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It is better
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John Sumser

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(September 24, 1999) While we could fawn over the nuances, the news is simple. BrassRing is going to use CareerCast to fill the gap between the Kaplan product and Hiresystems. Not only are they extremely well funded at BrassRing, they are apparently very, very smart.

There are so many implications in this move that we're speechless (imagine that).

Let's leave it at... in a single move, BrassRing has put the entire Applicant Tracking segment on notice. They've leapfrogged WebHire and left everyone else in the dust.

And they haven't touched their marketing budget yet.

- John Sumser, © TwoColorHat. All Rights Reserved.


(September 23, 1999) We've encountered a stream of companies who are outsourcing their marketing departments. While understandable (marketing is a lot harder and riskier than software development), we wonder what will distinguish these companies over time. Several of them have serious financial support from Investment Banks and Venture Capitalists. We're guessing that the financial outfits have hired a slew of MBAs who have read one too many books about focusing on core competencies. Or, they want to see the companies develop software and then go out of business.

The net result is that we're awash in a sea of bland information. The outsourced marketers just don't have the feel for a product or service. After thousands (literally) of software demos, we dread sitting through another endless stream of PowerPoint slides and fake-o software execution. Simply, it all looks the same. The difference between the best and the worst is a nuance at best.

Yesterday, we had the delightful experience of spending a couple of hours with a company called eployment.com. Their team had just completed about 20 demos. Still, they managed to convey the enthusiasm required to get us excited about their product and approach. We're tempted to think that it was because they kept the engineers out of the conference room.

The simply conveyed a deep understanding of the problem that faces a hiring manager in a certain environment. Then, they conveyed the fact that they could solve it. They did this while the room was awash in the standard array of mind numbing screens. Somehow, they had simplified their pitch so that it would always have room for passion, no matter how tired they were. It was pretty impressive.

Press Releases are the same way.

We see hundreds of plaintive notes each week, generated by professional outsourced publicists and marketers.. "Read My Press Release", they say. "Why?", we ask ourselves. The trick with a press release is to make your audience want to read it. You do that in one of several ways. The easiest to master is titling.

The press release question came to mind this morning when we saw the following item in the mail:

Angry Programmers Create FREE Computer Jobs and Resumes Site for Employers, Agents and Job Seekers

Although the title is too long (it would have been more effective as "Angry Programmers Create FREE Computer Job Site), it got our attention and we went to read it right away. It answered the question "Why would we want to read this?". We wanted to see just exactly what angry programmers might do.

The site, Programming Services.com, is a classic. Clearly the work of an impassioned amateur, the offering oozes with the sort of intensity that would make professional marketers drool with envy. Almost in spite of itself, the site feels intimate and effective. Rightly, they have kept their marketing endeavors in house.

Many of the companies that have emerged in the Electronic Recruiting Industry are inherently technical. The determining factor in their success, however, is not technical at all. For technical people, learning to do marketing is very hard work. Those who master it will be the long term players in the space.

- John Sumser, © TwoColorHat. All Rights Reserved.

New Day Dawning

(September 22, 1999) A new day is dawning. A nice thing about the dawn is you can predict that it will happen again. Today's milestone involves the newspaper companies. As promised, they are stirring.

Click on over to BrassRing.com. It's a new company, announced today with a very interesting pedigree. The Washington Post, The Tribune Newspapers and Accel Partners (a well known VC) are putting a couple of companies, $70M in cash, $30M in existing annual sales and the ability to "leverage the extensive media reach and promotional power of The Washington Post Company and Tribune Company" (free advertising in the various media properties). In addition, the company is being staffed by a high powered management team (many serious players).

The core companies include:

Obviously headed towards an IPO, we peg the opening day value of the company at well over $300M. By the time it hits the public market, it should easily weigh in at $1B. Probably more.

There are a number of implications in the announcement.

