BANGALORE (Reuters) - A fragile economy and increasing competition from social networking brands such as newly-listed LinkedIn Corp, are making life tougher for online job boards Monster Worldwide Inc and Dice Holdings Inc.
Monster’s margins are being squeezed, and the company, which pioneered digital recruiting almost 20 years ago, looks out of touch, missing out on an industry rebound.
The seasonally slower second half of the year may test both companies — not helped by the market volatility triggered in part by Standard & Poor’s downgrade of U.S. long-term credit ratings. Economic slowdowns hit jobs first.
More than $2 billion has been wiped off Monster’s market value this year, and its shares have more than halved in the past 6 weeks. Dice shares are down by a third in that period, while the Thomson Reuters U.S. Employment Services Index has dropped 26 percent.
Monster’s latest quarterly results highlight how pricing is weighing on operating margins. Revenue at its North America Career business rose 26 percent, but operating profit dived 8 percent.
And, despite a pick-up in recruitment this year, booking activity — a key metric for job boards — is still slowing at Monster.
“While the broader recruitment trends are improving across geographies, Monster’s participation in this upturn seems to be rather limited,” noted Deutsche Bank analyst Jeetil Patel.
And that has raised concerns that Monster may miss its own forecasts this year.
“With lower expected growth for the balance of the year, we’re increasingly concerned Monster might not be able to achieve its 20-25 percent revenue and bookings growth outlook,” said Citigroup analyst Mark Mahaney, who this month downgraded the stock to ‘hold’ from ‘buy’.
As social and professional networking services move aggressively into online recruitment, pricing has been hurt and is unlikely to climb back to recent peak levels.
As a counter-measure, Monster in June launched its Facebook application, BeKnown, which allows users to separate their personal and professional contacts and improve job-oriented networking. Dice Talent Network allows companies to network with professionals.
BeKnown had 55,000 daily active users in July, but that has dropped by more than a third this month, showed AppData, which tracks social media user data.
“Competition has been a long-standing risk to our Monster call, but it appears to have become more material more quickly than we’d anticipated,” said Citigroup’s Mahaney.
Monster, which owns Monster.com and is tracked on the S&P 500 Index, has three businesses: Careers North America, Careers International and Internet advertising and fees.
Some analysts predict the North American business should gain from a near-term increase in recruiting budgets, barring a second recession. UBS analyst John Janedis said the international division — which brought in 42 percent of the firm’s $270 million second-quarter revenue — is well placed as employment is still growing and advertising is shifting online.
Both Monster and Dice have solid traction in international markets, helped by early mover advantage in China and India.
“As labor markets become more sophisticated, companies and job seekers ... are going to rely more and more on companies like Monster and Dice,” said Morningstar analyst Vishnu Lekraj.
Analysts favor Dice’s higher margins and a vertical model that has a niche focus on industries like technology, finance and energy.
“While I think there is competition from social networking, arguably, competitive pressures on Dice are going to be less than on the more generalist job boards,” Avondale Partners analyst Jim Janesky said.
In a maturer, more refined market, Monster may need to change its basic strategies.
“Monster has talked about focusing more on branching out into more niche focus type websites ... that’s where the Internet career website is going,” said Lekraj.
Reporting by Bijoy Koyitty and Fareha Khan in BANGALORE; Editing by Ian Geoghegan