Seek and you shall find

On Friday OnRec published a press release from Seek about how Nielsen//NetRatings had understated Seek‘s traffic between April & October 2005 by about 8-10%. Given that Seek claims to draw 1,702,485 unique browsers and 1,733,488 in October and November 2005 respectively this is a fairly large understatement!

This statement got me thinking, how is Seek really going in the marketplace?

Seek floated in April 2005 on the Australian Stock Exchange and their price has gone from $2.35 to $2.98 (as of 16 Dec 2005), which when compared to the S&P/ASX200 is damn good but what has the year really been like for them?

9 November Seek released their annual results and had their first open AGM both contained lots of interesting information on their financials and perspective on the marketplace.

Firstly their total revenue has increased by about 73% on FY2004 and earnings per share from 5.6 cents to 8.1 cents. Their revenue was about A$69 mil not bad for a employment classifieds business in Australia. The job ad revenue grew by about 60% year on year with a net profit growth of 39%. The revenue for 2005 is geographically split between Australia and New Zealand as A$61 mil and A$7 mil, a similar split for 2004.

Seek has also been investing heavily in their new Learning business. Through the purchase in July 2004 of Selfcert and the more recent Dynamic Web Training in Aug 2005 for $2.5 mil. This is to diversify their offerings for job seekers and a defensive move in case their traditional market reduces. The learning business generated A$6 mil revenue compared to the traditional job ad business A$64 mil.

On these figures we have a healthy business that has also been recognised as an Employer of Choice. Seek also publishes a series of Employment Indicators that show while the labour market is stable, job ad (on Seek) growth of about 32% compared to November 2004, job applications are up 38% over the same period. This indicates that their might be a tightening of the market and potential pressure on salaries if it continues. All in all a good thing for Seek.

A couple of interesting ownership points that need to be addressed. James Packer is Chairman of Seek, and he is also Executive Chairman of PBL (part owner of Ninemsn). Chris Andreson (ex-Optus fame) is a non-executive director of Seek and on the board of PBL, Foxtel, Fox Sports, Ninemsn and Hoytts! PBL owns about 25% of Seek via an investment vehicle Windfyr Pty Ltd.

Now way down on page 82 of the Financial results is some sharing that is going on around this. PBL places about $24,000 in recruitment advertising through Seek, at market rates. There is also a freebie from PBL to Seek for about $2mil in advertising over the last two years. Finally Seek paid about $2mil to Ninemsn for referals, on commercial rates.

The online recruitment advertising market in Australia is controlled by 3 main players, Seek, MyCareer and CareerOne. I can’t forget the government offering Job Search which is a similar size in terms of job ads to MyCareer and CareerOne.

According to Nielsen/NetRatings in June 2005 Seek has about 67% of user eye ball time vs 16% for MyCareer and 14% for CareerOne. The others in the marketplace make up the last 3%. Seek estimates this translates to them holding about 48% of the job ads with CareerOne with 22%, MyCareer 17% and the rest with 13%. Which is strange given Job Search has similar number of job ads.

In reviewing the Alexa data for Seek over the last 2 years it shows an increase in traffic on average of about 60-80%. Now comparing Seek to CareerOne and Seek to MyCareer we see a definite gap between Seek and the other two players in reach on the Internet. Looking at CareerOne against MyCareer they are almost identical in their reach. A positive thing is all three sites seem to follow similar valleys and hills with regard to traffic.

On page views per visitor Seek has a 3 month moving average of 9.5, CareerOne has 6.9, while MyCareer has only a 5.5 page views. Which kind of disagrees with the Nielsen/NetRatings in June 2005 figures above.

Comparing the two smaller offerings with Job Search. CareerOne reaches about the same numbers as Job Search. While MyCareer seems to have a slightly larger audience.

Online employment classifieds are still growing in Australia with a 31% increase year over year in 2005, while print fell by 6.4% based on the ANZ Job Advertising Sales report. Within Seek’s Annual Report they see only a 15% penetration in dollar terms and compare this to a US figure of 22%, meaning there is at least still another 7-10% dollar growth out there although this will continue to grow.

CareerOne is a News Corp entity and automatically loads all jobs from all News Corp newspapers into CareerOne! Now due to size of News Corp’s newspaper stable, one has to question Seek’s claims as having 48% of the job ad market, they have the eye balls but the ads, but as we all know statistics can say anything you want.

The final major player in the market is MyCareer, a Fairfax offering. With Fairfax owning the Sydney Morning Herald, The Age and The Financial Review, but they charge extra for an ad in MyCareer, huh?

So what does this all mean?

I guess the market is growing both in terms of revenue and reach. All players seem to have been stable in their market position for the last 2 years. Seasonal impacts tend to impact all players at the same time. Seek is the only player moving into other revenue areas, although the others are ad-ons to existing businesses and do not have job ads as the core business. MyCareer would probably increase its reach if Fairfax did not require additional payment for online ads when taking out print. This is typical with Fairfax’s really strange online strategy of having users pay for everything.

Longer term I am interested to seek what happens with some of the smaller players, such as Linkme, CVOz and whether they are able to climb up the ladder into the big league. Although without some significant investment in brand awareness I doubt it.

Continuing the long term look, we are yet to have a vertical search offering enter the market. Will we get a Indeed or SimplyHired here? Will Google Base have any impact? In the same way as the smaller players these guys would need significant spending in brand awareness.

I feel the existing players have a dominate position in the market and that branding in this business is the make or break factor for anyone trying to enter the market. Yes there will be an impact from the free classified players (aka Google Base) but size will be directly proportioned to their brand awareness and focus put on the market. If Google was to focus I feel they could significantly impact the classified market the question is will they?

10 thoughts on “Seek and you shall find

  1. nice analysis. annual report was interesting, and doubling ebit to $27m was vimpressive. makes their market cap in range with US averages of 38 times earnings… if they had missed number, well.. but good piece.

  2. Thanks Ben. I kinda of feel it was too impressive but they do have a dominant position of a growing market. I wonder how they are going to stand up in the long run as the whole classifieds market changes again.

  3. You might be interested to know that advertising on Seek costs recruiters more than 5 times the charges on mycareer or careerone. Do they get 5 times the return? No.Sooner or later their customer base (largely recruiters) will spit the dummy and ask for quality not quantity.That would be novel…

  4. Mell, you neglect to mention that advertising on SEEK is about 100 times cheaper than display advertising in old media publications. Do those newspaper ads get 100 time the response? I think not!

    Advertising on SEEK is actually not 5 times more expensive than the other online players anyway. $154 on MyCareer and $148.50 on SEEK.

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