  • Applicant Tracking Companies ought to be seriously scared by the move. With a sizable warchest, the established marketing prowess of the Hiresystems team and full featured candidate aggregation tools, the company is now the largest player in the Applicant Tracking market. The stakes in that space have clearly changed. The incumbents will have to move fast to keep up with the coming market blitz.
  • The company represents a clear break from the newspapers' commitment to CareerPath. In our recent conversations with Stephen St. Marie (the CEO of CareerPath), we got the impression that he'd love the freedom to build more aggressively. Looks like he'll get his wish.
  • The size of the move bodes well for the prices of current job board stocks. It establishes the importance of the Electronic Recruiting Marketplace in a way that few things could.
  • The other large newspapers will clearly respond in equally large ways. As we've been saying, the slumbering traditional media companies are about to wake up.
  • The traditional staffing and search companies should be most nervous of all. After years of fudging around, the newspapers are ready to go into direct competition with these long term advertisers. BrassRing includes many of the functions that headhunters and contract agencies see as differentiating them from online Recruitment. And, it has the ready cash to get better and better at the game.
On the downside:
  • The management team, while extremely impressive, is limited to the kinds of "inside players" who are good at growing existing companies. With no proven entrepreneurs on the team, they are at least different (if not at risk) when compared to the other players in the space. Money simply goes further in the hands of owners.
  • While we routinely tell many of our clients that technology is not the most important thing, the company will have to build both a job board, a sales force and a brand in the job board market. $70M may actually be too little too late. (Yes, we've seen the pavement.)
  • You can tell that the company is part of the newspaper business. This morning, we asked a number of high school and college aged students what a "Brass Ring" was. No one knew that the idea had anything to do with merry-go-rounds. One in ten knew that the idea had something to do with achieving a goal. The others (probably because we're in San Francisco) thought it was some sort of sexual aid. After the laughter subsided, we realized that the company was named by an older generation.
  • While we don't want to dwell on the naming thing, it's more important than you'd imagine. The first intimation of trouble at LeadersOnLine was the fact that they didn't realize that LOL stands for "laughing out loud".
  • Kaplan, which is positioned as the lead firm in the arrangement, is a consumer oriented company with limited experience in the Business to Business environment that we live in.
As we said on Monday, our marketplace is roomy and inclusive. There really is always room for another player. After all, we're entering a generation of labor shortages and the customers need (and can pay for) all of the help that they can get.

For the time being, we know at least 50 CEOs who won't sleep quite as well tonight. Though the new company has a long way to go to prove itself, the announcement is awe inspiring. It's also just the tip of the iceberg. Expect more.

Provocative Post Script (PPS)
According to the team at HotJobs, both the Tribune and The San Jose Mercury News refused to run ads for their job fairs this past weekend. We thought those days were over. Given the radical shifting of the newspaper business model, hanging on to the notion that they don't take competitor advertising is getting a little tenuous. After all, if the Merc was really serious about this idea, they wouldn't take grocery store advertising. They own a stake in WebVan (the web grocery delivery company).

Media attention for web companies is a scarce commodity. We'd suggest that refusing the company that bet itself on a Superbowl Ad is asking for trouble. What better publicity could there be than a David Vs Goliath courtroom battle that paints the newspaper as a creeping monopolist with its fingers in everything. As the stakes go up, the game changes.

Less Provocative Post Script (LPS)
Vault.com (the artist formerly known as Vault Reports) entered into a cobranding deal with the New York Post. Everybody is getting up for the dance.

Modest Correction
In the original version of this story, we listed Kaplan Educational Services as a core component of Brass Ring. In fact, Kaplan contributed its job fair business, a more modest piece of the equation.

- John Sumser, © TwoColorHat. All Rights Reserved.

Scared? Who's Scared?

(September 21, 1999) The numbers speak for themselves. In the hottest job growth economy on record, newspapers have completely lost their grip on classified advertising. In particular, the employment advertising revenues are beginning to tank. All things considered, wouldn't you expect Recruitment advertising Revenues to be exploding? After all, there's a labor shortage going on.

The following table, straight out of the published financials for the New York Times, says it all... Classified advertising income is down 3.8% for the month of August and 1.7% for the year as a whole. This, in spite of rate increases that cover up an even more astonishing decline in real advertising volume (lineage). A close look at the chart shows that heroic efforts in the National Sales Department were required to keep income roughly level with last year.

                       August                    Year to Date
      -------------------------      -------------------------
      1999  % Change  % of Total     1999  % Change % of Total
      ----  --------  ----------     ----  -------- ----------
Retail   34.7     0.0      13.2        331.3    -0.7      12.9
National 94.6   +13.7      36.1        931.3    +6.8      36.2
         73.0    -3.8      27.9        673.6    -1.7      26.1
Zoned    59.7   -11.3      22.8        639.6    +1.6      24.8
         ----              ----        -----              ----
Total   262.0    +0.3     100.0      2,575.8    +2.2     100.0
        =====   =====     =======       =====

Until now, the old media has been able to avoid clearly addressing the impact of the web. Employees of big companies are often quite good at spinning the worst news into a soft landing. The problem with that standard "What, me worry?" thinking is that the newspapers are at risk. There appears to be no viable strategy. The change is so extraordinary that revenue forecasts (the heart of good relationships with Wall Street) appear to be at risk in the 4th quarter.

