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JobStreet Corporation: Why It Sold 89% Of Its Net Profit Source
By: Peter Ng
Articles (81) Profile

Most folks would have probably come across the JobStreet.com platform during their quest of job searching which was founded by JobStreet Corporation.

According to JobStreet Corp, it is one of the leading providers of online recruitment services in Southeast Asia (SEA) with an established presence in Malaysia, Philippines, Singapore and Indonesia.

The platform houses a network of 13 million jobseekers and more than 230,000 employers. In 2013 alone, the website has posted more than 1.8 million job postings.

Considering the platform’s prominence, as well as most people having to search for a job at some point in time, it is hard to have missed this platform entirely. This, is coupled with the high internet penetration rate in SEA.

Core Business of Recruitment

The core functionality of the JobStreet.com platform is aimed to match employers with the most suitable applicants within the pool of users under its network.

Under its main business model, employers are charged a base fee for the listing of job advertisements on the JobStreet.com web portal. At the same time, employers can pay an additional amount on top of the base fee and elect for premium listings of their advertisements.

Separately, a job seeker is not required to pay when applying for jobs but could subscribe for priority applications at an additional fee where the job seeker’s application will be placed at the top of the list among other applicants.

Along with JobStreet.com and others, these online job portals have streamlined traditional human resource services into an all-in-one platform.

In a nutshell, the network of jobseekers has grown to a size that is much larger than before due to the ease of acquisition and added convenience, since all that is required is for a job seeker to register on the network and they are ready to use most of the services offered by the hiring platform at no charges.

Porter’s Five Forces

JobStreet.com and other job portals are one of the fine examples of e-businesses that have been successfully monetised, such that it has become a norm for employers to pay fees to job portals in order to put up their job advertisements.

Just like anything else, there will always be the flipside of a coin. Zooming into the most major aspects of the Porter’s Five Forces will help to provide a clearer picture of the industry.

There are technically no barriers to entry from a new entrant standpoint. A boutique job portal business could be set up at the minimum investment outlay, where the majority of which is spent on software and software development costs while the rest would likely be variable costs like utilities and a server hosting platform.

At the same time, this also means that there is close to no exit costs. While these start-ups may not be able to compete at the same level as the big boys, but it demonstrates that there is almost nothing stopping others from entering to compete.

Over the years, due to the attractiveness of this industry, the level of competition has been increasingly intensive. A search on the internet has revealed more than 30 web portals for Malaysia alone, offering plenty of choices for both employers and potential employees.

The intensity of competition tends to erode profitability and this is apparent as the past five-year return on equity and return on assets between FY09 and FY13 have shrunk into the single digit territories.

Source: FactSet

Lastly, the growth of social media networks is becoming an imminent threat as substitutes to online job portals. For example, LinkedIn, a social media network that connects career professionals around the world and offers paid hiring service like online job portals, is able to offer a wider pool of candidates and has 332 million users around the world as of 2014.

Due to its global reach and the large amount of users, LinkedIn possesses a durable competitive advantage of a network effect and its growing prominence is not something that online job portals should ignore.

Divestment of JobStreet.com

Given the backdrop of a highly competitive and evolving business landscape where more hiring is turned towards social media platforms, JobStreet Corp’s sales revenue and operating earnings have declined in excess of 90 percent in the past three years.

As at 9M14, the company does not have any outstanding debt balances on its balance sheet which is definitely a positive note, given that the company has divested its JobStreet.com job portal for RM1.7 billion.

This is because a highly leveraged business would most likely take the opportunity to pay off its creditors first, since a potential income source has just been removed.

The good news from the divestment is a potential special dividend which will be given to existing shareholders while the bad news is, JobStreet.com, which contributes 89 percent to the company’s net profit as at FY13, is the company’s main income source.

The divestment would mean that the company would have to venture into other space in order to replace this income source which encompasses uncertainty and more importantly risks.

What’s Next?

Having discussed and looked into the online job portal industry, there is no doubt that the highly competitive environment coupled with a changing business landscape, has eroded the profitability of JobStreet Corp’s flagship product, JobStreet.com, and subsequently led to the proposed sale of the job portal.

Without JobStreet.com and given its past 15 years of experience dwelling in online job portals, what will be JobStreet Corp’s next move?

This article is brought to you by Bursa Malaysia Berhad. The research in this article was conducted independently by Pioneers & Leaders (Publishers) Pte Ltd (“Pioneers & Leaders”) and the views and opinions expressed in this article are Pioneers & Leaders’ own and do not represent the views and opinions of Bursa Malaysia. Bursa Malaysia does not warrant or represent, expressly or impliedly as to the accuracy, completeness and currency of the information in this article. In no event shall Bursa Malaysia be liable to the reader or any other third party for any claim howsoever arising out of or in relation to this article.
Backed by a strong interest in investments, Peter's research spans across a range of industries, with his focus placed on companies listed on the SGX.

Please click here for more information about this author.


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