Online recruitment advertising ñ last of the dotcoms?

By Calum Chace, director of transaction services at KPMG

It hardly seems possible that only three years ago, Lastminute.com and the like were raising vast sums of money for business plans which relied entirely on the belief that large parts of everyday life would migrate to the web. Since then it has become fashionable to rubbish the internet as a source of new business models.

But there is a type of internet business that is doing very nicely, thank you: online recruitment advertising, also known as jobsites. GoJobsite, a pureplay internet startup, is one of a number of profitable jobsites in the UK. Its founders have become wealthy individuals, and it has attracted significant corporate investment. Monster, the giant among US jobsites, has expanded aggressively in Europe.

It is not only internet start-ups that are taking the growth of online job advertising (and other classified advertising) seriously. Classified ads make a significant contribution to the revenues of the major publishing groups. Regional newspapers carry ads for local, often blue-collar job vacancies. Trade publishers carry ads for people in specific industries or trades (IT contractors, engineers, and PR professionals, etc). National newspapers carry ads for executives - often in specific sectors, like accounting and finance professionals in the FT.

Naturally, the large groups behind these publications did not idly sit back and watch classified ads migrate to the web, and out of their grasp. They have all been experimenting with jobsites, and many have made significant investments in the business. Some have been more successful than others. Examples of the reasonably successful variety are Fish4, owned by a consortium of the large regional newspaper groups, The Guardianís Workthing site, and TotalJobs, owned by Reed Elsevier, a leading trade publisher.

So how far has the migration of job advertising to the internet gone? And how much further will it go in future? An industry sector at the leading edge of the change is IT, and the internet became the medium where IT contractors actually looked for and found jobs several years ago.

In the early days of online job ads, it was thought that recruitment consultancies might be killed off by online ads ñ disintermediated, in the jargon. If employers could use the power of the internet to talk directly to jobseekers, why would they need to pay the fees of recruitment consultancies? It quickly became apparent that this was not going to happen. Recruitment consultancies bring an expertise and a confidentiality to the process of matching candidates with jobs, and even more important, they save employers a great deal of time.

Another early idea was that recruitment consultancies would exploit the arrival of job boards to save the substantial sums they spend in offline media. They would desert the offline media, and the big publishers would lose their business. Again the reality was somewhat different. Recruitment consultancies pay far less than employers for an ad in the job pages because they are buying in bulk. Many of them also make healthy margins by selling their cheap space on to employers at close to the rate the employer would pay direct.

Recruitment consultancies also like offline media for another reason. At the moment anyway, it is far easier to build and maintain a brand offline than it is online. So a curious situation emerged. Although IT contractors were actually finding most of their jobs online, they were still flicking through the back pages of the trade magazines, and the consultancies were paying large sums for ads in those pages for branding purposes.

But in the last 12 months things have changed again. Computer Weekly, once fat with job ads from recruitment consultancies, is now a thin shadow of its former self. The consultancies have fallen on hard times, and have had to cut their offline spend.

The slump in job ads is by no means limited to the IT sector: recruitment consultancies serving most sectors are suffering badly. Job ads in national newspapers, for instance are reported to be 40% down on last year, which is one of the factors prompting peace in the newspaper price wars. But it is clear that the downturn in IT job ads is more severe than elsewhere, and it may be structural rather than cyclical.

All this leaves us with three questions. 1) Are IT professionals uniquely internet-oriented, or will other sectors go the same way, with candidates increasingly using the internet as their main medium for actually finding jobs? 2) If so, when? 3) Will the recruitment consultancies go back to spending serious money on offline brand-building ads once their own market recovers?

No-one knows the answers to these questions yet, but an opinion piece is not much use without opinions, so here are my personal answers. Online job ads will become increasingly effective in different sectors, with some sectors migrating quickly (engineering, perhaps), and others taking many years. And as they become more established, online job ads will generate bigger revenues. But recruitment consultancies will also go back to spending money in offline media when they can afford it.

As is so often the case, the success of the new medium will not kill off its predecessor, but will instead create new value, and a new layer of revenues, by fulfilling a slightly different function. While offline ads will be used for brand-building by both recruitment consultancies and employers, online ads will be like direct response advertising, used to produce a quick result. In other words, offline will be above-the-line, and online will be below-the-line.






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