Monster Worldwide, Inc. (NYSE:MWW) Q2 2009 Earnings Call July 30, 2009 5:00 PM ET
Robert Jones - Investor Relations
Salvatore Iannuzzi - Chairman of the Board, President & Chief Executive Officer
Timothy T. Yates - Chief Financial Officer, Executive VP & Director
Darko Dejanovic - Executive VP, Global Chief Information Office & Head of Product
Mark Stoever - Executive VP Internet Advertising & Fees
James M. Langrock - Senior VP Finance & Chief Accounting Officer
Ted Gilvar - Executive VP, Global Marketing Officer
Monica DiCenso - JP Morgan Securities
Toby Summer - SunTrust Robinson Humphrey
James Sanford in for Mark S. Mahaney - Citigroup Smith Barney
Christa Quarles - Thomas Weisel Partners
Tim McHugh - William Blair & Co.
Good afternoon. My name is Katina and I will be your conference operator today. At this time, I would like to welcome everyone to the Monster Worldwide second quarter 2009 earning results conference call. (Operator Instructions) I would now like to turn the call over to Mr. Bob Jones, Vice President of Investor Relations. Please go ahead, sir.
Thank you. Good afternoon and thank you for joining us on Monster Worldwide’s second quarter 2009 conference call. Our format calls for us to have formal remarks from Sal Iannuzzi, Chairman, President and Chief Executive Officer, and Tim Yates, Executive Vice President and Chief Financial Officer. Also available to answer any questions you may have during the question-and-answer part of the call are several members of our executive operating team. They are Darko Dejanovic, CIO and Head of Product; Ted Gilvar, Chief Marketing Officer; James Langrock, Chief Accounting Officer, and Mark Stoever, Corporate Development and Strategic Alliances.
Before we begin, I’d like to remind you that except for historical information, the statements made during this conference call constitute forward-looking statements under applicable securities law. Such forward-looking statements involve certain risks and uncertainties including statements regarding the company’s strategic direction, prospects and future results, and do not include the effect of the defense or outcome of the ongoing litigations related to the company’s historical stock option grant practices or costs associated with the restructuring and the 2007 security breach.
Certain factors including factors outside of our control may cause actual results to differ materially from those contained in the forward-looking statements including economic and other conditions in the markets in which we operate, risks associated with acquisitions and dispositions, competition, seasonality and the other risks discussed in our Form 10K and our other filings made with the Securities & Exchange Commission.
With that, I’d like to turn the call over to Sal.
Thank you Bob. Good afternoon and welcome to our second quarter 2009 conference call. Today I will address second quarter highlights and accomplishments and the longer term opportunities we see for Monster. Ted Yates, our CFO, will then discuss the quarter’s financial results in detail before we take your questions.
The global economy remains challenging and customer demand weak. Employers continue to take a deliberate approach to talent acquisition, carefully weighing both the amounts and type expense; however, we are seeing encouraging signs of stabilization in the US employment market and a slowdown of decline in our markets in western Europe.
More importantly, the discussions we’ve had recently with our customers have taken on a more positive tone compared with earlier this year. We remain cautiously optimistic that we will be operating in a more favorable environment going forward. However, we are not waiting to see clear evidence of a recovery, rather we are taking advantage of the downturn by moving quickly and decisively to not only compete but to create a much stronger company for the future. We are determined to be both the biggest and the best in our business.
As we discussed in the past, our key focus during this economic downturn is to capture global market share. We have successfully taken advantage of our wide global presence, powerful brand, and strong financial resources to added share. With each successful quarter, we become more confident that we are succeeding.
We are gaining market share by introducing broader and new products, creating an industry-leading search and match capability, significantly upgrading our technology platform, aggressively expanding our media product, continued development of our community needs sights, which provide our seekers with networking capabilities, extending our global reach and finally, aggressively enhancing our golden market approach.
