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51job, Inc. (NASDAQ:JOBS)

Q3 2007 Earnings Call

November 12, 2007 8:00 pm ET

Executives

Linda Chien - Investor Relations

Rick Yan - Chief Executive Officer and President, Co-founder

Kathleen Chien - Chief Financial Officer and Senior Vice President, Co-founder

Analysts

Jason Brueschke - Citigroup

Nate Swanson - ThinkEquity

James Mitchell - Goldman Sachs

Jenny Wu - Morgan Stanley

Wendy Huang - Bear Stearns

Operator

Good day, ladies and gentlemen. Welcome to 51job Incorporate third quarter 2007 conference call. (Operator Instructions) Now I would like to turn the conference over to your host, Ms. Linda Chien, Investor Relations Director of 51job. Please go ahead.

Linda Chien

Thank you, Operator and thank you all for attending this teleconference with 51job management. With me for today’s call are CEO Rick Yan and CFO Kathleen Chien, and we will discuss unaudited financial results for the third quarter ended September 30, 2007. A press release containing third quarter results was issued earlier today and a copy may be obtained at ir.51job.com.

Before we begin, I would like to remind you that during this call, statements regarding targets for the fourth quarter of 2007, future business and operating results constitute forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933 as amended, and Section 21-E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995.

These statements are based upon management’s current expectations and actual results could differ materially. Among the factors that could cause actual results to differ are the number of recruitment advertisements placed, sales orders received, and customer contracts executed during the remaining weeks of the fourth quarter of 2007, any accounting adjustments that may occur during the quarterly close, fluctuations in the value of the Renminbi against the U.S. dollar and other currencies; behavioral and operational changes of customers in meeting their human resource needs as they respond to evolving social, economic and political changes in China as well as stock market volatilities; introduction by competitors of new or enhanced products or services; price competition in the market for the various human resource services that the company provides in China; acceptance of new products and services developed or introduced by the company outside of the human resources industry and fluctuations in general economic conditions.

For additional information on these and other factors that may affect the company's financial results, please refer to the risk factors section of the company's filings with the Securities and Exchange Commission.

51job undertakes no obligation to update these targets prior to announcing final results for the fourth quarter or as a result of new information, future events or otherwise.

Now, I will turn the call over to Rick Yan, Chief Executive Officer.

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Rick Yan

Thank you for joining us on this conference call. I will begin with highlights of the third quarter and Kathleen will follow by reviewing our financial results in greater detail. Then I will discuss our current business initiatives and provide our outlook for the fourth quarter of 2007. Finally, we will open the call to your questions.

We are pleased that the third quarter saw revenues and profitability topping our expectations. Driven by higher growth in our print business and continuous strength of our online operations, Q3 revenues reached RMB220 million, above our forecast of RMB205 million to RMB215 million. The revenue upside also benefited our non-GAAP EPS, which came in at RMB0.68 compared with our guidance range of RMB0.55 to RMB0.65.

A highlight of the third quarter was the growth reacceleration of our print business. Q3 print revenues grew 16% year over year and this was our fastest growing quarter for print in the past two years.

As we have communicated over the past year, we have been closely monitoring customer behavior, particularly in the larger cities where we have observed some transition of budget allocation and preferences from offline to online products.

With the pick-up in print growth in each quarter this year, we believe the steepest part of the transition phase may be behind us.

Complemented by the growing contribution of the smaller inland cities, which remain predominantly print-advertising markets, we believe that our print business is regaining its strength.

Solid growth continues for our online business, as unique employers reached almost 60,000 in the third quarter. Innovation remains a key initiative for this business and we successfully completed a facelift of our website in September. The new site provides greater advertising space on our homepage and city channel pages, as well as increased functionalities.

We have ongoing efforts to introduce site enhancements and upgrades to further improve user experience and effectiveness.

The performance of our other HR services segment, particularly our corporate training and outsourcing services, continues to be a bright spot this year. Third quarter revenue for this segment grew 48% year over year and revenue contribution is now more than 13%.

While the training and outsourcing markets remain nascent in China, we are bullish on the long-term prospects for these services. We believe the capabilities that we are building and the infrastructure that we are putting into place will uniquely position us to capitalize on these growing opportunities.

We believe the initiatives and investments we have undertaken this year have strengthened our organization and market position. Our businesses are on track and we aim to carry this momentum through to the end of the year.

Now I will turn the call over to Kathleen for a more detailed financial review.

