The Internet recruiting industry in North America today can be broadly defined as those vendors who provide Web-based solutions for some aspect of recruiting, such as job board postings, applicant tracking, workforce management, or candidate screening. Although still in its infancy, the industry has become a widely accepted alternative to traditional (and costlier) recruiting options due to its ability to reduce administrative inefficiencies. In today's technology-driven work environment, hiring companies now have access to a vast array of online tools which help reduce hiring costs and administrative inefficiencies. In addition, the growth and effectiveness of corporate career web sites have helped companies center their recruiting efforts around their own web pages. For professional recruiters, the Internet provides a cheaper medium for advertising existing job openings, as well as an additional resource for identifying new pools of talent.

The following report examines the current state of the Internet recruiting industry in North America in terms of the latest trends affecting employers, job seekers and vendors, as well as the challenges confronting the industry in the next three to five years. Our analysis and conclusions are based on extensive phone interviews conducted among human resource executives, industry executives and leading investment analysts who track the human capital industry.

Internet Recruiting 2002 gives you:

The year 2001 shaped up as one of the worst years ever for the entire recruiting industry as both corporate spending and hiring came to an abrupt halt. After 10 consecutive years of uninterrupted growth, most recruiting businesses suffered double-digit revenue declines. But unlike traditional recruiting agencies who endured the nation's previous downturn in 1991, the online recruiting sector evolved during the economic expansion of the late 1990s and had never experienced unfavorable business conditions in its brief history. Shrinking revenues and fierce competition forced several weaker, debt-ridden internet recruiting businesses to be either acquired by stronger players or forced into bankruptcy by their secured lenders. Those fortunate to survive the recession now operate in a leaner business environment where employers have re-gained the upper hand in their triangular relationship with recruiting vendors and job seekers.

Executive Summary

Although a slower than expected economic recovery indicates hiring activity will not match the frenetic pace that existed in the job market two years earlier, opportunities still exist in the marketplace for online vendors who can demonstrate long-term value to their customers. Regardless of the state of the labor market, the continued reliance on technology-based recruiting solutions is a favorable trend for the online sector. For example, according to iLogos Research, 81 percent of the Fortune 500 post job openings on their corporate web sites. As cost conscious companies attempt to maximize their investments in the recruiting arena, online recruiting options will remain a lower cost alternative to traditional recruiting methods such as classified print advertising and the agency model. Based on this scenario we anticipate the following themes will prevail in the next 12 to 18 months:

• Stronger competition for Monster.com.
• Opportunities in hourly market.
• Continued industry consolidation

Economic Trends Impacting the Internet Recruiting Industry

After hitting a 30-year low of 3.9 percent in October 2000, the nation's monthly unemployment rate for the civilian labor force rose to its highest rate in nearly eight years with a rate of 6.0 percent in April 2002. For the managerial/professional specialty sector, unemployment has steadily risen from a low of 1.7 percent in 2000 to between 3.0 and 3.1 percent since February 2002. One of the biggest losers during the hiring downturn has been the newspaper industry. According to the Newspaper Association of America, newspaper classified revenue in 2001 fell 15.2 percent to $16.6 billion. Classified ads last year accounted for 37.5 percent of newspaper companies' $44.3 billion of advertising revenue. The hardest hit sector within the classified advertising space was the help-wanted category, which saw total revenues plummet to $5.7 billion. "I am a big proponent of the idea that the classified ad market will continually shrink over time, with the online ad market standing to gain the most," said Randy Mehl, senior equity research analyst at Robert W. Baird & Company.

Employer Trends In Online Recruiting

Unlike 2001 when economic uncertainty had human resource professionals planning cautiously due to a pending economic slump, 2002 appears to have more clarity as companies operate with leaner staffs and expect to fill fewer positions. A few other trends seem likely for the coming year. In a quest to save money, companies will be using fewer job boards and relying more on the employment sections of their own Web sites for hiring. They will also be conservative in spending on technology, as they consider any system that helps them find and process candidates more efficiency.

To understand what other trends may unfold in 2002, Hunt-Scanlon interviewed several human resource professionals to discuss their companies and expectations for the next 12 to 18 months. Our findings indicate companies are looking to continually trim their recruiting costs, while improving operating efficiency.

Vendor Trends

One notable trend among job boards recently is the growth in fee-based services targeted to job seekers. Historically, third-party web sites have provided career tools, such as competitive salary information and company research, as a means of attracting job seekers. However, lower revenues from fewer job postings have forced job sites to seek additional revenue streams. Many third-party web sites now offer job seekers premium services such as resume writing, resume distribution, interview skills, networking parties and relocation tools. One-time fees can range from $100 for a resume makeover to $7 per month for resume enhancement and online career coaching.

Hunt-Scanlon Conclusions and Recommendations

Despite the availability of cheaper alternatives to commercial job boards, such as DirectEmployers and niche web sites, full service job boards will remain the best choice for the vast majority of online job seekers and employers. Job seekers recognize the brand names of most commercial boards and are more likely to visit these sites due to the wide range of job opportunities and employers as well as the robust career content offerings. Conversely, small-to-mid-size employers who are understaffed and have not adopted or invested in e-recruiting capabilities on their corporate web sites will instead opt for the full service capabilities of a commercial job board vendor, especially if their hiring needs are minimal in the short-term.