Customers have been more selective and are consolidating their buying with fewer partners during the downturn. Our brands and improved service provide a competitive edge enabling us to capture and retain business, even more so in this environment.
During the quarter, we went up against our top competitor and gained shared of wallet in over two thirds of the cases. Let me give you just a few examples of transactions that we closed in the second quarter where we were able to increase share.
Our relationship with Microsoft is a great example of our ability to expand our relationship with a global client that is spending less because of market conditions. Monster has become the primary provider of online recruitment services for Microsoft by offering an addition to our core products, diversity, and career ad network services in North America, Europe, Asia, and the Gulf region. We are uniquely qualified to deliver result and appreciate Microsoft’s support.
Another example, Burns & Wilcox, North America’s largest independently owned insurance wholesaler, recently signed a multi-year deal for approximately three quarters of a million dollars, up from the $90,000 they spent with Monster last year. In addition to job postings, the agreement includes several recruitment media products, enhanced job postings, video, and talent management suite. We completely displaced our top competitor and are now the sole service provider to this important customer.
We’ve also maintained the integrity of our pricing structure. In some cases, we have met competitor’s prices; however, this has been an exception and we have not lost a significant amount of business because of pricing.
We believe these market share gains will become increasingly evident in the course ahead.
Our greatest achievement this year is in the area of product development. We continue to see impressive engagement metric on the seeker side as a result of the new applications and tools we issued in January. I’m very pleased to tell you that the beta testing for our new employer search product driven by Trovix Technology is performing extremely well.
This new resume search product better enables the recruiter to search on relevant skills, work experience, educational fit, and other means for qualifications and then analyzes, ranks, and compares the information quickly and efficiently.
Employee feedback has been very positive.
The full U.S. launch is targeted for later this year and will be followed by a launch in Europe soon thereafter. We’re equally excited about our new seeker product that began beta testing two weeks ago. This will allow seekers to capture a broader more comprehensive range of jobs. The integration of Trovix powered technology to the seeker search result will add even more fire power to the new seeker experience, constant search as opposed to standard key word search, will become the core of the job seeker experience over time.
By the way, today we received news from the U.S. patent office that one of the most important patent applications with respect to Trovix Technology has been allowed and that the patent will be issued shortly. This is very encouraging development and further emphasize that the unique nature of the technology and the value proposition that Trovix will bring to Monster’s product offering.
With these new products, Monster is driving efficiency for our customers as well as cost savings. Customers, including recruitment agencies, capital providers, and seekers will have access to new tools that save time and produce better results.
We plan on having a full demonstration of these important new products at our investor update in the fall. We will follow up with more details in upcoming weeks. I’m sure Bob will be contacting you and we will publicize exactly when that event will occur.
We recently announced plans for a new high tech research and development facility focused on innovation and industry-leading product development. This new technology center of excellence and innovation will be located in Cambridge, Mass. and is the latest addition to existing product and development facilities in Maynard, Silicon Valley, the Czech Republic, Malaysia, and India.
With this world class talent and leading R&D infrastructure, Cambridge is an ideal location to compliment our other innovation facilities.
This fully support the strategic direction we’ve laid out at the time of our restructuring two years ago. During our first phase, we fixed the call as we started to design and create new products. Our current phase is focused on the next generation of product and search innovation. I assure you, we have the best products in the industry. We’ve worked hard to consolidate various operating platforms, half of what existed two years ago.
This allows us to operate more efficiently, industry-leading products and services rather than maintaining inefficient technology.
This efficiency has allowed us to actively recruit for approximately 80 engineers, designers, and product developers to support our product strategy. At the same time, we eliminated approximately 160 positions in product and technology group across the globe.
As we successfully enhanced our traditional core products, we have made great strides in expanding our recruitment, media offerings, mainly through Monster’s Career network. We are actively building a large online media network. Our strategy is to broaden our network capability and expand audience reach. This provides greater exposure for the Career as on the sight and increases the reach to passive seekers and approves our extensive global traffic.
