:

• Built our web readership to about 150,000 per month
• Visited with over 125 web entrepreneurs and evaluated their businesses
• Were quoted in over 500 stories about online recruiting
• Launched the 1999 Top 100 Electronic Recruiters Website
• Generated over 350,000 words of editorial content
• Increased our research staff to 5 full time web evaluators
• Surveyed about 3,000 working recruiters (50% third party, 50% HR)
• Began routine coverage of stock market performance in the industry
• Built a freestanding conference center in our Mill Valley compound
• Started a separate Consulting Company (The interbiznet Group...more about this in the first quarter).

It's been an amazing year for all of us here at interbiznet. We clearly owe our success and longevity to our customers, our daily readers and our advertisers. Although it may sound trite, Thank You for your business and support.

The New Year promises to unfurl more mergers, acquisitions, IPOs, business approaches, new entrants and fun and games from the long time regulars. We're looking forward to watching the changes, sharing them with you and hearing your thoughts about how right or wrong we happen to be.

Thanks again for keeping us on your radar screen.

As Jimmy Durante said in the 1948 film On an Island with You, "...[I]n show-business you work whether you feel like it or not. Nobody cares about your personal troubles. Sure, there are times when you feel like crying, you gotta laugh, and when you feel like laughing, you gotta cry. That's show-business."

That sentiment applies equally as well to this industry. Hot Cha Cha Cha Cha Cha.

- John Sumser, © TwoColorHat. All Rights Reserved.


The Other Side (1 Dozen Trends)

1. Product Positioning
   We attended nearly a dozen trade shows over the course of 1999. While wandering through the various and sundry vendor-occupied booths, we were struck by the complete inability of most vendors to distinguish themselves from the competition. At one particularly large exhibit (sparsely attended by the conventioneers, as usual), it seemed as though there were 250 vendors who all claimed to be the "premiere provider of end to end recruiting, hiring management, web integration products and services". The customers wandered through the exhibits in a glazed-over fog. Although there are profound differences between many of the offerings in our industry, positioning (at the paying customer level) was weak in spite of the huge dollars thrown at marketing. The irony was not lost on the customers.

   Software leasing was born again in 1999. Although there are no known examples of financial success, many players latched onto the term ASP in a vague attempt to differentiate themselves from the rest of the pack (who were also grasping onto the term).

2. Product Innovation
   Hands down, the three most interesting product improvements were:
   • Personic's Palm Pilot Extension and,
   • RecruitUSA's unified billing.
   • The emergence of Talent Markets
   With all of the money that flowed through the industry, that's more than a little scary. The industry shifted its emphasis towards marketing without a clear understanding of the competitive forces, customer desires or product requirements. Huge amounts of time, energy, and money were expended on the development of me-too features, non-productive partnerships, "networks" and (the big bugaboo) investment bankers.

3. Billionaire Envy
   Like its Freudian cousin, Billionaire envy comes from comparing the size of the other team's PR with your own internal operations. Measuring the predictable anxiety of daily entrepreneurial travails with the supposed successes claimed by a press release factory is a recipe for heightened feelings of inadequacy. The net result is a rush to decision making about ancillary issues. Just look at the badly executed television advertising campaigns.

   Another aspect of Billionaire Envy is the emergence of investment decision making as a part of daily operations. Most of the top 50 (or so) Job Boards have been flooded with offers to buy, sell, merge or take an investment. The entrepreneurs in charge of these operations have had to come to grips with the question "What is your number?". Over the long haul, it's a maturing process. During 1999, it was a major attention diverter.

4. Market Cap
   While the broader media focused on the performance of public companies, the market cap of the privately held operations exploded. $20M became the baseline value of a job board that could show a reasonable forecast of $1M in 2000 sales. The industry's collective market cap grew to $15,000,000,000! ($15B) That means that in 1999, Electronic Recruiting became more valuable than traditional staffing by a large measure.

5. Sticking To Knitting Works
   Interestingly, amidst the strain of Billionaire envy and bad marketing, a range of providers moved their companies into position for second stage growth. By focusing on the delivery of results, the teams at companies like HireSystems, Net-Temps, TheWorksUSA, Hire.com, CareerCentral, IDG, LatPro, CareerCast and CareerSite quietly moved their operations into the mainstream. Each of these companies managed to successfully grow their customer bases, product lines and operations into permanently grounded market forces with enduring futures.