As we've often noted, traditional media companies don't die from a bad quarter (or bad year or decade for that matter). But, the heat should be on at this point. Expect a slew of high dollar investment activity from the big old boys on the corner. When scared, they really spend.

This year, we're expecting to see Revenues in the job board sector swell beyond $1.5B for the first time (last year, we counted $450M or half of all reported Internet advertising). It's not that big a stretch, really. We see more than 1,000 companies operating profitably and another 2,500 closing in on profitability. For the most part, they've just started growing.

Big newspaper classified advertising revenues will continue to decline (Duh). Of course they won't go away entirely. Not everyone is on the web and you still can't reach the train commuters electronically. But, 1999 will be remembered as the year that the newspapers were somehow caught off guard by a five year old trend.

The impact of large investments will have two phases. At first, (because the public companies are all so new), newspaper investments will modestly depress stock prices. Then, the market will realize that newspapers are confirming the value of the newly minted companies. Even the dogs should experience explosive growth by year's end. Older, less agile firms in the traditional staffing industry (and other related areas) should be prepared. The newspapers will do unto others what was done unto them by the job boards.

We're not saying, by the way, that the newspapers are doomed. Far from it. However, waiting for the obvious to become apparent has raised their price of entry by at least two orders of magnitude (100 times). They've backed themselves into a corner that will require reinvention rather than incremental change.

- John Sumser, © TwoColorHat. All Rights Reserved.

It's Work And Timing

(September 20, 1999) We visited the HotJobs Job Fair in Silicon Valley on Saturday. Our faith in the depth and breadth of the market was restored. The job fair, conducted in the San Jose Museum of Technical Innovation (less than 100 yards from the Knight Ridder corporate headquarters and a short ride to the Westech headquarters) might have been seen as a declaration of war for market share in Silicon Valley. It turned out to be verification of the fact that our market is broad, deep and roomy.

Hundreds of Job Seekers lined up to register at a bank of PCs networked to capture their resumes and contact info. From the queuing, we guessed that attendance was higher than expected. With 60 to 70 companies represented, it was nothing like one of the Huge Westech Career Expos. Slightly more intimate with a slightly different audience, the event presented some new twists.

We particularly liked "IPO Row". With five rows of recruiting booths and a swarm of job hunters, it was a long wade to get to the back of the hall. The last aisle was reserved for about 20 "dot com" companies in various stages of pre-IPO startup. Hawking stock options and the opportunity to work long hours with the possibility of hitting the lottery, the section was jammed to the rafters with Recruiters chasing prospects.

Given the initial success, we expect to see HotJobs do more Silicon Valley (and other neighborhood) Job Fairs.

That doesn't, however, mean that the end is near for Westech. We think the two firms serve different audiences. A Westech Job Hunter visits during the Work week. Hot Jobs is positioning for the Saturday crowd. Westech serves the core of established Silicon Valley companies. Hot Jobs is offering an edgier presence. Rather than a gargantuan battle for market share (which is what we expected), we saw a company in the process of taking a share of an expanding pie.

Which brings us to last week's ad by Monster.com. Following the various announcements about whose stats were larger in which area, the TMP job board took out a full page ad in the Wall Street Journal insulting anyone who believed the various press releases. It was a defensive move that should have scared any analyst following the industry.

We are operating in an industry that has never consolidated. Historically (though we're sure that you're aware of our disdain for most traditional players), the industry has mightily resisted consolidation. The upper limit has been a 4% market share. Why? For the same reasons that the Internet is so wildly successful. The market is fractured, regional, nichey and so on.

Monster's ad should have raised a concern about whether or not they understand their own marketplace.

In our industry, there is a great deal of money to be made delivering service excellence in a range of microniches. It isn't about being the biggest, it's about hard work and timing.

Richard Johnson. the CEO of Hot Jobs, was onsite at the Job Fair. He's bi-coastal and works Saturdays with the rest of his team. When we talked with him, he was his usual Jimmy Stewart-esque self. His mind was focused on making the Job Fair a success, not market share or headlines. He was working hard for his customers.

- John Sumser, © TwoColorHat. All Rights Reserved.

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