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Advertising Networks VI

(October 16, 2003) - The term 'business model' is  rich in contradiction. It means "this is how we think we are going to make money". Companies with successful proven businesses, don't spend much time thinking about their models. Companies trying to figure out a business model are often simply focused on cash flow. Very few companies ever say to the public "here is our model".              Even fewer say "here's what we learned when it broke".

To keep it simple, we'll look at five areas of the business models that drive the various advertising networks: Sales, Marketing, Technology, Targeting and Position. With these five variables, it is possible to describe the unique market position of each of the networks.

Sales is the issue that most companies spend the most time on. Without sales, there is no income. Satellite properties in a network rarely do sales well unless they are specifically in the job board business. Local newspapers, radio stations, professional associations and other web properties that are able to generate job board revenue often do not because they cannot build a sales culture. So, the way that a network approaches sales is the single most significant part of its business model.

For the purposes of this analysis, we've made the choices simple. Either the network centralizes sales (all salespeople operating under one roof for the entire network) or decentralized (the salespeople work for the particular network node). Given the early age of the industry, it's not surprising that most operations centralize the sales function. Training a good sales person takes between six and nine months of investment (and even then the results are murky). Sales is usually perceived as the highest risk in the process.

Marketing (brand development and lead generation) covers a very broad range in the Recruitment Ad Networks. From Monster's tremendous focus on brand and traffic generation to Net-Temps micro-management of pure traffic acquisition to Salary.com's pure reliance on sales to generate leads, the centralized Marketing strategies vary broadly. In the newspaper industry, CareerBuilder almost exclusively focuses on the central brand while hardly anyone outside the business has ever heard of CareerCast. The companies that operate like advertising agencies invest in marketing as a percentage of desired sales (You've never heard of most of the JADS because they rarely invest in marketing).

For many of the networks, marketing is difficult to understand. Often, they are purely technical operations founded by technical people who have trouble with the ambiguity involved in marketing investments. Of all of the variables in a business model, marketing is the least like the technical investment. Surprisingly (to the technical entrepreneurs), there is a nearly pure correlation between size, recognition, sales volume and marketing investment.

Tomorrow, we'll wrap up the analysis and take a look at viability.


Model Elements

Sales Marketing Job Board Technology Targeting Distribution Income
CareerBuilder Decentralized Centralized Centralized Centralized Bulk-Precision Reseller
CareerCast Decentralized Decentralized Centralized Decentralized Precision Manager
HodesIQ Centralized Centralized Decentralized Centralized Precision Reseller
Hot Jobs Decentralized Decentralized Decentralized Precision Bulk-Precision Reseller
JADs Centralized Centralized Decentralized Centralized Bulk-Precision Reseller
Monster Centralized Centralized Centralized Centralized Bulk-Precision Owner
Net-Temps Centralized Centralized Decentralized Decentralized Bulk Owner
Niche Boards Decentralized Centralized Decentralized Decentralized Precision Rep
Regional Helpwanted Centralized Decentralized Centralized Centralized Precision Manager
Salary.com Centralized Centralized Centralized Centralized Hyper Manager

John Sumser

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