Kathleen Chien

Thank you, Rick. Let me go ahead and actually review the financials. Revenues for the third quarter totaled RMB220 million, which is a 22% increase over the same quarter in 2006. Print advertising revenues increased 16% year over year, due primarily to the higher page volumes, which were partially offset by a lower average revenue per page. The number of print advertising pages in the third quarter this year increased 37% to approximately 4,400 pages, compared with about 3,200 pages in the same quarter last year.

Our average revenue per page decreased approximately 16% compared to the third quarter of 2006, driven principally by the higher print revenue contribution from the lower priced cities. We have generally maintained similar pricing levels with each city over the past year and as a result, we expect that to continue growing contribution from the lower priced cities while continue to reduce the overall average revenue per page.

Our online revenues grew 27% year over year to RMB73 million in the third quarter, driven by a greater number of unique employers using our online recruitment services.

During the quarter, our number of unique employers increased 32% to over 59,000, compared to 45,000 in the third quarter of last year.

Revenues for the other HR services increased about 48% year over year to approximately RMB30 million in the third quarter. This growth was primarily driven by the greater customer demand for our training and also our outsourcing services.

Gross margin was 56.5% for the third quarter compared to 56.2% in the third quarter of 2006. Included in the cost of services was share-based compensation expense of RMB1.3 million this quarter.

Our sales and marketing expenses increased to RMB50.5 million from RMB35.5 million in the third quarter last year. In accordance with our strategic plan for the year, we ramped up advertising expenditures, as well as spending on marketing and promotion campaigns during the third quarter.

In addition, we added headcount in our sales and marketing department to strengthen our customer service and our branding efforts. Included in our sales and marketing expenses was share-based compensation expense of approximately RMB1.1 million in the third quarter.

As we have done in each of the prior years, we will be increasing our marketing spend in the fourth quarter on year-end customer events and other activities.

In addition, during the fourth quarter we will be expanding our sales ahead of the Chinese New Year seasonal peak in 2008.

Our G&A expenses for the third quarter increased to RMB32 million from RMB30 million in the third quarter of 2006, due to higher employees and office expenses, which were partially offset by the lower professional services fees.

Share-based compensation expenses included in the G&A line was RMB5.7 million compared with RMB5.2 million in the third quarter of 2006.

Our operating income for the third quarter increased about 15% to RMB35.4 million from approximately RMB31 million for the same quarter last year. Excluding the share-based compensation expense, our operating margin was 21% this past quarter, compared with 22% in the third quarter of 2006.

Our effective tax rate for the third quarter increased to 31.2% compared with 20.4% in the third quarter of 2006. We were subject to a higher statutory tax rate due to the expiration of certain tax exemptions earlier this year.

In addition, share-based compensation expense and foreign exchange translation loss are not tax deductible in China and therefore inflate our effective tax rate. We continue to actively engage in tax planning efforts but the certainty and the timing of the tax statuses remain unclear, especially due to the ongoing changes in the Chinese tax system right now.

Due principally to the higher tax rates, our net income for the third quarter was RMB26 million compared with RMB27 million in the third quarter of 2006.

Our fully diluted earnings were RMB0.47 per common share, which is equivalent to $0.13 per ADS.

Excluding the share-based compensation expense and the foreign exchange currency translation loss, our non-GAAP adjusted income for the third quarter of 2007 was RMB38.5 million compared with RMB37.6 million in the third quarter of 2006.

Our non-GAAP adjusted fully diluted earnings per common share for the third quarter were RMB0.68 or $0.18 per ADS.

Finally, turning to our balance sheet, our cash position remained very strong and the balance grew to RMB987 million, or approximately $132 million, at the September exchange rate.

During the third quarter, we provided financing of RMB8.7 million to the coupon advertising business operating in conjunction with Recruit. This is categorized as long-term investment in our balance sheet.

Under the terms of our collaboration agreement, we are committed to providing up to a total of RMB32.8 million to this venture, which will be provided over several years over several tranches.

Now I will turn the call back over to Rick.

Rick Yan

Thank you, Kathleen. We operate in a highly attractive industry in China, which has been validated by the entrance of many international players into our market over the past several years. Despite financing from these foreign companies and aggressive spending strategies of our competitors since 2005, we nonetheless remain the leading HR services provider in China and the only profitable company in the industry.

In the print segment, we believe that competition has generally stabilized, along with the impact of the offline to online transition moderating in the larger cities and growing strength from the inland cities, we believe that the conditions are becoming more favorable to our print business.

In the online space, although competition remains heightened, we maintain a volume market share lead at two to three times greater than our nearest competitors, according to our internal tracking measures.