6. The Innovator's Dilemma
   Old-school companies were overcome by inertia (with the possible exceptions of Korn Ferry, Heidrick and Struggles, TravCorps, Adecco and Romac - all but one focused on acquisitions). Pressed to coalesce old customer bases with new products and services in an environment driven by decreasing market values, the traditional staffing, newspaper and applicant tracking companies floundered, unwilling to bite the ever-increasing costs of market entry. Unfortunately for these players, good management of an existing business is at direct odds with the risk profiles of a web entrepreneur.

7. The Flight From The Web (and the Predictable Return)
   The most ironic trend in our industry to date has been the move to non-web advertising sources. While a very few companies might be successful in this gambit, it was a loser for most aspiring players. Web advertising (for customers and candidates) is more time consuming (you can't just write a check) but far more effective on a dollar for dollar basis. The fad (another example of me-too-ism) will end shortly. It's amazing that solid web players were so willing to abandon the thing that they know best!

8. The Proliferation of MBA-Speak
   You can probably blame it on the influx of money. In 1999, we tired quickly of conversations about "Business Models, Value Propositions, Time To Marketshare, Realizable Return On Investment, Depreciable Human Assets, Customer Bliss, Brand Equity, Monetizing the Customer Base, IP, ASP" and other multisyllabic moves to hide incompetence.

9. The Emergence of the Middle
   Pro-Recruiter, RSLLC, IIRC, Best Internet Recruiter and others hit the scenes with solid attempts to help recruiters solve the clutter problem. By leaps and bounds, the two most interesting were RSLLC (a unified management interface) and Pro Recruiter (buffering recruiters from the Internet).

10. Candidates In Droves
    The best news of all. In 1999, online job hunting became the dominant first step in looking for work. Through waves of hype and contradictions, candidates flocked to use the web as a career enhancing tool. This was the year that the method came of age.

11. The Value of Content
    Licensing, publishing and distribution deals favored players like The Vault.com, our own publishing operations (interbiznet), The Electronic Recruiters Exchange and a range of consultants. Building an audience requires the delivery of routine content that draws visitors back again and again.

12. Real Strategies Begin To Emerge
    Several players have emerged with meaningful, deep strategies to position themselves and capture key leverageable positions in the market. We're paying particular attention to HireSystems (now the number three hiring management system), techies.com (quietly taking the regional markets), RecruitUSA (grabbing the middle), SV.com (redefining regional distribution), Digital Discovery (a very full service profile based offering), Eployment (assaulting the large HR department), LatPro (patiently building), CareerEngine (staffing with the best in the industry), Brass Ring (hoping against hope) and several under the radar operations (sorry, NDAs). The essence of a strategy is knowing who you aren't, clearly defining customer targets, having an adequate customer acquisition budget, and developing a meaningful partnership strategy. Each of these operations seems to have a strong handle on the questions. That's where it all starts.

- John Sumser, © TwoColorHat. All Rights Reserved.


