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    Monetize The Candidate

    (December 13, 2001) We've been saying for a long time that the Elephants were coming. In a brilliant tactical move, Yahoo unveiled its unsolicited bid for HotJobs at the close of business (pacific time) yesterday afternoon. Yahoo! Pretty soon, we'll be seeing the entry of AOL-TimeWarner, Microsoft and a number of other elephants. As we've been trying to tell you, this game is in its beginnings. 

    In the first phases, the battle is for the rapidly growing $12 Billion or so available in Recruitment Advertising revenue. The second phase is not the exploitation of resume databases, it is the premium available to large scale agents for talent. Smart investors are beginning to recognize the implications of a sustained talent shortage. With the bulls predicting an end of the recession this month and the bears only out til March, the question of when the labor shortage will be felt is only varied by the pace of the upturn.

    Meanwhile, the entrenched players, blinded by dwindling resources and operational details are seeking the next wave in the development of revenue from candidates (not for them). The newspapers, too pennywise to make a play like this, are out bidding on local contracts against their own suppliers

     To say that this has been a wicked year for job boards and recruitment businesses is an understatement of massive proportion. Although the marketplace did grow at about 8%, it was a screeching halt to years of double and triple digit expansion. The fact that regional offerings exploded on the scene this year contributed  to a business-by-business experience of nearly flat growth. The best minds in the business were focused on the development of counter-cyclical revenue streams.

    With ads for books at Amazon, resume upgrades, an education profit center with key alliances, a revised contractor play and, we assume, other emerging monetization schemes, Monster leads the pack in demonstrating the current hunger for revenue from candidates. It's a new arena (beyond book sales and the Haldane approach to career planning) and subject to the vagaries of experimentation. We're certain that many job boards and recruitment advertising businesses will hop on the bandwagon quickly.

    There are big risks, however, and the payoff, as near as we can tell, is limited to about 5% of job hunters. No one has ever made real money by extracting it from a candidate's pocket.

    We're particularly curious about the resume enhancement service. The offer is, essentially, allows a candidate to use "the bold text and colorful icons of Resume Enhancement" to help a resume stand out against the backdrop of other, plainer resumes. We think it sets the stage for the sale of search engine placement for candidates, but the current offering only allows the addition of bold text and icons from a menu. The fee is $19.95 for 30 days. umm, let's see 5% of 3,000,000 visitors times $19.95 is about $3Million a month, at best (that would be, optimistically, a 2% increase in TMP's revenues).

    The sad thing is that revenue from resume enhancements will come at the direct expense of revenue from Recruiters. Great Recruiters scan resumes looking for particular items of relevance. They are certain to read the usage of resume enhancement services as an indication of desperation. While that means that bolded resumes will certainly help them weed undesirable resumes out more quickly, it also means that candidates are being asked to pay for the opposite of what they are being offered. Job Boards have to tread the territory carefully. Recruiters are the central source of revenue and if the quality of their services are compromised, the central business model is exposed to significant risk. A serious play for candidate monetization would have to involve the acquisition of companies that make money from candidates without interfering with recruiting services.

    Although it's obvious that the next decade will involve a growing awareness of the labor shortage, the possibility of temporary downturns remains a business risk that must be factored in. When hiring slows, recruitment related businesses need alternatives. If this were a stable industry with no looming labor shortage, this newspaper style revenue offset strategy might make sense. Obviously, Yahoo sees a different picture and smells a bargain.

    So, the $64 question is "How will Monster react to the Yahoo bid"?  A sweetened offer would have to compensate HotJobs for regulatory delays and would, therefore, involve a significant bump. A concession would risk the core case that TMP has been making to the markets and therefore the incredible valuation. Either scenario will result in strong downward pressure on the stock price. 

    In other words, Yahoo has made a move that is significantly more meaningful than a simple acquisition play.

    - John Sumser © TwoColorHat. All Rights Reserved.

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