The strategies undertaken by our competitors have been basically unchanged over the past three years and they continue to spend disproportionately in an attempt to gain share.

Incidentally, from publicly available reports and comments we observed that our competitors’ net losses continue to expand.

Since our inception, our management team has been and will continue to focus on long-term growth and profitability of the company. These efforts continue to be targeted on product development, especially for the online business, as well as brand building and new customer acquisition.

We have made excellent progress this year on these areas and will build on this foundation into 2008.

Turning now to our fourth quarter guidance, over the past several years, we have observed a seasonal pattern of sequential revenue decline from the third to the fourth quarter. We have similarly factored this trend into our fourth quarter forecast.

In addition, during the fourth quarter we traditionally increase our marketing spend for year-end customer events as well as expanding our sales force across multiple geographies in preparation for the Chinese New Year seasonal peak in the first quarter of 2008.

Based on current market and operating conditions, our total revenue target is in the estimated range of RMB205 million to RMB215 million. Our estimated non-GAAP fully diluted EPS target for the fourth quarter of 2007 is between RMB0.47 and RMB0.57 per common share.

Please note that this non-GAAP EPS range does not include share-based compensation expense or the impact of foreign currency translation loss.

While the HR services industry and its tremendous growth potential is our main business focus, we announced in August a cooperation agreement with Japan’s Recruit to establish a new company to provide coupon advertising services in China. This company has begun operations and we launched the first issue of the free coupon advertising magazine in Shanghai in September.

Since our inception almost 10 years ago, our strategy has remained consistently focused on generating sustainable and profitable growth. We are confident that this is the right strategy that will generate greater shareholder value in the long term.

That concludes our presentation. We would be happy to take your questions at this time. Operator.

Question-and-Answer Session

Operator

(Operator Instructions) We’ll take our first question from Jason Brueschke with Citigroup.

Jason Brueschke - Citigroup

Thank you. Good morning. Let me congratulate you guys on another really fine quarter. I’ll ask two questions, kind of the standard questions that I’m interested in. With respect to the demand environment, we saw the demand this year really start to pick up all the way back to Chinese New Year, and you’ve now delivered really a third solid quarter for this year in terms of both your revenues and your earnings. And what I’m trying to understand now as we get to the end of the year and we look out into 2008 is really how much of that pick-up has been the -- just the demand increasing in the market itself and how much of it should we attributed to your strategic decision at the beginning of the year to really step up your sales and marketing and to go aggressively after your competitors this year?

Rick Yan

Jason, thank you for the question. I think we noticed a stronger demand, market demand environment at the beginning of the year when we had our year-end customer events and when we talked to customers, a lot of them are looking to hire more people in 2007. That’s why in the first quarter of 2007, we started feeling that the market demand is more encouraging and I think certainly that’s shown by our numbers.

In terms of whether how much of that is really market growth versus our share gain or our investment in marketing, I think I have probably two things; one is on the print front, as we said that print growth has been more encouraging than in the past couple of quarters. Actually, this quarter we had the highest growth, 16% year over year, the highest growth in the past two years. And I think on print, it’s just a fact that the smaller cities are primarily print markets and when they grow, print would normally grow, and also the fact that the transition from offline to print in the larger cities might have become more moderate.

So I think on print, yes, I think not only the market demand but also the transition from offline to online in the larger cities might have become more moderate. That’s another driving factor.

On online, I think in 2007, we still see a very strong competitive environment. If you look at our competitors financials, which are available publicly, you can see that their losses are expanding very fast. I mean, they are still investing a lot of money in the Chinese market, so I think on the online front, I think we are holding our position. I don’t think our growth will be attributed to share gains at this stage, but we are holding our position. We are looking for a more aggressive sales and marketing investment in the coming quarters.

And if you look at our sales and marketing spend, a lot of that actually came in around quarter three. Quarter three we actually had a more meaningful increase in our sales and market. Quarter one, quarter two, we started planning for more spending but actually the bigger spending actually came in quarter three. And quarter four will be high, historically because of the year-end customer events, et cetera.

So I would say in summary, probably more of that is driven by market demand than share gain or sales and marketing investment.

Jason Brueschke - Citigroup

Great. Thanks, and maybe a quick follow-up on the print business and the transitioning kind of coming to the end; I know that if we look back over your business say the last four years, that about two years ago, you kind of slowed down your geographic expansion into these second-tier cities, and whether it’s coincidental or there was some relationship, we saw the print business slow.