In the month of June, the Monster career network ranked in the top 25 advertising networks globally with exposure to over 75 million monthly unique visitors across the internet. Additionally, the level of interest and customer adoption is starting to spread beyond the U.S. and to key European markets as recruitment media becomes a greater contributor to Monster’s global sales mix.
Affinity Lab which operates a portfolio of professional and vocational communities has performed well and has been successful in creating traffic and generating leads. It now operates 17 niche communities and provides social and occupational network capability to millions of numbers. We expect out of approximately niche vertical communities by year’s end. We will integrate the Affinity Lab’s communities onto the core Monster platform this fall.
This will provide a number of benefits to job seekers and employers while fueling the great of our core, network, and lead generation businesses. Monster’s employers will be exposed to a larger, more relevant pool of candidates, including passive seekers who go online to share occupational insight and network with the professional communities.
The existing Affinity Lab sights align well with Monster’s customer and seeker base and help the vertical audiences in key occupational areas like law enforcement, nursing, and teaching.
Other parts of our internet advertising business are growing as well. Our military business recently welcomed the addition of seekhelp.com, a social network for military wives and women in uniform. Seekhelp.com will help military.com strategy of close promoting offerings to every member of a military family at every stage in life.
Our market share gains have been aided by steady and deliberate geographic expansion. I’m pleased to announce that Monster is officially back in Australia. The joint match we announced late last year when News Limited Career I, the fastest growing job search site in Australia is now live. The website combines Monster’s technology and industry expertise with career one sales and marketing capability.
Consumers now have a competitive alternative to the existing providers as this important region becomes significantly more competitive.
Our wide global presence provides a significant competitive advantage and uniquely positions Monster to serve large, multi-national customers that fuels talent around the globe.
The progress we have made in China reinforces our strategy to be a global service provider. In addition, we are formulating plans to move aggressively into market where we have little or no presence, including the Middle East and Latin America. We will enter these markets using both traditional and strategic methods, such as joint ventures, partnerships, newspaper alliances. Our priority is to establish a presence, taking a low cost efficient approach to build brand awareness.
Our decision to expand and integrate the U.S. sales force has changed the competitive balance in Monster’s favor. We have more than doubled our sales force and now touch customers and potential customers quickly and more effectively. This has made a significant difference-in our ability to capture a larger share of the total spent.
The expanded sales force is highly scalable as volume increases and we will add resources appropriately as we see an increase in customer demand around the world.
Before Tim walks you through the second quarter results, I would like to make a few comments about our financial performance. Top line pressure we face, we believe that the company has managed the business well. We have kept up and in fact are adding to our investments and new activities. We feel our spending has been effective to compete in this touch environment while at the same time position us well for future growth.
This is the right strategy for the company. Monster is in the strongest position in our industry to capitalize when this economy turns around.
I’d like to now turn it over to Tim and then I’ll come back after his comments.
Thank you, Sal, and good evening everyone. First I will walk through our pro forma income statement and highlight the adjustments which reconcile to the GAAP results. I will then provide some additional comments on operating expenses, briefly discuss the results of our operating segments, and finish with our cash flow, liquidity position, and brief comments on our outlook.
Pro forma revenue for the second quarter was $224 million, which was essentially in line with the expectation provided on last quarter’s conference call and down from the prior year revenue of $354 million. Revenue continues to be significantly impacted by sharply lower customer demand as a result of the ongoing global economic recession. Despite this top line pressure that related companies face, we have made outstanding progress in successfully executing our plan to rebuild Monster.
In the quarter, currency rates negatively impacted revenue by approximately $16 million. Excluding the effects from currency and the contribution from China HR, organic revenue declined 34% compared with last year.
Non-GAAP operating expenses decline $60 million or 22% over the prior year period and $39 million or 15% from the first quarter of 2009. After taking into account approximately $14 million of currency benefits and China HR’s operating expenses, organic operating expenses were reduced by approximately $55 million over the prior year.
