Heat On Seek: Disruptor becomes the disrupted

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Twenty years after it disrupted the newspaper game online, recruitment specialist Seek now finds itself having to bend its model to the emerging global distribution behemoth, LinkedIn, and a few other nimble start ups like The Search Party.

For the first time the company will charge its recruitment industry clients to access its databases via its Talent Search system, according to a financial analytst report.In the report by Morgans, obtained by Which-50 off the back of the usual truck, analyst Ivor Ries notes, SEEK managing director Australia Mr Joe Powell yesterday confirmed that the company has commenced negotiations with major recruitment firms on charging for the ability to access candidates via the Talent Search system. While clients would be granted credits for the volume of current business, any consumption of candidate data and access above a set data limit would be subject to charging.

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The report estimates the size of the recruitment placement fees market at $4 billion and suggests the industry will have to cop five to eight percent of that pool being directed to the cost of database access in future.Ries is bullish in Seek’s move, buying the company’s spin that the decision to pull forward the new model is a measure of its strength and acceptance by the recruitment sector.

Seek’s approach looks more like a nod to the inevitable, than a significant innovation. Quite apart from LinkedIn, a new generation of startups is already delivering new layers of service based on analytics. The Search Party for instance has organised with recruitment firms to pool cv data into a single database with what is claims is significantly more depth than a typical Seek offering.

Then they apply their ‘data algorithm magic’ to match a clients search to its needs with what they claim is significantly more accuracy. They claim the overall service is cheaper, faster and more efficient for clients and provides the recruitment firms signed up with a distinct market edge over competitors.

Seek’s moment alone in the sun following the decline of News and Fairfax in the 90s and noughties as tier one recruitment channel is long past. LinkedIn has led the charge on reseting the rules around recruitment in two important ways. Firstly for many companies LinkedIn isn’t necessarily a better way to advertise – but rather it has removed the need to advertise altogether, or at least mitigated against it as anything but a last resort, especially in senior white collar jobs.

And just as importantly LinkedIn has reframed the recruitment industry game through the provision of new subscription based services levels of which database access is just one component.

News and Fairfax bore the brunt of the first change, and Seek, the market leader for online jobs down under must now respond to the second.

Seek has a long track record of success and unlike the companies it usurped, it has a native understanding of what disruption looks like, and the chaos it can unleash on slow moving incumbents.

One problem however – just like local banks going up against tech giants in the transaction space, or retailers battling Amazon and Alibaba – is the tech stack. In the case of LinkedIn it will be battling a global technology superpower and may will struggle to match the levels of investment in that stack. It will have to find a new way to respond. In the case of the smaller innovative start ups like The Search Party, they are facing a model which competes in data matching, pricing and agility.

And while Linkedin’s and The Search Party’s users are permanent and highly engaged, that’s not a claim a job’s board can credibly make. In his report, Ries writes, “The importance of a successful launch of the Talent Search database product – sometimes dubbed SEEK 2.0 – cannot be underestimated. The market for job advertising is limited and job ads only result in approximately 25-30% of job placements. Only by penetrating the market for candidate data can SEEK grow its domestic recruitment business to provide a larger share of successful job placements, and thus the value created.”

He cautions however that some cannibalisation is inevitable. “Every job placement made via the database means that no job is advertised and SEEK loses revenues. Therefore it is reasonable to expect that the gains in revenues projected from the database will result in some erosion in advertising revenues.”

Morgans estmates Seek will deliver Ebitda of $371 million this year. Interestingly, Seek this week announced a major management restructure.

According to CEO Andrew Bassett, the new executive team reflects the continued expansion and increased complexity of the business. He said it also involved recognition of strong performance by everyone who had been given new or expanded roles. Ben Hutt, Founder of the Search Party will be speaking at Daze of Disruption in May.

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