And it seems like to me that we might also be anniversarying in some form or fashion that you are now looking more at organic growth as opposed to what we’ll call the geographic expansion. Is the slowdown in the geographic expansion, the fact that we went through this transition period, did that in any way make the results or the growth from these second tier cities, did it make it look worse than it really was? Or was there really a period where the demand, for whatever reason, the transitions to online was really weak? Could you help me try to think about that, please?

Rick Yan

Jason, the reason we didn’t expand geographically since the beginning of 2006 was we felt at that time that our strategic priorities online, and we are very clear in our mind that our resource and our focus should be in online. I think for the online business, most of the market is in the large cities. That was more a strategic decision to focus on online and I think that might have some impact on the growth of the print, but I would say the transition from offline to online has a much bigger impact on the slower growth in the print business in the past couple of quarters.

So geographical expansion is something that we’ll continue to do once we feel more comfortable that we have the management and other resources to handle that. But I think even you enter a new city, as you get into the 27th city, certainly that will be smaller than Beijing, Shanghai, and also it will take time for us to build up there. I mean, you might not see a meaningful revenue contribution from our 27th city until 18 months or afterwards.

So it has an impact, but I don’t think that is a significant driver of the performance of the print business in the past couple of quarters.

Kathleen Chien

Jason, I’ll add a comment to that though. I think actually though part of the -- I would say the re-pickup, if you will, is also related to the fact that going deeper into the pool of customers all the time, getting smaller and smaller, if you will, always takes time and effort and trying to find the right product and right value proposition to it. So I think that takes a little bit of time, so I think we’re pleased certainly that this year, that a lot of the cities that we have worked on that in the past have kind of borne fruit for us.

So aside from just talking about the online/offline transition, I think that’s something that our team has really focused on in the cities that we’ve been in and I think that’s something that’s been yielding positive results for us.

Jason Brueschke - Citigroup

Great. Thank you. That’s very helpful and congratulations again.

Operator

We’ll move next to Nate Swanson with ThinkEquity Partners.

Nate Swanson - ThinkEquity

Hi and congrats as well. I was wondering, just a follow-up on the pricing question on the print business, I know with the newer smaller cities, obviously you are seeing lower pricing right now. I’m just wondering historically if you went and looked back, what have you seen in terms of longer term pricing trends? Do you have the opportunity to increase your page rates in these newer, smaller cities over time? Or do they typically stay low and maybe even decline over time as they become more competitive?

Kathleen Chien

I think for us on the pricing side, it’s always been, I guess in our own view of things, we’ve always traded volume against pricing in the past because as I just talked about early, the key has always been to penetrated deeper into the customer pool.

The first 500 customers, it might be very easy for us to increase price on but then next 30,000 might be very difficult, so I think we’ve always tried to actually go for volume at this stage rather than go for the price upside because we don’t feel like the overall market really would bear too much of a pricing upside for us.

But I think we are a little bit more -- I guess we have to be a little bit more opportunistic on pricing increases, rather than look at it as a blanket price increase across the board, which is typically what you see for maybe like CCTV, for example. Every year they increase their advertising prices X percentage or what not, but I think we need to be a little bit more -- because we’re dealing with small corporates in a lot of these cities for the print market.

So I don’t see that at that point in time that pricing is going to be a big lever for us. We hope certainly that we will not see price erosion and I think for the same cities, same product we haven’t seen that. But nevertheless, I don’t expect that we’ll see huge upsides on the pricing at this point in time.

Nate Swanson - ThinkEquity

Okay, that’s helpful. And then in terms of your sales and marketing spend, I was wondering if you could break out how much of the increase is headcount versus just kind of marketing dollars, and then also comment on the overall hiring environment in terms of finding good people. How is wage inflation and how has turnover trended in the last quarter or so?

Kathleen Chien

I’ll try and answer the first question first, which is if you look at this year versus last year, this past quarter our sales and marketing expenses were about 50 million versus about 35 in the same quarter last year. Certainly about -- I would say about half and half, really, in terms of sales and marketing because we definitely have added quite a lot of headcount since last year and that’s contributed to a higher payroll, as well as increases in wages overall. So I think it’s about a half-and-half kind of mix for us in terms of how that breaks down.

As you asked as well on wages and what not, I think overall I would say that probably at the entry level, there’s been a smaller percentage of wage inflation but at the managerial ranks, that percentage is actually definitely in the double-digit range for everybody that we see in the market. I think that’s the segment that’s harder to hire typically for everybody.

