The main charge: Seek is making a ton of money!

The bastards!

Well, there are a few reasons why Seek’s destiny (read profitability) is not the same as that of the recruitment agencies:

1/. Most, if not all, of Seek advertisers are in the recruitment business. But Seek is not; Seek is in the online advertising vertical. And because of their business model, they’re now driving an NPAT that is 10 times that of the commercially viable agencies (don’t quote me to the cent; I am not running an analyst briefing). There are drastically different economics driving each industry.

2/. Seek’s goods are price-inelastic, which means that changes in price levels will not dramatically change customers’ demand for it. Recruiters as well as hiring companies that need people cannot do anything else other than continue posting jobs. Conversely, companies that are not hiring will not advertise for roles no matter how affordable a job posting is. So why not up the price? If I were a shareholder I would have cheering for a 19% rise, not 9%.

The assumption here is that there is either a belief or hard data that indicates that Seek still gives placeable candidates to its advertisers. Knowing that you’re keen on price-inelastic goods, you better be damn sure that they return to you what is expected of them.

3/. I reckon demonizing Seek is significantly less effective than voting with your feet. Perhaps now (better late than never) is the time to think about what else do you do as an agency or employer to get the talent you need and reduce your dependence on a single source of people.

What if you invest half of you what you spend on Seek on building other sourcing channels? This is what we did when we swapped newspapers for jobs, right?

My clients are all recruitment agencies; none of the guys and gals I have spoken to are overly worried about Seek’s price increase. What they are thinking is: how do continue ensuring my business model works? How do I keep my profitability intact, or how can I better it? Do I need to diversify? Move out of Aus?

Which are the right questions to ask.

I’ve read it’d be a good move because LinkedIn could then be able to migrate the customer/revenue base from the job board over to them, and then a different revenue multiplier kicks in, and the rivers of gold continue to flow.

… bollocks, I say.

Why as I LinkedIn shareholder would I want to spend money on a job board?

Job boards are by definition antisocial. They are not antisocial because they are nasty or mean, or run by people with those traits.

Job boards are not social because they don’t foster relationships out of the transactions they thrive on (e.g the classified ads). That’s how they make their money. Meantime, LinkedIn’s value resides in the connectivity of professionally minded individuals and the networks it reveals.

If it wanted job ads, LinkedIn could have given them for free years ago. Instead they remain stubbornly expensive. And arguably, it already has a resume search product (and more). So they’re not buying features.

What do you think? The first person to comment with an agree or disagree mention, gets a coffee (in Sydney) if the transaction happens.

This got prompted by Peter Martin’s post in relation to inferior goods.

Inferior goods are defined as those for which demand decreases as their users’ disposable income increases. He mentions cask wine and International Roast coffee as a couple of retail/consumer examples.

Is your recruitment product an inferior good, based on the definition above?

When our clients are better off financially, do they seek out your services or do they seek to replace you with what they perceive is a superior product (DIY recruitment, a more reputable agency, employer branding consultants)?

Yes, there are many moving parts to offer a one true answer. This is an intrinsic limitation of the neoclassical economic model which relies a lot on the Ceteris Paribus (all other variables remaining equal) which never happens in real life.

However is it worthwhile asking this question as recruitment service providers, don’t you think?

Looking forward to being in touch during 2012

I am not sure when you last time paid attention to a You-Haul advertisement pushing a jobs website, let alone remembering to check it out once you got home. Seriously, I am just glad to get out of the bumper-to-bumper nightmare without getting too stuck.

Pretty dumb to spend money on this, huh?

Well, the ad is parked in a spot that is pretty much equidistant to The Royal North Shore and Mater Hospitals; surruounding them there is an entire ecosystem of labs, surgeries, private practices, physio centers, you name it.

My neighbour is a nurse. At the small primary school my kids go to, there are at least 1/2 dozen midwives who live in the area. They surely drive around River Rd all-the-time.

I’ve a had look at the advertised website. It is a bit of a substandard online experience, compared to best/better practice. It does what it needs to do as a jobs site, however.

Question is: What would you say is the candidate response due to the ad by the side of the road? I am not expecting huge flows of CV’s, but possibly high relevance levels and material volumes of applicants, given their geo hyper-targeting.

I will aim to get in touch with the agency guys and see if I can complete the picture. Just remember: you can have a niche campaign on wheels if you want to, outside Uni’s (graduates), coming out of Pyrmont (digital, IT), etc.

Have a good evening.

The core reasons these and other Facebook-based services are being given a good chance of success against LinkedIn is not their technology prowess or unique business-commercial model; rather they are positively viewed by pundits due to the fact that they are hosted on Facebook, the largest social network at 750 million users (plus).

It is certainly possible that these FB-based systems do have great systems or unique value propositions for its users. These however seem to only come second to the “fishing on the biggest pond” advantage.

There are a number of reasons as to why I am sceptic as to this argument. Mainly, I am reminded of how China was viewed as a market a decade (or perhaps more) ago. I clearly recall many sales, marketing and business development presentations introducing China as a market with 1.3 billion “consumers” (which is as you know their entire population, more or less).

Closer inspection, of course, showed the fallacy of counting every Chinese national as a consumer without recognising their purchasing power, whether they lived in rural areas, etc. The rise of the middle class in China is certainly bridging the gap but it is still necessary to look deeper to understand they real size of the market for specific products or services.

