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Monster Moves Ahead

August 13, 2008
Related Topics: Internet, Featured Article
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Monster Worldwide is taking steps to put a stock option scandal behind it and offer customers better job matching, but a weak hiring climate still threatens the job board giant.

In late July, the company reported progress toward the resolution of lawsuits related to Monster’s past stock option practices. Monster also announced the acquisition of recruiting software firm Trovix as well as partnerships with employment screening specialist HireRight and e-learning services provider Cornerstone OnDemand.

Nate Swanson, an analyst with investment firm ThinkPanmure, calls the Trovix, HireRight and Cornerstone OnDemand deals "baby steps toward reinventing Monster’s value proposition, providing companies with higher-quality candidates, as opposed to just high volumes."

But a worsening job market remains a threat to Monster’s financial health. The company reported a 9 percent increase in revenue for the quarter ended in June, to $354 million, and earnings growth of nearly 8 percent, to $30.8 million. But Monster’s own gauge of U.S. online job demand fell in July.

"We anticipate that we will continue to operate in a difficult environment in the near term," Monster CEO Sal Iannuzzi said in late July.

Monster weathers troubles
   A pioneer in the online job board field, Monster has weathered a wave of troubles the past few years. These include a decision to cut hundreds of jobs, a major data breach and concerns that traditional, comprehensive job boards are declining in importance. Monster also was among the companies accused of backdating and improperly accounting for stock options—a scandal that has tarnished the reputations of former Monster executives including ex-CEO Andrew McKelvey.

But Monster has been working to lay the backdating issue to rest. In July, the company announced a tentative settlement agreement in a class-action suit that would cost Monster about $25 million. The company also said that the New York state Supreme Court granted preliminary approval of a settlement of related lawsuits.

In a statement, Iannuzzi said: "We are extremely gratified by these developments, look forward to the resolution of the remaining actions relating to the company’s historical stock option granting practices as quickly as possible, and are eager to focus our energies on the continued evolution of the company."

Iannuzzi has outlined a vision of expanding Monster’s reach to include online professional hubs. He also says Monster can capture many more customers.

Customers in the past have dinged Monster for the quality of its matching technology. The company hopes to improve in that area with its $72.5 million purchase of Trovix, which has developed "semantic search" technology designed to analyze résumés and job descriptions. Both employers and jobs seekers will benefit from the addition of Trovix, Monster says.

"The implementation of this technology will allow Monster to provide unparalleled match capabilities, taking us beyond keyword search into contextual search," Darko Dejanovic, Monster’s global chief information officer, said in a statement.

HR technology consultant Jacqueline Kuhn agrees that the Trovix software improves on keyword searches. In other words, if an employer is looking for a software engineer, Trovix may return résumés that use the phrase "computer scientist."

"They’ve got some outstanding recruitment technology," Kuhn says, "particularly their search engine for searching résumé content."

But Gerry Crispin, co-founder of recruiting advisory firm CareerXroads, disputes the idea that Trovix’s contextual search capability puts it above other products in the recruiting software field. Crispin says that of the 80 companies in the CareerXroads Colloquium—a group of corporate recruiting professionals that meets several times during the year—none uses Trovix.

"They’re not a player," Crispin says.

New features for employers
   Through the HireRight partnership, Monster will let employers buy background screening services as part of their current candidate management experience on Monster.com. Monster’s deal with CornerStone OnDemand is designed to provide online courses to job seekers.

Crispin sees the Monster moves as part of a push by players in the recruiting arena to offer a wider range of services. Customers want to reduce the number of vendors they deal with, he says.

"What you see is a major trend toward mash-ups of employer-related services," Crispin says.

It’s an open question, though, how much such services are in demand right now. U.S payrolls continue to shrink, a trend that threatens the job ads that are a key source of revenue for Monster. Monster’s own U.S. employment index fell for the month of July.

"The decline in U.S. online recruitment activity during July is likely due in part to the seasonal summer slowdown that is typical of this time of year; however, the breadth and depth of the contraction in July also suggests further softness in the country’s underlying demand for labor," Jesse Harriott, vice president of research at Monster Worldwide, said in a statement.

There are also signs the international economy is slowing, a scary development for Monster. Monster’s "Careers International" revenue—which reflects the firm’s career-related services in Europe and Asia—has been growing fast and now accounts for 44 percent of the company’s revenue.

Iannuzzi, however, has pledged to treat a downturn as a chance to expand Monster’s market share. He repeated that stance in late July.

"We are committed to investing in critical areas that will provide a superior job-seeker experience and deliver the best products and services to our employers," Iannuzzi said. "We are increasingly optimistic about our long-term growth prospects and believe that our ongoing investments and recent developments with respect to the resolution of some of our key outstanding litigation will benefit our customers, shareholders and associates now and in the future."

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