Does Monster.com's ChinaHR Pose a Threat to 51Job? (MNST, JOBS)

From 51Job’s (JOBS) Q1 2006 earnings conference call transcript:

Q - Jason Brueschke, Citigroup

Let me start with a question on competition. Some people out there are worried about China HR because of their Monster (MNST) investment. By my estimates you had RMB 5.5 million in online revenues in Q4 and China HR had a little bit more than RMB 2 million. Now in Q1 you’ve grown 53% YoverY to RMB 6.1 million and the rate of your growth is accelerating for the last two quarters. Online, your rate of growth is now on par probably with what China HR is doing, despite you being at a significantly higher absolute level of revenues. Could you help us understand why, when you have a much better… You have to focus on profitability where China HR does not, and the fact that you’re actually larger, that you’re able to grow at least as fast as them if not faster. Is it your brand? Is it your reach? Is there some benefit of your mixed plant and online model that is offering a better service to your customers out there that’s really allowing you guys to keep and probably extend your lead? Thanks.

A - Rick Yan

Jason, this sounds like a complex strategy question that I can take an hour to answer, but I will try to make it short. I think it’s a combination of our strategy and you know, execution. First of all, we have a much bigger sales force compared to our competitors. The reason that we’re able to sustain a large sales force is because we have both print and online. As we know, you know, online development in China is accelerating but if you go to many cities in China, online development is still at the early stage. Having the capability to combine online and offline help us to sustain a bigger and higher quantity sales force compared to our competitors. In addition, having both print and online increases our revenue per customer. When you earn more revenue from each customer then you can afford to invest more in the relationship. So I think that’s, you know, as you said, the integrated online plus offline strategy is certainly a core to our competitive strategy. In terms of – on the execution front, I might just highlight one point, although there are many factors that kind of contribute to what we do.

The most important thing is really about results for recruiting customers. Customers pay for services to recruit talent and fill their recruiting targets. I know that our competitors tend to use more of an advertising on the air approach, we are a different company. We are more on the ground with an effective sales team, doing a lot of customer events, building our brand and building our topics to make sure that we get better results for our customers. I think that is fundamentally a different approach. If you remember Q1 2005, we burned – I shouldn’t use the term ‘burned’ – we invested $6 million on TV advertising and if we look back, I mean that was a good brand-building exercise. But in terms of really getting results for customers and in terms of building customer relationships, that was not as effective as we would have hoped. So I think, on the execution front, there are really two things. We are more of an on the ground sales company, working with customers to improve their results. We are less of a marketing company that pumps a ton of money into TV advertising. I think if you look at our past 7.5 year history, we believe that our approach generates better results for our sales and for our customers, and certainly for our shareholders.