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October 03, 2002) - Late yesterday, Gannett Co purchased a one third stake in CareerBuilder for $93 Million. The move, which adds a new layer of distribution points and traffic to CareerBuilder's arsenal gives some meat to the CareerBuilder claim on the number 2 job board position. The proceeds of the sale were split between Knight Ridder and The Tribune Company.

We remember a day in 1997 when we sat in the Knight Ridder Offices (while CareerPath was still the newspaper's play of the day) and proposed a range of solutions that cost significantly less than the expenditures to date. But, the newspaper industry moves at a pace reserved for those with deep pockets and turf to protect.

The truth is that, as we mentioned earlier this week, the newspapers have some real leverage in local markets. Over at the Wall Street Journal and the New York Times, the players are learning how to build businesses out of their franchises. Rather than signing up for an endless supply of capital calls in a market share war, those New York operations are digging in to their real customer bases and figuring out how to exploit them.

What's most surprising about the job board segment of our industry is that, in spite of economic pressures, the number of small job boards has continued to grow. Little niches and aggressive entrepreneurs are the key to Million dollar businesses. That end of our universe will continue to flourish.

When large, cash rich, businesses make investment decisions, they can not afford the complexity of small companies that grow at compound interest rates. Inevitably, the spreadsheets argue for a big play. Rumors that Gannett would attempt to acquire Monster preceded this announcement. Just for a moment, however, imagine what might have happened if Gannet had decided to invest a million bucks in each of its own newspapers for job board development. Ultimately, that will be the path to profitability and sustained involvement in local markets.

CareerBuilder certainly earned this level of trust from its potential pool of investors. Able to back the investors away from day-to-day manipulations of the operating structure (the reason that CareerPath failed), the CB team has made enormous progress in the creation of a hybrid national-local infrastructure. Sustained negative pressure from across the newspaper industry on the emerging JAD companies (HodesIQ, IIRC, eQuest and so on) has preserved the operation's ability to claim a local distribution mechanism. The process of squeezing competitors out of the newspaper's monopoly turf has been fascinating to watch.

And then there's Monster. Steve Pogorozelski, Monster's President, shrugged at the suggestion that this move changes much. "Let them fight with Yahoo for the number two position", he was quoted as saying. We think that's the right approach. Although financial battles are the primary conversation within TMP, the leader is currently unchallenged. If the Gannet deal had included cash flowing into the CB treasury, things might be a bit different. 

The price has interesting implications. If CareerBuilder is worth $300M, then so is HotJobs, more or less. It makes Yahoo and TMP stock look severely underpriced.

Our guess is that TMP will continue to differentiate levels of service and types of customer. CareerBuilder just swallowed a huge integration problem an will end up focused on that for a while. We guess that it means that it's HotJob's turn to make the next breakthrough.



-John Sumser

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