The Chinese Market (size) fallacy reminds me of the volume advantage of the Facebook-based applications better-than-LinkedIn chances of succeeding. Even if these platforms were to grow large, recruiters know well that volume does not automatically imply quality (which drives candidate place-ability).

I am certainly not prepared to write off LinkedIn on the basis on the volumes argument. I’d love for other companies to continue innovating and making it easier for people to find jobs and for recruitment professionals to add more value to their employers/customers. I think this battle will be fought on the basis of benefits and value. I certainly hope so.

I posted more or less the same lines to G+ a few weeks back; fact is I am not using it regularly and there is no immediate or apparent reason to go to it in a hurry.

But this is not about Plus; it’s about me reaching 1000 connections on LinkedIn which, as you well know, has no intrinsic value. It is also about a couple of articles on the rise of LinkedIn and its impact on human/real connections:

- Rick Bookstaber’s “Ultimately LinkedIn Will Make Your ‘Weak Links’ Less Valuable”
- “The continuing devaluation of LinkedIn connections” by Ross Dawson

These pieces are not comparable straight away in as much as they are not addressing the same issue. Bookstaber’s post centers around network theory and how weak links need to remain ‘weak’ in order for societies to flourish and develop (whilst LinkedIn might be doing totally the opposite).

Ross’ article is about the bastardisation of the LinkedIn connection as more “strangers” approach you to link-in simply because -as per the system’s features- this is the only way to get in contact with a member. As a contrast, he references Facebook, where strangers can message you and you can “sus-out” people without a prior connection commitment.

The point of convergence for the articles was reaching the 1K connections mark, which prompted me to reflect on what happened to my way of doing business since joining LinkedIn. Some insights and personal experiences follow:

- I think I have done well in not connecting with every man and his dog just for the sake of increasing reach. Weak first degree connections that have no opportunity to strengthen are very much like those conference attendees whose business cards we hoard but whose face or pitch you cannot recall. You cannot help them and they cannot help you.

- Strong first degree connections off the system as well as those nourished in it after the initial contact have been extremely positive for repeat business. LinkedIn has proven to be an effective CRM; then again I don’t have thousands of clients or lots of staff that demand highly coordinated relationship processes.

- Almost every new customer I signed up is (or was at the time) a second degree connection linked to a strong first degree connection. At the same time, there is a huge chunk of second degree connections which are, to-date, strangers; however, more often than not, I have enough information to work out what their business needs and priorities might be. So, you know where my marketing efforts go.

- Third degree connections is uncharted territory; every now and then, I see little archipelagos (members who I know or can connect off the system) but they are rare. LinkedIn Signal might change that, but I am not a heavy user yet.

- Throughout the five 1/2 years of going with the biz, my marketing expenditure has been negligible. You might say I could be more/really successful if I had spent money. I think that if I had decided to have marketed more, I would have done more of the same (e.g. blogging more, increased participation on Groups, more presentations, videos, etc.) which is a resource with a cost but still imply no material disbursements of dollars.

- My cold calls on LinkedIn – inMails, connection requests via Groups – have had about a 30% success rate at the most. Success here is understood as having the chance at strengthening a relationship, so that 30% is looking not too hot, is it. I don’t believe the conduit was the culprit; rather, it was my inability to sell the connection request well enough.

About 10 years ago, a recruitment ‘big-wig’ told me something along the lines of “Jorge, you will never be able to accumulate the amount of business cards I have on my Rolodex”.

I am not exactly sure how he did business, but one thing LinkedIn has enabled me to do is to check thousands of ever-changing Rolodexes of people that I am not even directly related to. My future clients, employers, colleagues, employees are – more likely than not – living right now in second degree land.

This is argued on the basis of four core reasons:

- Larger volumes of people on Facebook
- Similar demographic groups
- Recruitment tools showing up on Facebook already
- Better ‘social marketing’ at Facebook

I think the article should have been better titled ‘Why Facebook can be used as another platform to recruit’. Less attention-grabbing for sure, but perhaps more balanced.

This piece, IMHO, assumes that LinkedIn will sit on its hands and let all the wealth of profiles, companies and relationships information logged over the years go to waste. I don’t see it happening

Along these lines, the ‘Facebook is huge’ argument echoes the pitch of job boards sales reps of yesteryear selling eyeballs and traffic. Organisations never needed Unique Browsers; they always needed placeable candidates that allowed agencies to earn a fee, or corporations fill a role. Bits of functionality like LinkedIn Skills which enables self-skills-coding has the looks of a powerful offering to do things like ‘get me 15 developers with android games experience in Sydney’

Similarly, demographic similarities have to be complemented with intention of presence – I go to LinkedIn to generate leads, connect with professionals, and hopefully grown my personal brand. I go to facebook to chat to my sister in Peru, look at pictures of friends and fam, mostly.

I joined Branchout early in their life and was trying to use BeKnown. Kindly, and – this might go for Australia only – we’re at very very early and immature stages of seeing candidate attraction and retention happening on FB. I am not saying it will never happen; rather I am arguing that the social links – which can nurture professional links (e.g. I want to work at Adidas ‘cause I love the brand, and my cousing tells me training for salespeople is great) – are at this stage a huge haystack to look for needles.

I am looking forward to seeing a network, environment, app, etc. giving LinkedIn a run for its money; this will be very beneficial for the market as it will accelerate the pace of offerings. I just don’t see LinkedIn destroyed anytime soon.

Have a good rest of the week.