Top 15 Stories Of 1999

1. Our 1999 revenue estimates for the Electronic Recruiting Industry (we forecast about $9,060M) proved low by nearly 50%. With nearly 40% of all companies offering a jobs component of their website, growth in the deeply segmented site development sector (nearly $11,000M) outpaced the rest of the market. 1999 was the year that brought the internal corporate development team to the forefront of web recruiting. Job Posting fees (including subscriptions, pool development and online sourcing tools) grew to about $2,950 (versus our forecast of about $1,500M). We thought our forecasts were aggressive!
2. Monster led the pack with $125M in annual sales. The amazing story is the emergence of nearly 500 services with sales in excess of $500K. Although the top 1000 services have an average revenue of about $300K, we can point to nearly 50 with sales approaching (or exceeding) the $3M mark. While the big spenders clearly deserve the year-end limelight, we think the big story is the growth and development of stable, profitable small businesses. While many analysts forecast consolidation, the little weeds grew profitable.
3. In a series of moves that will help shape the long term future of the industry, upstart RecruitUSA implemented broad unified billing initiatives that allow corporate users to focus on targeting instead of administration. With each passing day, the need for centralized administrative control grows. The broad proliferation of profitable job boards (a necessary component of real targeting) means that RecruitUSA has uncovered a leverage point in the middle of the industry.
4. The acquisition and merger frenzy, driven by 5 Major IPOs and Internet lust, grew to unprecedented levels. We imagine that it was simply a staging for next year's play. Our traditional staffing industry index grew about 5% driven exclusively by the Korn-Ferry and Heidrick and Struggles IPOs. The E-Recruiting Index grew nearly 100% over the same six month period. We expect the large traditional staffing firms (the sleeping giants) to hit the ground with major initiatives in 2000. Expect Manpower and Adecco to follow in the footsteps of Romac whose K-Force is shaking the assumptions of who is and isn't an Internet player.
5. Monster (and TMP) spent more than 10 times the budget of their closest rivals on advertising. While the bulk of the benefit may have accrued to the competition (connecting "monster" and "jobs" is a tough advertising sell), Monster clearly established a dominant market position in the small customer segment. In all, advertising for job boards and other related services exceeded $1.3 Billion.
6. The merger of MonsterBoard and OCC, one of the last big moves of 1998, exceeded anyone's reasonable expectations. While we poo-pooed the idea, it's clear that marketing one brand was a winner for TMP overall. Who'd have thunk it? Not us, for sure.
7. In what has become a fascinating pattern, Monster opened a new market on July 4th with the launch of its Talent Market. As of our last count, their are over 75 competitors in this rapidly growing segment. Contract workers are usually "acquired" through the purchasing department (rather than HR). The talent market segment really opens a major bypass. In the first quarter of its existence, Ework listed over $250M in projects that needed staffing. Even the lackluster traditional staffing firms made investments in the talent market space.
8. Webhire (the artist formerly known as Restrac) acquired, integrated, marketed and pushed its way into a position as a powerful market force. While the jury remains out on customer satisfaction, Webhire is clearly a contender in the large client, full service segment. Meager efforts from historical competitors (with the exception of Personic), allowed Webhire to outpace the field and push its stock price to new highs.
9. The newspaper industry was stunned by the launch of BrassRing. The venture combined assets from the Washington Post, The Chicago Tribune and $70M in cash to form the largest (at the time) market cap in an end to end (applicant tracking through Job Fairs) play. Kaplan Career Fairs, the pavement.com, HireSystems and Terra Star (a job fair company) form the foundation of the company. Expect the rest of the newspaper industry to respond in interesting ways. Many observers felt that BrassRing was the beginning of the end for CareerPath, the newspapers' initial attempt to manage the online recruiting market.
10. Tiny CareerCast, the San Diego-based job posting and distribution company, received major cash infusions from both BrassRing and Careers.wsj.com. Actively moving to resolve the concerns of one time Junglee customers (Junglee was purchased by Webhire in 1998), CareerCast demonstrated the volatility of the technical component of the industry.
11. The enterprise software companies (SAP, Peoplesoft, Baan), all positioned to grow with the ERecruiting market, consistently failed to deliver anything of interest.
12. Scrappy TheWorksUSA finished its fourth year in the business with revenues of over $5M. The company (explicitly not a job board) delivers CareerCentral style results at a simple subscription rate. The company received the highest levels of customer satisfaction of any company whose users we surveyed.
13. The Internet Recruiting Training market exploded with AIRS (the New Hampshire training company) receiving the largest net benefit. The company has clearly positioned itself as the provider of choice for hands-on Internet training. The market for information about online recruiting exploded with over 30 periodical newsletters (from the trite to the sublime) being delivered on a regular basis. The Electronic Recruiting Exchange came away from the year well positioned as the necessary first step for novice recruiters.
14. As the year ended, the growing need for managerial strategy began to dawn on the marketplace. A series of small one-off companies are emerging to handle recruiting specific strategy requirements.
15. Hire.com managed to clearly segregate itself from the rest of the pack in the $11B (see above) corporate job site marketplace. With a clear focus on optimizing a client's traffic, the company has a meaningful chance to shift the industry's attention during 2000. Given the complexity of the current market, we expect customers to regroup and focus on the fundamentals. That will mean choosing predictability at the very front end of Recruiting...the corporate website.

- John Sumser, © TwoColorHat. All Rights Reserved.


The Best Services

In a change from years past, we're releasing our survey results at a top level prior to the details. We've tried to capture the sense of the market by separating "penetration" (or market awareness) and customer satisfaction. They appear to be only coincidentally linked! Over the course of the coming week, we'll explain the findings at a deeper level of detail.

Without further ado, here are the best and brightest in this year's survey results.

Category	Market Penetration	Customer Satisfaction
Job Board	Monster	Nation Job Network
3rd Party Job Posting Service	RON	Net Temps
Recruiting Service	TheWorksUSA	TheWorksUSA
End To End Solution	Webhire	Personic
Posting Distribution Service	CareerCast	CareerCast
Consolidated Posting	RecruitUSA	RecruitUSA
Targeted Job Board	ComputerJobs	LatPro

- John Sumser

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