In April 2019 SEEK CEO Andrew Bassat presented a trading update that outlined two levers for growth in the Australian and New Zealand job board market.
“Aligning price to value” was the most significant of those two levers (Product Set Expansion being the other), which in layman’s terms means customers pay higher prices for ads and betting that the overall rise in revenue will offset the revenue loss from the disgruntled customers who reduce their spend or move to competing products.
The recruitment industry was clearly in SEEK’s sights given the historical discounts the sector had enjoyed relative to the prices SMEs and corporate customers were paying.
The Go button was pushed in October 2019 when Andrew Bassat and other SEEK executives hosted the company’s most valuable recruitment agency customers at a luxury Victorian boutique hotel.
Bassat broke the hard news to these owners, and the rest of the industry was informed the following week, that prices were going up and discounts were going altogether.
Shortly afterwards, SEEK ANZ managing director, Kendra Banks, met with representatives of a number of Victorian-based recruitment agencies to explain the new pricing structure and the rationale for it.
The majority of those in the room saw it as a price grab, or gouging.
Banks said that this was not the case and that the aim was to create a better candidate experience through having fewer and more relevant jobs on the site which she asserted was an intended outcome of the pricing changes.
The reduction in ads and improved candidate user experience would, assured Banks, in turn lead to better quality of applications for advertisers, and recruiters would win. She speculated that recruiters while ‘potentially’ paying more per ad would not see their overall spend increase as they got a better return for ads posted, posted fewer ads, and ended practices such as refreshing and multi category listings.
More than two years after the changes were announced the jury has returned its verdict – agency recruiters have lost.
Agency discounts are gone; prices for all SEEK products have gone up; more premium products are being purchased by job board advertisers, and ad volumes have gone up.
The juicy outcome, for SEEK shareholders, were there for all to see in the release of this week’s SEEK Limited results for the six months, 1 July 2021 to 31 December 2021 (H1 2022).
|SEEK ANZ division|
|H1 2022||H1 2021||Variance|
|Revenue (AUD millions)||$383||$223||+$160 (72%)|
|EBIDTA (AUD millions)||$255||$131||+$124 (95%)|
For every marginal dollar of revenue, comparing the two six-month periods, 77.5 cents dropped to divisional operating profit (the equivalent group result was 68 cents). That’s a dream outcome for the new SEEK Group CEO, Ian Narev.
Revenue growth was driven by: volumes (49%: 38% classic, 11% premium); yield growth (21%: 5% classic, 16% depth products) and non-job ad depth (Talent Search) growth contributed 2 per cent.
Year-on-year growth in ad volumes was largest amongst corporates (+73%) with SMEs up 60% and recruitment agencies up 24%. The recruitment agency share of ad volume has dropped from 46% in 2019 to 27% for the 2021 financial year and it is now 24% for the first six months of the 2022 financial year.
Australian and New Zealand recruiters have gone from ranking #1 by ad volume to #3 (of 3 segments) in two and a half years and SEEK ANZ is making more profit on a better margin than it ever has done before.
SEEK reported their share of placements as having risen from 29.8% the previous year to 34.3% (35.2% was the January 2019 figure) and unique monthly visitors climbed 6 per cent.
The news for recruiters was all bad as applications per job declined throughout 2021 and reached the lowest point on record in November.
Although the following month saw a 5.7% month-on-month improvement in applications per ad, December 2021’s result was exactly half of the December 2019 figure.
In the most recent edition (published today) of their Employment Report, SEEK noted that January saw the most job ads on seek.com.au in the company’s 25-year history with job ads growing 4.9% month-on-month, which was 39.6% higher year-on-year and 33% more than January 2019.
Applications per ad recorded another rise (5.7% up on December 2021) although still only slightly above the record low recorded two months ago.
All great news for SEEK shareholders and executives although investors had factored in all the good news late last year as the SEEK share price dropped 50 cents across the first four trading days of this week, having reached a record high of $35.74 on 16 November 2021.
Unfortunately, new CEO, Ian Narev, continued the tin-ear tradition of his predecessor when he told Shortlist earlier this week that
Relative to when Seek started the new pricing, he says the level of concern among recruiters has lessened.
“There’s less of the ‘why are you doing this’, which is quite well understood, and much more of the ‘how are you going to keep delivering the high return for us’,” Narev says.
I had to laugh with Narev’s use of ‘concern’ (don’t get me started on ‘high return’); I mean how many recruitment agency customers has Narev actually spoken to in the past six month?
I think what Narev meant to say was:
“Recruitment agencies have become so accustomed to the terrible service we give them they have stopped complaining as much. The cynicism they have about SEEK listening to any of their complaints (January complaining-per-job-ad was down on record highs reported in November 2021 but are expected to climb again in this month’s results as agency owners return to work) is so entrenched we now feel free to ignore them altogether!
How good is it to run a monopoly global tech company after all that annoying competition I had to worry about when I ran a Big 4 bank”.