In an earlier post, we looked at how companies could use our job search engine to gather competitive intelligence.  Likewise, at WorkHound we track how many new jobs are created daily.  In an era when guessing the direction of unemployment data is darn important, we believe that our real-time tracking of new job creation could be a strong leading indicator for future unemployment numbers.  Unfortunately, this data is showing that unemployment will trend negatively for the next several months.

For the last 18 months we’ve been seeing about 35k new jobs being created daily and this kept the unemployment number fairly flat. New jobs created were being equally offset by jobs that were being eliminated. In the last month, this number has fallen nearly in half.  We are now seeing 21.5k jobs created daily.  Coupled with more job cuts, new job creation is falling well behind job elimination and will lead to higher unemployment.

The good news, though, is that new jobs are being created daily and there are better tools by which to find them. Some general “new job creation” trend data that we’ve data-mined tracking directional changes over last 12 months:

MORTGAGE ADVISOR:  jobs decreased by 59%
COFFEE: jobs decreased by 39%
ADVERTISING: jobs decreased by 25%
PROPERTY: jobs decreased by 23%

while…

PILATES Instructors: increased by 57%
Marketing with Facebook Experience Jobs: increased by 24%
LEGAL: increased by 22%

Granted, the increase demand for pilates instructors won’t offset job losses by estate agents, but flexibility might just be the ticket to get through this crunch period.

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It’s not clear to me that job sites and recruiters have a standard metric that can be reverse engineered to create a common benchmark for publishers/recruiters/boards to position against, but this may just be the inherent nature of the category.  Since online media, when bought and tracked smartly, is so accountable, some common metrics and benchmarks would be eminently useful.

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The advice given by Calacanis and Wilson on how to adjust a business in light of a downturn, I believe is just good advice for managing a start-up in any climate.  (Frankly, for start-ups, it’s pretty much always nuclear winter - very few companies get funded and more companies go in to receivership or simply fold than onto a positive liquidity event).

In recruitment advertising, offline still sucks up at least half the revenues.  They offer very little accountability, declining applicant volume, and high CPMs.  They have strong brands which co’s might feel that there’s some transference through associating with (as advertised in the Financial Times) and some qualifying of leads (readers of CDS Swap Weekly are a self-selecting bunch).  But, offline has the tougher case to make in a tougher economic environment, hence the recent wave of layoffs.

What’s important to remember, though, is that big market opportunities even with some contraction remain massive opportunities and recruitment is one such opportunity.  Global recruitment in 2007 was nearly a $100 billion opportunity, in 09 even if topline drops 20% there’s still a lot of money to be made.  The key is understanding how a contracting market alters the behavior of the key players.  Wilson, in his piece, offers advice targeted for for advertising driven internet plays that is spot on for the online recruitment space.  He notes that in past recessions, that media buyers have sought more accountability and been more focused on ROI.

It is for this reason, that Google had a great quarter while the NY Times is pushing towards junk status and its CEO is flying coach (a fun data point is the contribution to EBIT from about.com for NYTimes).

My belief is that even when global economic growth recovers, that there is enough inefficiency in the recruitment space that profits can increase but topline revenue will remain essentially flat.  There is still a massive global competition to attract talent.

Online recruitment sites have an expense in drawing traffic and then have a path to make money from it.  Whether unemployment rates go up (seems likely in the US and UK in Q4), or individuals are slightly more insecure about their current jobs, the demand for recruitment sites will increase which will take down traffic acquisition costs.

SocNets, blogs, and other non-recruitment focused sites will grab some recruitment advertising since their low cost of traffic and increasing ability to target advertising allows them to be a low cost provider but will be challenged to provide scale and quality leads.

Job boards will see their cost of traffic drop but will see pricing and accountability pressure from media buyers. Being able to provide more quality leads through superior screening/targeting will allow them to maintain a slight price premium.

As a job search engine, we are seeing, especially in the UK, a sharp drop in newly advertised jobs (down 27% in the last 2 months) and a sharp uptick in traffic.  Job sites if positioned well, can be solid negative beta plays if they can manage to contain costs and grow their margins. This positioning will also serve them well when the business cycle inevitably turns favorable once again.

Wm

more thoughts from John Doerr

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We agree that in this environment, startups need to focus on building revenue while containing costs, but we also think that these transitional periods create real opportunities.

