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Flippin' Company

(July 28, 2000)

Drop the flippin' Chalupa!

No, this isn't a regurgitation of our piece on F****dCompany.com (the best place to get layoff info in the dot com space). Today we offer a look at that other flippin' sensation, FlipDog. Amidst the torrent of bones and other doggie treats that they send us as a part of their "woo the press" campaigns (and we have to admit that no one else has been kind enough to keep our office Great Dane, Tally, in rawhide and biscuits), we've begun to wonder about their business and their dramatic rise (from nowhere).

As you probably know, FlipDog, a product of Whizbang Labs designed as a technology showcase, is a Utah based startup that hunts and scrapes for jobs, consolidating them in a huge database. The play is similar to the old Junglee (now owned by Webhire) offering. With solid market makers like CareerCast driving the market and scrappy entrants like Ezeenet entering the fray, we wondered just how good the FlipDog product actually was.

Obviously, the answer depends on the underlying business model (which we wonder about). If the business is to provide job hunters with lots of data, they do a good job (though we can't imagine where revenue comes from). If the business is proving the accuracy of their scraping technology, the results are less satisfactory.

Here are the weaknesses we see:

In general, FlipDog acquires between 10% and 70% of a company's job postings. In a world that requires accuracy, this will be a problem when they start charging employers for their service.
Generally, the data in the job postings is about a month old.
Flipdog offers no response tracking mechanism which means that verifying their value to customers will be problematic.
Lots of companies post numerous jobs on a single page. When FlipDog encounters this issue, it posts none of the jobs. Another market shrinker.
A thorough look at company listings will show multiple offerings from the same company, another accuracy problem.

These are only weaknesses if FlipDog intends to compete with CareerCast, Webhire or Ezeenet in the business of acquiring and distributing jobs on behalf of employers. Candidates may not be able to tell and it may not change the resume flows that they generate to their customers. However, without heightened accuracy, fresher data and a response mechanism, FlipDog will have to content itself with banner advertising revenues and a vague play to charge candidates for reviewing old data.

What we like is the company's graceful execution of a guerrilla marketing campaign. Their traffic development program has been astonishing. To take a meager offering and move it to the top of the visibility pile is no small feat. That sort of emphasis on marketing before technology is the saving grace of the offering, from our perspective.

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Cadres Online

(July 27, 2000) Vivendi, Seagram and Canal+ merged in June to form Vivendi Universal. You are certainly asking yourself, "Why should I be interested in the merger of a liquor company and a French outfit?" The corporate vision?

Create and Deliver the Most Preferred Consumer Content and Services to Customers Everywhere, at Anytime, and Across All Platforms and Devices
To Build Shareholder Value through the Acceleration of our Core Businesses and the Development of New and Profitable Revenue Streams
…a vision built on industry leading businesses, unique breadth of global and local content, and the premier multi-access footprint

The combined giant includes:

An Internet Incubator
A Huge Publishing Empire
Operations in 100 Companies
Cable TV
Wireless Operations
Movie and Video Production and Distribution
Music Production and Distribution
A Deep Relationship with Softbank
Broad Video Game Development and Distribution

Last week, we had the privilege of entertaining the principal players of France's Cadres Online, the leading non-English speaking job board. As France's largest, the company has an eye on (and the internal financing for) a major expansion in the European Union and the United States. The company is fully owned by Vivendi (through its Havas publishing empire) and has partnerships with 24 leading newspapers in France. They are the French partner in Talent4Europe, a pan European alliance of 12 leading job boards.

The team from CadresOnline understands that recruiting is a very local market play. With the ability to reach out to the individual consumer at the intersection of leisure and professional life (can you imagine job URLs on a bottle of Seagram's finest? or in spare product placement slots in videos or video games?), the company plans a global tool that includes:

A hiring and advertising workbench that features
- Needs Definition
- Job Ad Writing
- Hiring Authorization Processes
- Network Posting
Applicant Management
- Resume Management
- Ranking
- Scheduling and Online Interviewing
- Relationship Management

This is a strongly positioned global play with very deep corporate backing. Expect them to visit your part of the market.

- John Sumser © TwoColorHat. All Rights Reserved.

Job Board Decay

(July 26, 2000) If you can't make it as a job board, you can always become a technology company. That seems to be the typical strategic thinking of a dying job board. While we aren't seeing an end to the explosive growth of startups in our industry, we are seeing a number of the tired older horses trading in their destiny for their roots.

Often, a job board comes into existence because a recruiter (or a recruiter wannabe) meets a clever technical person. The two dwell on the hiring process over long late hours of pizza and too much coffee. The product of their collaboration is a reinvention of the wheel that has some particularly interesting novelty (say, five corners or a spherical shape).

Pet rock in hand, the founders make the rounds of angel financiers (family friends with more money than they can spend personally). "We're going to revolutionize the Recruiting Industry", proclaim the inventors. "Just look, our revolutionary approach revolutionizes revolving. We have identified the holy grail of privacy (matching, fit, communications, speed, transaction complexity, workflow or some other technical footnote). All we need to become gazillionaires is to hire a sales guy and a lot more technologists."

