With the acquisition this week of Indeed.com, Recruit.com has taken a major step toward becoming a worldwide recruitment powerhouse, directly challenging CareerBuilder, Monster, and Indeed’s most direct competitor, SimplyHired, for a share of the global employment advertising market.
A curiously eclectic conglomerate with holdings in the B2C classifieds and direct sales marketplace, Recruit has been moving aggressively to expand its human resources market, and broaden its footprint from Asia Pacific and especially Japan where it is headquartered.
In the last two years, the company spent more than $700 million buying American staffing firms, establishing its first U.S. presence while simultaneously become one of the top four or five staffing firms in the world.
Recruit already was the dominant staffing and placement firm in Japan, where it operates both job boards and employment agencies. It also owns a piece of 51Jobs, the leading publicly traded job board in China. Buying Indeed, the No. 1 or No. 2 most trafficked job board in the world (depending on what’s counted and how), Recruit leaves no doubt it intends to be a global player.
Betting on the pay-for-performance model
“I think that’s their goal,” said Paul Forster, co-founder and CEO of Indeed. “We are the No. 1 job site worldwide, which makes us a good fit with the company plans … They are looking to Indeed to be their tech platform worldwide.”
His comments echoed those by Recruit CEO Masumi Minegishi. In the announcement of the sale, Minegishi made clear that the play for Indeed is a key part of the company’s overall goal. “Recruit aspires to be the leader in HR and recruitment services worldwide,” he said. “Our acquisition of Indeed is a critical step in achieving that goal and we are excited to help build on Indeed’s #1 position in job search.”
That Recruit acquired Indeed, rather than, say Monster Worldwide, which was quite publicly put in play months ago, is a bet by the company that the future of recruitment advertising is in the pay-for-performance model pioneered by Indeed, and competitor SimplyHired.
“It’s a big bet,” observes Gautam Godhwani, CEO and founder of SimplyHired, in both the “globalization of recruitment and performance recruitment marketing. When a company like Recruit makes a bet (like that) it’s a clear sign of the direction of recruitment.”
His view is that the Indeed acquisition is a validation of pay-for-performance and the vertical search model that gives job seekers access to a vast number of jobs posted online, not just those a company pays to post.
Directly competing with the big job boards?
SimplyHired and Indeed launched within months of each other, with Indeed coming to market first late in 2004. The companies are vertical search engines, similar to Google, but specializing in recruitment job postings, which they collect from thousands of employers, professional associations, and some niche and specialty job boards and post for free. Employers — and often job boards and staffing firms — pay for premium positioning on a pay-per-click basis.
CareerBuilder and Monster charge a per-posting fee. They also collect resumes and charge for searching and sourcing the candidates. Both companies have been challenged by SimplyHired, LinkedIn, and especially by Indeed, which began accepting resumes last year and now gets about a million a month.
Although it doesn’t charge for accessing the resumes, it charges $1 to email each candidate. Even that small cost can often be avoided by using the resume information to obtain contact information elsewhere. In the future, Indeed could adopt more aggressive pricing, putting the company in direct competition with CareerBuilder and Monster. About a third of their revenue is attributable to resume searching.
Both companies — as well as newcomer LinkedIn — now will have to contend with a newly deep-pocketed Indeed. Already in 50 countries and available in 26 languages, Indeed’s new owner can open doors to greater penetration in Asia, and, of course, Japan. The company has a significant head start over LinkedIn, which has been expanding quickly into Europe and elsewhere. Although somewhat more than 60 percent of its registered users come from abroad, LinkedIn is at the early stage of growing its international revenue.
CareerBuilder and Monster both have a significant overseas presence. CareerBuilder is privately held and doesn’t disclose its international revenue. Monster’s financial reports show its international is approaching parity with its North American revenue.
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Sale price estimated at $1 billion or more
Privately held Indeed offers no financial information. Forster said the company has been profitable for several years and has doubled revenue in each of the last three years. It also has mostly bootstrapped its growth. Its startup was financed by the founders, and had only one round of venture financing, taking $5 million from The New York Times, Union Street Ventures, and Allen & Company.
Although the terms of the acquisition were not disclosed, guesstimates by business blogs and site put the purchase price in the billion dollar range; The New York Times said in a public filing it would realize a $100 million profit from its investment. According to the announcement of the sale, Indeed will remain a separate company with the senior management continuing to run the firm.
The sale, Forster said, is a “testament to the strategy working. We’ve built this along a strategy that had job seekers and employers first in mind. We’re proud of what we’ve created.”
“With Recruit, he added, ” we’re in a position to accelerate our growth globally.”
Recruit began in Japan in the early 1960s, focusing on jobs promotion to new and upcoming college graduates. In the 1970s it broadened its reach into real estate, rentals, and job advertising beyond the college environment. Since then, the company has expanded into multiple consumer marketplaces offering both editorial content and online sales. These include automotive reviews, fashion and beauty, travel, food and bridal. It also branched into staffing and search, launching what would become one of the largest firms in Japan.
In the 1980s, Recuit Co. became embroiled in an insider stock trading scandal in Japan, that lead to multiple resignations of government officials, including members of the Japanese cabinet. Recruit’s founder and company leader was forced into retirement.
Since then, Recruit has grown into one of Japan’s largest privately held companies, with revenue of more than $10 billion and ownership of dozens of classified ad sites and services, consumer marketplaces, and an increasing footprint in human resources. It owns the leading job sites in Japan and holds an interest in 51Jobs, one of China’s two largest job sites.
A year ago, Recruit bought Staffmark for $295 million. The acquisition which closed at the end of 2011 made Recruit the fifth largest staffing provider in the world. That deal was quickly followed by the $410 million purchase of Advantage Resourcing International.
That acquisition broadened Recruit’s presence into Europe, Australia, and the Middle East, and expanded its U.S. presence. Recruit first entered the U.S. market in 2010, when it bought The CSI Companies, a Jacksonville employment and staffing services firm.