Nate Swanson - ThinkEquity

Okay, great. And then just a last question, I know historically Q4 has been seasonally weak for you but given the strength that you’ve seen thus far this year, at this point in Q4, halfway through the quarter or so, do you expect it to be another seasonally weak quarter? What kind of trends are you seeing, both in the print and online?

Rick Yan

I think on the seasonality front, we will be a slower quarter versus quarter three, but if you look at the midpoint of our guidance, which is RMB210 million, that will represent almost a 23% growth on a year-over-year basis. So on that basis, we are still seeing a high growth year over year for quarter four, but I don’t think that’s going to switch the seasonality pattern.

Nate Swanson - ThinkEquity

Okay, great. Congrats again. Thanks.

Operator

And we’ll move on to James Mitchell with Goldman Sachs.

James Mitchell - Goldman Sachs

Thank you for taking a couple of questions. The first one, if I look at your operating margins, it seems like they are in the low 20s in the first half of the year and then for the second half, you are essentially guiding for high teens. Entering first half ’08, should I think of high teens as a sort of base level going forward, given your marketing spend? Or is there some seasonality, which means that the first half in general will be better? I seem to recall the first quarter is usually a good quarter for revenue.

Rick Yan

I think on the marketing spend, I think 2007 is a little bit kind of a particular because the first half of the year, we were planning to increase our sales and marketing but some of the programs actually get started in the second half of 2007. That’s why you see the sales and marketing spend in quarter three, actually were more than 50 million. It was like 30 to 40 million in the first half of the year per quarter.

So I think on quarter four, it’s a seasonality thing. I think that’s why if you look at 2007, it seems like sales and marketing are lower in the beginning of the year and then high at the second half of the year. As a result, operating margin was high in the first half of the year and lower in the second half of the year. But I don’t think that is a pattern we expect to repeat.

I think in terms of the beginning of 2008, I think we are ramping up 2007 and we are still on track to spend more on sales and marketing, at least compared to what we did in the past couple of quarters. So I think what might make sense is to look at quarter three and quarter four and we’ll probably be on that trajectory for a couple of quarters. And it depends on what happens next year on our competitors, because we do see that their losses are expanding and I think they either need additional funding or they will have to adjust their financial strategy going forward. We need to react to that quickly.

But anyway, I think the trajectory that we are on today we expect to continue for the next couple of -- next few quarters.

James Mitchell - Goldman Sachs

Right, and maybe a second question, and I think I know the answer but just checking, I guess normally with a print business, if you ramp up the volume at the expense of the price, then the margin would take some strain because of the cost of the newsprint and the production of the ink and so forth around the newsprint. For your business, the local partners pay for the newsprint and the production irrespective of the pagination, is that correct?

Kathleen Chien

I think we’ve talked about this a little bit in the past, which is we have different structures with different contractors in different cities, and I think at the end of the day, obviously there will be some component that’s fixed at a certain volume, and then beyond that, it will be something that we will have to work out to make the economics work for both sides.

So I think for us, I mean, when I said earlier that we will have to explore different pricing, different product, that doesn’t necessarily mean that our aim is to lower our prices overall. It just means that we need to structure different products to make the economics work.

So you can see that actually our gross margin has not been affected in the past regardless of the page count increases or too much of the news price fluctuation that’s in the marketplace. So for us, more of the focus is really on the gross margin and we try to structure our product and our agreement, if you will, our partnership with our newspaper contractors accordingly.

James Mitchell - Goldman Sachs

So the decision to drive volume rather than price on the print business would not have any impact on your profitability?

Kathleen Chien

That strategy has not changed for us, ever.

James Mitchell - Goldman Sachs

But if I look at this quarter, obviously your print volume improved and your print pricing is down a little bit, and that’s fine, and then equally, your margins are down a little bit. But you’re saying there’s no relationship between the two, the margins are --

Kathleen Chien

Yes, the reason for it, actually to be very honest, this quarter our gross margin not being as attractive as last quarter, is really partly we actually increased our service [infrastructure] also for the online at the same time.

James Mitchell - Goldman Sachs

Right. So there’s no impact from ramping up pagination on your gross margins?

Kathleen Chien

It’s not a significant impact for us because, like I said, we try to work out agreements with our contractors to make sure that we actually are able to preserve margin levels that we are targeting.

James Mitchell - Goldman Sachs

Okay. Thank you very much.

Operator

Next we’ll move to Jenny Wu with Morgan Stanley.