Eager to cash in on the quick money, the angel offers just enough money for the entrepreneurs to hire the friends and buy new offices. Soon, there are software folks hanging from the rafters. Official looking Non Disclosure Agreements are foisted upon the uninitiated visitor. The hours increase while the money evaporates. Competitors who have aggressive sales teams are condemned. Booths at trade shows are mocked. The big secret is perpetuated and refined.

The net result?

At the end of about 18 months (the timeline depends on the depths of the angel's pockets), an overly technical team has produced a food processor in a world where groceries are scarce (see yesterday).

Then the scurrying begins. MBAs are hired with promises of untold wealth from stock options. "We need a brand", say the founders. Spreadsheets are developed at a breathtaking pace. The discovery? The early money should have been spent finding out what customers wanted before assuming that anyone could solve a technical problem.

The cost of acquiring candidates and distributing them to customers dwarfs the cost of developing a piece of software that all but duplicates every other piece of software already on the market. We generally estimate that a sound technical investment is 10% of revenue. (Marketing to candidates and customers is about 50% while sales gets the other 20% left before profit.)

Broke, with no hope of ever filling their online database with fresh candidates for customers, the job board shows its initial surrender with a new business plan. The headline in the new approach reads: "We're a job board and a technology company."

- John Sumser © TwoColorHat. All Rights Reserved.

The Pulse Test

(July 25, 2000) Software is dead. For 20 years, companies have made small investments in the development of tools for information workers, their companies and their families. The big money was made by licensing the tools. That meant selling the same work repeatedly as if it were a musician's composition or a novelist's work of fiction.

It was a good scheme in a transitional generation. Many of our California friends bought their mansions with the proceeds. The core concept, that software is a primary source of wealth, is seriously flawed. It's like saying that the value of the construction project should go to the shovel maker or that the value of the car repair should accrue to the lift maker. In the early days of any new exploration, tools get sold at obscene profits. Ultimately, however, the real value is what moves in the real transactions.

Software has become a media, like CDs, tapes, paper, television or radio. While continuing to be more complex than the other, easier to use, media types, software shares the basic characteristics of those earlier forms. The value of software matures as it fills with content.

In publishing, the difference between a ream of paper and a book is the basis of the business. In the music business, the CD is worth a quarter, the music makes up the other $15. In the broadcast media, the receivers (TVs and Radios) are assumed to have almost no cost; the value is exclusively in the content.

What is most exciting about a job board, a piece of enterprise software or an applicant tracking system is the content: candidates, jobs, transactions, workflow details. The technology (and we use that term very loosely) is simply a vehicle for carrying and presenting the content within.

Though we're hesitant to say that the value of software is zero, it's clear that the real value of any offering in this industry is the information that is contained and manipulated in a given application.

And, that's where most of the vendors fall down. Stuck in an earlier generation's mindset about features and benefits, the vendors in our industry focus on the details of their software rather than the details of the customers' problems. We liken it to a food processor invented before there were grocery stores. The vendors line up to compare blade sharpness, motor speed and holding capacity while the customers are malnourished. Software without content, like food processors without food, is a valueless set of potentials.

The customers of our industry are suffering from a candidate shortage while the vendors are behaving as if it were a tools shortage. It's one of the silliest pieces of market dynamics that we've ever witnessed.

- John Sumser © TwoColorHat. All Rights Reserved.

What's In A Name (from our vault)

(July 24, 2000) It's just the primitive beginning. Pushing traffic to overly complex websites in order to extract resume data is no more than a modest automation of the unemployment office. When you consider the level of hype associated with this 'huge technical feat', it's quite astonishing, really. Demographic data, predictive events and long term relationships are just beginning their lives as recruiting tools.

As we adjust to the fact that labor shortages are a permanent phenomenon, major shifts in mindset will begin to dominate the market. Unfortunately, those changes will be driven by painful public failures of companies whose labor shortages drive poor economic performance. It's simple ... growth is driven by the number of available people. We know of a number of companies who have 20% of their desks unfilled. In the short term, staffing problems create a very negative spiral of morale problems that lead to attrition increases followed by more staffing problems.

It was easier in the old days.

In the late 1970's, the old Personnel Department (long a bastard stepchild of accounting) was renamed "Human Resources". The theory was that people were a company's ultimate capital resource and should be managed accordingly. In retrospect, nothing hurt the profession more than the name change.

During that time, the baby boom was entering the workforce with the usual repercussions of a large population wave. The boomers trampled down existing boundaries and occupied every available crevice in the organization. HR became the complaint department, the training department, payroll and benefits, recruiting and organizational development all rolled into one unwieldy organism.

It really didn't matter that the very organization of HR forced it to mismanage Human Resources. There were so many people willing to do just about anything that mistakes were easily covered. No one ever suggested that HR be measured against typical business metrics (like opportunity cost for missed hires, sunk cost for bad hires or return on investment for screening quality). The most basic financial element of recruiting, cost-per-hire, is a fluff number without a full recognition of the value of company time and expense.

All of these excesses were possible because labor was in a surplus position.

In order to manage shortages effectively, very different thinking is required. In spite of the damage done to the concept, people really are the organization's most important asset. The tools that mine, cultivate, repackage, maintain, refresh, identify, track, lubricate and retain these assets are just starting to be developed.

They don't look much like Job Boards.

Contacting Us:

Call, fax, write, email. We'd love to talk about your project.

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