(September 08, 2003) - A look back to September 8, 1999.

Yesterday, DowJones announced that it had acquired a 40-percent stake in our old friends at CareerCast. The move is important and interesting on a variety of levels. It demonstrates the Dow Jones commitment to controlling customer service, while bestowing powerful market credibility on CareerCast.

CareerCast, as you probably know, competes nearly head on with WebHire. They both provide the muscle behind "do nothing Recruiting" (replication and distribution), while delivering their services through and for other providers. In this arena, the service provider (CareerCast or WebHire).

"scans internal job-posting systems of its employer customers and automatically replicates the postings and places them in a searchable online database. Users can then search the jobs by title, company name, location, salary level and other criteria."

The results become an integral part of the database of the primary provider (usually newspapers or other large Job Board operation). In a nutshell, CareerCast and WebHire make it possible for a corporate customer to simply post job ads on their web site. The replication and distribution service takes care of the rest. WebHire owns the original technology in this market (formerly known as "Junglee." CareerCast has been able to nimbly observes the mistakes of the market leader and perfect its offering as a result.

Both vendors offer a basket of other services to their corporate customers. CareerCast specializes in the delivery of integrated web services for multidivisional large companies. WebHire focuses its energies on its historical business in Applicant Tracking. While the two companies have some differences in their service offerings, they are the most observable players in the Replication and Distribution segment. In general, WebHire has the advantage in market momentum; CareerCast has the edge in service delivery. Were both stocks on the market, we'd rate them as a "Buy."

While the acquisition confers lots of credibility on CareerCast (and we're certain that this is the first of many near-term investments), the real story here is about DowJones.

Tony Lee, the driving force behind careers.wsj.com and all of the DowJones online classified advertising operations is a red-blooded newspaperman at heart. If you're ever in Northern Virginia, stop in to visit the Newseum, a museum devoted to the history of the news business. Much of Tony's personal collection is on display in the museum. He is an active contributor to the operation. He is one of those folks, who has the news business in his blood, from history to inventing the future.

Tony spent more than a decade as the editor of the National Business Employment Weekly and is a major force in our industry as a result. He knows everyone in the game and has a remarkable bullshit detector. He has watched the industry evolution over decades and has made a solid mark on its progress.

>From our perspective, that explains why he is personally establishing the model for profitable online classified advertising in the historical Newspaper business. Tony Lee combines the deepest "domain expertise" in the business with a lifelong burning passion about the industry itself.

Have you ever wondered why the newspapers lost out on the first round of the online Job Board business? Obviously, there are several underlying trends that include the kinds of factors that let Amazon.com beat out Borders and Barnes and Noble in the first years of the business. Old mindsets are hard to change; new investments always seem risky and non-essential; and it is hard to believe that a profitable business will erode quickly.

But, there was also a structural problem.

During the heady years following Watergate, the newspapers overemphasized the importance of their editorial team at the expense of clear business sense. The very customer service operations of the industry's cash cow (Recruitment Advertising) was outsourced to clever operations like the Bernard Hodes Advertising Group. Between 1975 and 1995, Hodes and its peers in the Recruitment Advertising Agency business took control of the day-to-day customer service operations in Newspaper Recruitment Advertising. As a result, when it was time to make a serious change, the newspapers had no internal expertise. A generation of outsourcing will destroy any core competence.

When Tony began making his moves in the Internet world, he quickly grasped the pluses and minuses of the situation. The demise of internal competencies is simultaneously a blank slate and a skills deficit. He has been able to slowly and patiently build a real vision of Newspaper based Recruitment Advertising as a business that can be approached with passion. It's a more difficult chore for MBAs and industry outsiders.

A constant focus on the expressed needs of customers (he visits with lots of them) and the slow building of a real internal talent pool has placed Tony in the catbird seat. If you watch closely, you'll see him become one of those "overnight successes that only took 20 years of hard work." He appears to have mastered the internal politics and the market politics required to create a sure winner. The rest of the online newspaper business is starting to take note.

Tony's business model is the exact opposite of the recently dishonored hard copy Recruitment Advertising world view. He owns all of the critical elements of his operation. The sales people are internal, the website is internal, pricing is set locally and so on. The DowJones acquisition of a stake in CareerCast simply underscores the corporate commitment to his vision.

Keep your eyes on both of these companies.

John Sumser

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