Unforeseen events can play havoc with the best laid plans – and it appears job websites are no exception. The Sichuan earthquake in May was one of several external factors 51job CEO Rick Yan held responsible for the company’s lower-than-expected earnings growth in the second quarter.
“While we anticipated there would be business disruptions, the impact was more dramatic and widespread,” Yan said during 51job’s earnings conference call.
Certain longer-term challenges, however, are much easier to predict. Investors are pouring money into a host of new arrivals in China’s online recruitment market, which could ultimately threaten the hegemony enjoyed by the big three, 51job, ChinaHR, and Zhaopin.com.
Heavyweight backers have already invested in these major players. Australian recruiter Seek boosted its stake in Zhaopin to 43% in July and Monster said in February that it would take full ownership of ChinaHR. Japan’s Recruit continues to strengthen its ties with 51job.
Now money is entering the lower tiers as well. Job post aggregator Jobui.com intends to raise US$1-2 million in 2008. Guangzhou-based site Baicai.com announced in April that it had received a US$2.92 million investment from Tiande Venture Capital. Hong Kong firm Recruit Holdings invested US$7.3 million into its wholly owned mainland job site 1010job.com. Finally, Irish online recruitment firm Saon took stakes in Chinese operators Job001.cn, Job1998.com, SHjob.cn, HRM.cn and Myjob.com.cn.
Despite the interest, most job sites aren’t making any money. For investors, it’s a case of waiting for long-term windfalls, spurred on by projections from the likes of China Market Research Group, which expects online recruitment services to be worth US$58 million by 2010.
“Investors want to be major players in the market in the long run and have a lot of patience in terms of profitability,” said Barak Paztal, co-founder of Meijob.com.
The profitability situation isn’t helped by the fact that there are more than 2,000 job sites in China. This should make the market ripe for consolidation, but Ashley Steinhausen, co-founder of Zhaopin.com and now CEO of Newchinacareer.com, isn’t optimistic. He believes Saon overpaid for its acquisitions, pushing up industry-wide valuations to the extent that organic growth is more viable.
Although expensive, these younger companies have their merits. Many have dismissed ambitions for national coverage in favor of establishing a regional dominance. Others are targeting second- and third-tier cities, where the big sites have yet to corner the market.
“Second- and third-tier cities will be the main drivers for growth for the existing business models,” said Steinhausen. “But for the more sophisticated models, I think the top-tier cities will be the growth areas for the foreseeable future.”
Indeed, there is a growing dissatisfaction with the job ad model employed by the big three sites, which typically throws up a large number of unsuitable CVs. Job ads on the big three sites also do poorly in reaching passive candidates (talent not actively job-hunting), seasoned executives and people with international experience.
The market is gradually responding to these needs. Innovations include search engines that aggregate job ads from other sites, job advertising networks and paid-access candidate databases. Entrepreneurs are also beginning to offer solutions that extend beyond pure online job ads. OXChina, for example, provides a Web 2.0 approach to recruitment branding as well as technology for psychologically evaluating candidates.
Although the big three will continue to push the standard online job model, Yan of 51job singled out the performance of his company’s non-recruitment-related HR solutions as a bright spot in an otherwise dismal quarter.
“Although these services are less mature, we believe in particular that the recurring nature of the HR revenues will provide a good complement to recruitment revenues,” he said.