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ERNIE, please use the form on the
linked page. Historically, no player has been able to amass a market share larger
than 4% in the staffing-recruiting-recruitment advertising sector. While
"monopoly", as a surrogate for a more detailed view, is enough to drive a
company, the strategy got us to wondering about real monopolies in related
segments.
As you know, there are three major newspaper initiatives in our
universe. CareerBuilder, once publicly traded, was used as a vehicle to
convert the winnowing assets of CareerPath (remember them?) into usable
pieces of the next phase solution. CareerCast, the tiny technical
job-shop, is being used by a fair number of newspapers as an experiment in
avoiding the higher costs of the CareerBuilder solution. Finally, there is
BrassRing.
Historically, the advertising agencies owned the customers for
newspaper classified advertising. Over the years, the sales teams in the
newspaper business atrophied as the agencies continuously brought
increasing revenues to the table. By the time the Internet reared its
head, the newspapers' control of their own advertising revenue was
theoretical at best. (The situation...losing control of the channels of
sales distribution... is not uncommon, a close look at the struggles at
Peoplesoft will show that the loss of channel control ultimately results
in the choking of the core business).
The underlying goal of the three newspaper initiatives is to regain
channel control. The costs involved, however, are hard to stomach. The
newspapers, forced to compete directly with Monster/TMP, simply shrivel at
the thought of making those sorts of investments. Learning to retake
control of the channel involves deep pocket investing.
Operated as massive entitlements (trust funds), the newspapers are
fixated on the notion that the opportunities in online recruiting are
theirs as a right. Investing in rights is a hard thing for a good CFO to
swallow. Like others in the industry, the newspapers always show up a day
late, a dollar short and looking for the cheap way out (particularly if
they can avoid actually selling anything at the same time).
Each of the JAD players (some much more sophisticated than others)
wants to develop a relationship with each of the newspaper entities. With
700 separate newspapers and a growing number of JADs (currently 24 if you
include CareerCast in the mix), the cost of negotiating 15,000 separate
agreements is staggering. (we estimate that solid, predictable, working
alliances take between $50,000 and $250,000 to get going). But, everyone
of the JADs needs everyone of the newspapers and vice versa.
The CareerBuilder answer is to draw a line in the sand. Their answer is
that they "are" the network and can not and should not participate in
other diluting answers. It's a predictably closed system answer to the
question, robbing the newspapers of revenue in order to protect turf. It's
also an astute way to avoid the inherent conflict of interest involved in
the alternatives.
The CareerCast solution is to centralize authority and expand directly
into the job ad distribution business. With a variety of support from
within the newspaper industry, CareerCast is now acting simultaneously as
the agent of the newspapers (its customers) as it negotiates the deals for
access to online posting while building a Job Advertising distribution
business of its own.
The situation is evolving this way because the newspapers do not want
to shoulder the expense of becoming fully articulated businesses with
Marketing and sales arms focused directly in our industry. The internal
claims of profitability in the job board arena will only hold water if the
form classified advertising managers can maintain their cost structures.
It's fairly typical trust fund thinking. By taking this tack, the
newspapers are forcing CareerCast (whose management is far too
inexperienced to understand the issues) into a liability laden bind.
A player with embedded conflict of interest who engages in deals in
order to build an internal business can get away with it when the stakes
are low. That's just not the case in the newspaper industry which has
regulatory watchdogs.
Our bet is that the reluctance to invest will continue and the
resulting flaps will keep the newspapers from maturing their "new new"
economy businesses.
That should accelerate Monster's trip to Monopoly Court.
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