Study: SMBs Key Battleground in Employment Advertising

The economic recovery and declining unemployment rates of the last 18 months have fattened the job advertising market for the first extended time period since 2000. That upturn, according to a study by Borrell Associates, signals the start of a seven-year cycle of intense competition between online and print classifieds publishers, and the key battleground in that market war will be for the business of companies that employ between 5 and 500 people.

“The big question in the next seven years is, as the tide rises, whose boats will float to the higher level,” said Gordon Borrell, president and chief executive of the Portsmouth, Virginia-based company. “When we drill down to the local market, what we see as the real battleground in terms of recruitment is the small- and mid-sized businesses.”

As evidence, Borrell cited the case of Monster.com, which currently has an estimated 65 percent penetration into the enterprise job market (of approximately 3000 companies, employing 2,500 people or more). For the last year and a half Monster has been focusing its business growth primarily on much smaller companies.

Monster’s Chairman and Chief Executive Andrew McKelvey stressed that focus at the Credit Suisse First Boston-organized Media Week Conference in New York City last week. In his remarks, McKelvey estimated that by the end of 2004, Monster will have tapped about 10 percent of the marketplace of an estimated 2 million small and medium-sized companies. He predicted that in three or four years, 75 to 80 percent of Monster’s revenues would come from such businesses, even as it continues to grow its share of the enterprise market.

The chief source of that business will come from territory currently owned by local newspapers, he said.

“People ask us, who is our competitor. The answer is positively, positively the newspapers,” McKelvey said. “In 2003, which was a bad year for job advertising, 2 million small companies spent $3 billion on help wanted classifieds. These companies are going to spend billions more in the coming years online, and we want them to spend it with us.”

Monster is not alone in taking that adversarial stance versus print. Overall, revenues of the big three online job boards, which also include HotJobs and CareerBuilder, have grown nearly three times the rate of newspaper classifieds in 2004.

One reason for the less robust performance by newspaper publishers in the job advertising space has been their inability to establish a competitive online component to their print ads, researchers found. Borrell research found that most U.S. newspapers simply republish their Sunday recruitment ads on their Web sites. Among job advertisers whose recruitment ads appear on the Web sites of local newspapers, Borrell found that “many don’t know they are doing it.” (Borrell bases its findings on hundreds of advertiser interviews it conducts annually through WebAudit.)

While newspaper classifieds revenues are still five times that of the online job sites on a quarterly basis, it’s widely expected they will continue to lose share in the coming years. Which print publishers will stand their ground more effectively may come down to ad pricing, according to Bruce Murray, chief executive of Corzen, an analysis group that tracks the recruitment advertising market.

“Smaller, locally based companies don’t have the same hiring needs as the Fortune 5000 companies, which need to advertise vigorously to a national job market,” Murray said. “The small to mid-sized companies are also much more price-sensitive. How the job classifieds publishers in the online and offline media cater to those concerns will be a decisive factor.”

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