Jenny Wu - Morgan Stanley

Thank you for taking my questions. I have two questions; the first one regarding the offline to online migration. I recall Rick just said the migration becomes kind of moderated in larger cities. Would you please elaborate more on that, why was that and how much upside the management may see here? And how about the migration state on the smaller cities? And I have a follow-up. Thank you.

Rick Yan

I think on the larger cities, I think you can see that in terms of the year-over-year growth on the print business, if you look at your print business, in 2005 the print business grew at around 20% and then in 2006, it dropped to only 5.7% in quarter three of 2006. And since quarter three 2006, print growth has resumed to 10%, 6%, 10%, and 16% this quarter.

I think if you look at the growth of the print segment and a lot of that is really driven first of all by the growth in the smaller cities, and also the more moderating effect of the transition in the large cities.

I don’t know how much or how you want me to elaborate because that’s what we’re seeing in terms of our business.

Do you want more details or -- I’m not sure what you are looking for.

Jenny Wu - Morgan Stanley

Because migration -- moderate migration speed for large cities but it’s [inaudible]. This is why because you know the online penetration rate is still low across the board, how come it becomes so moderate at such a low level?

Rick Yan

If you look around the world, I don’t think there is anywhere in the world that you have 100% online recruitment advertising market. If you look at the U.S., print still accounts for more than half of the recruitment advertising revenue in the U.S., and I think if you look at Australia, Japan, Hong Kong, Taiwan, in all the markets, the market is split between print and online.

We have been seeing a transition from offline to print in the past two or three years but now we are seeing that the transition is still going on but at a much slower rate than we saw before.

Kathleen Chien

If I could just add to that, I think what Rick is trying to say is for example, let’s say someone that used to only do print advertising with us as an early customer, if you will. At a certain point in time, they would have made a decision, for example, to move let’s say $20 or $30 maybe to the online and leave the $70 in the print space, for example. And then, over time, and that number doesn’t become 100 online, zero offline. It may just still stabilize around let’s say $30 or $40 online and keeping $60, let’s say $70 offline.

So that’s what he is alluding to when things become more stable, because things become in an equilibrium, if you want. There’s like a very sharp drop the first year the customer makes their change, but in the subsequent periods then, it will not be something that’s not noticeable in terms of the change in behavior. I think that’s what Rick is trying to allude to, reference earlier.

Jenny Wu - Morgan Stanley

Thank you. And a second question regarding the sales force. How many sales people does 51job currently have? And what is the change year over year? And how long does it generally take for sales people to become fully functional? Thank you.

Kathleen Chien

For us, our sales headcount is close to about -- almost at 1,600 and we’ve added over 200, 250 in the last year, if you will. I think for us, we’ve always said that in the first three to six months, we’ll probably get a sense of whether or not a sales person is going to survive, if you will. And then they will become productive after that, so that’s kind of the trend that we’ve seen.

Jenny Wu - Morgan Stanley

Thank you.

Operator

(Operator Instructions) We’ll move to Wendy Huang with Bear Stearns.

Wendy Huang - Bear Stearns

Good morning. Thanks for taking my questions. Just to follow-up on your previous comments about the market competitive -- you mentioned that according to your internal data, your market share is two to three times that of your nearest competitors. So could you elaborate on that? Is that by the revenue share or by traffic or by advertisers?

Rick Yan

I think what we referred to was volume market share. We track our competitor websites continually and look at the number of positions and number of customers. We generally found that if you know the number of positions and number of customers they have on their website, that would be a good estimate. That’s the way we measure our volume market share.

Our revenue market share is very hard to get because our competitors are not public and they do not disclose their numbers and their pricing seems to fluctuate a lot across different customer groups.

On traffic, that’s interesting because I think traffic is actually very, very even harder to estimate than revenue, because today there is no third-party independent reliable sources in terms of traffic.

I know that some people look at Alexa or other website, but we also found that some of that data was kind of tainted by different marketing initiatives. So actually what we refer to is volume market share that we around two to three times larger than our nearest competitors, meaning that we have two to three times more job postings on our website versus our [customers]. Revenue is hard to get and traffic is even more difficult to validate.

Wendy Huang - Bear Stearns

Thank you.

Operator

And that does conclude our question-and-answer session. I’ll turn the call back over to you, Mr. Yan, for any additional or closing remarks.

Rick Yan

Thank you for joining us today. We look forward to updating you on our progress next quarter. We value your continued support of 51job. Thank you. Bye-bye.

Operator

That does conclude our conference call and we do thank you for your participation.

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Source: 51job Q3 2007 Earnings Call Transcript
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