Over 15 years ago, online sites such as job boards quickly replaced print media solutions, such as local newspapers, as the primary recruitment vehicle. Almost overnight, sites like Monster and Careerbuilder gained explosive traffic and built large databases of job seekers. The model was simple, charge a fee to post a job and job seekers were given free access to review and apply. On the Recruitment Agency side, growth was also fueled by these new online tools. Prior to the internet, it might take 10 years to amass 20,000 resumes and there was real value in that database.
Fast forward to today and what do we see at iMerge? Monster, a public company enjoyed a stock price of $91 in the spring of 2000. Today it trades at just over $14! Korn Ferry, an international staffing company, traded at over $42 in February of 2000. Today this stock is under $15 as well! Certainly the economy has had its effect as less jobs means less job posting and less willingness to pay fees to professional services firms, but big companies are always hiring somewhere so something larger is likely at play.
While job boards and staffing companies are two very different animals from an M&A perspective, they are within the same industry and we believe a similar trend is occurring – which presents both opportunity and challenges.
Web 1.0 was about access, the online boards could generate many more eyeballs (at a lower cost) than their print counterparts and that was appealing to expanding companies. With regards to staffing companies, they pitched themselves as experts at locating and qualifying talent and their own access to job boards allowed for quick growth. Today, companies are measuring the return on each invested dollar and embracing new ways to find talent in these economic times. Living on Cape Cod, I’ll use a fishing analogy; they are sick of using so much bait! They are looking for more efficient ways to get through the schools of small fish and capture that prized yellow fin tuna!
We see a lot of opportunity for growth in this space as the “war” for top talent will continue.
Web 3.0 is about socialization and networks! Large general boards that try to be all things to everyone we believe have seen their best days. In fact without major overhauls to their model we do not believe they will survive the next decade. Niche sites, that provide not just a job posting but resources, advice and community engagement will prosper. In fact we see the major boards already moving away from a single entry point to multiple sites based on area of skill. Sites such as linkedin focus first on networking with “finding a job” as one of many benefits of being a member.
Web 3.0 is also often about “less is more”, from a recruiting standpoint. Companies will still pay an agency fee, but most often they want a level of service they can not easily duplicate in house. What they want is access to a pipeline that has been nurtured by people that know a specific field and really understand the local talent pool. In short they want value. If it’s just combing through Monster, they can do that themselves!
iMerge has engaged many buyers and sellers in this space in recent years and this trend is obvious. There is demand here and the story is similar to what occurred in the hosting arena. For both the boards and agencies, acquisition will be an attractive path to growth by acquiring customers. We’ve worked with clients to help them look at the value they provide and build upon it. Those businesses that can cater to a niche, build loyalty and offer valuable services that are not easily duplicated will receive more favorable pricing when they do exit. We see this as a return to value and a focus on that is always a better long term strategy.