We track UK online recruitment ad inventory very carefully and we’ve seen about a 15% drop in the last 60-days.  Since recruitment advertising is migrating to the internet at a quick clip, this does not portend well for print publications that rely upon classified ads.  As Mark Sweney points out in the Guardian,

“Regional newspaper publisher Johnston Press, which has taken a battering due to its exposure to freefalling ad sectors such as recruitment and property, has been under the eye of analysts.”

Newspapers have high fixed costs and thin operating margins.  These conditions make revenue downturns dangerous.  Likewise, a downturn in asset values and revenue is wreaking havoc at the highly levered, high fixed cost, investment banks.

Yet, the core business for banks and media co’s still represents a massive opportunity.  It will just shift to more accountable/nimble/cash efficient enterprises - boutique i-banks, hedge funds, search engines etc.  We believe that even if there is a temporary decline in topline revenue in these sectors, smart operators will find a way to grab higher profits and create real wealth.

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In similar fashion, while conversing about who was taking tenancy in the new Westfield London mall, I took a look at their website which was, typically, coy about their new leaseholders (many landlords like to keep this info on the DL).  But, since staffing is a critical path item, many retailers have already started the recruitment process and with a couple quick searches on a job search engine like, say, Workhound, it was easy to compile a list of the new tenants.

Good search engines take unstructured data by the terabyte and structure it. Which, in our case, can help those looking for a job, trying to benchmark their salary, or even just gathering some business intelligence.

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Wm

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Although in traditional business channels, there are a myriad of ways to put up protective walls to impede competition, it’s more difficult to do so on the Net.  Just have to build better products.

Wm

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When looking at consumer research, what I find interesting are non-intuitive, actionable insights. Elberse’s discovery that, as she modestly states, “may be of intellectual interest to readers,” that there’s money to be made in blockbusters is neither.  A record executive that states “if we just had more platinum records, we’d make more money,” would not be applauded for strategic vision. 

I found the tone of the piece somewhat arch as if Elberse felt it necessary to provide a necessary tonic to the success of Anderson’s book. There’s a hint of straw man building when she suggests “…that it would be imprudent for companies to upend traditional practice and focus on the demand for obscure products.” As if, a Blockbuster executive might put forward the shifting the product off the new release wall and replacing it with the French New Wave.

To look at the Rhapsody data and to come away with the insight that the music that is most popular to music consumers is also of most interest to Rhapsody customers is not that interesting.

That, as Anderson puts in his rather polite response, Rhapsody gets 68% of its demand from titles that are not available in traditional retail stores, is the type of insight could really upend the entertainment media value chain.  Even limited just to the arena of producing more blockbusters, if companies can monetize inventory they had previously written off and find more ways make profits on titles that fail to appeal to a larger audience, they can afford to make more bets and increase their odds of having more blockbusters in their portfolio.

The notion that entertainment co’s might be able rethink their portfolio strategy seems much more useful than Elberse’s advice that “When producing niche goods for the tail end of the distribution, keep costs as low as possible.”

One of the key tenets of the Long Tail was that new modes of distribution were causing a regression towards zero in inventory carrying and transactional costs.  This is why a company like Netflix (NFLX trades at 3x BBI) can have an inventory position vastly superior to a regular video store.  Elberse’s advice that retailers need to “Strictly manage the costs of offering products that will rarely sell,” especially given to retailers who traditionally have operating margins close to 3% and are already very cost focused just doesn’t seem that useful.

In a final dig, noting the delicious irony that Anderson’s ideas were contained in a bestseller, she again (just as her Rhapsody and Quickflix data seem to reinforce Anderson’s thesis) states the obvious and inadvertently makes Anderson’s point.  Publishers were willing to make a surprisingly large bet on a book with a few too many mentions of Power Laws to generally attract a large audience.  In making a large bet, Hyperion signaled their awareness that bestsellers can make money and in Anderson’s case, maybe they took to heart that with new potential audiences for niche content, they had a hedge that allowed them to make the “jaw dropping” offer and subsequently win the bidding war and make a decent return.

As it pertains to recruitment advertising, our Workhound and SalaryTrack sites benefit from investments in data procurement and processing.  A key proposition for is that we provide substantial market coverage and that our data is of sufficient quality and quantity to be useful.  Much of our investment is in processing data records that are found in the Tail of the distribution curve and our users find great value in it.

Wm

Update:  Good Blog post here.

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Update:  Ink not on paper just yet.

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