Despite the significant year-over-year revenue decrease, our cost reduction initiatives enabled us to generate a slight non-GAAP profit in the second quarter.
Interest and other income was slightly positive compared to $3.1 million last year.
Loss and equity interest was $1.2 million, most of which comes from our joint venture in Australia that Sal has commented on.
Our effective tax rate was 323%, compared with 33% in this year’s first quarter.
Pro forma earnings from continuing operations was $4.2 million for the quarter or $0.03 per diluted share, compared with income from continuing operations of $49 million or $0.42 per diluted share in last year’s second quarter.
I will now review the impact of the $8 million in pro forma adjustments recorded in the second quarter that reconcile our GAAP and non-GAAP results. The adjustments consisted of a revenue adjustment of $725,000, related to the purchase for China HR. $2 million in legal fees related to stock option litigation and $5 million of expenses associated with the restructuring plan which we announced in 2007 and has since wound down.
The total cumulative charge from the restructuring plan initiative was approximately $49 million compared with the initial range of $55 to $70 million. At the time of our restructuring announcement in July 2007,which preceding our investments in China HR, Affinity Labs, and Trovix, non-GAAP operating expenses were $260 million. Excluding these investments, non-GAAP expenses in the 2009 second quarter were $200 million, approximately $60 million lower on a comparable basis.
When we announced the restructuring, we anticipated annual cost savings of $150 to $170 million and we plan to add back $80 million in near investment areas for a net savings of $70 to $90 million on an annual basis. While there are a number of factors that contribute to the overall reduction you see this quarter, we believe that the savings from the restructuring have surpassed the amounts originally communicated.
On a GAAP basis, the company lost $0.01 on revenue of $223 million.
Now I would like to take a closer look at our operating expenses in the quarter. To recap, total non-GAAP operating expenses were $216 million, down 22% year-over-year and 21% for the first half of 2009 compared to last year’s first six months, and 15% sequentially.
As we signaled on our last quarterly conference call, marketing expense declined significantly. In this year’s first quarter, we spent an incremental $27 million to aggressively promote and support our seeker product launch. The relaunch was very successful and seeker engagement metrics in terms of job searches and applies remain up from the levels immediately preceding the introduction of these new applications and tools.
We believe that the additional advertising and promotion done on a global basis contributed to the high adoption levels our new products have experienced.
Marketing expenses were $45 million for the quarter, representing a 35% decrease from last year and a 39% sequential decline. We have efficiently promoted the Monster brand globally through creative marketing platforms, such as Monster career, which are ongoing in the U.S. and Europe, while building up relevant traffic to Monster.com and our affiliate sites.
Salary and related expenses were down 16% on a year-over-year basis and 7% sequentially as a result of the number of factors. Lower sales commissions due to reduced sales volume, the benefit of the compensation initiatives we implemented in the first quarter of the year, and headcount reduction of 296 from the prior quarter.
Office and general expenses were down 19% year-over-year to $58 million, reflecting reductions in a wide variety of areas across the global organization.
Turning now to our non-GAAP segment results, revenue from the combined career segments was $191 million, a 40% decrease from the prior year period. Excluding the currency effect and the contribution from China HR, the organic decline was 38%. The careers operating margin was 7.5%.
Within our operating segments, North America revenue was down 38% to $102 million reflecting the weak domestic recruitment market; however, through relative marketing expenses and operating efficiencies, we generated an operating margin of 12.2%, a rough 10 point expansion over the 2.6% operating margin in this year’s first quarter.
Our SMB business decline at a slower pace during the quarter. This data point combined with the flat sequential revenue performance in our e-com channel suggests that degree of market stability among SMB clients. Smaller companies have been flexible and we act quickly to changes in the employment market.
Our government business remain positive and a bright spot during the quarter.
Our international business generated revenue of $89 million, a 43% decline over last year’s second quarter. Our major international markets, particularly in Europe, was significantly impacted by the economic slowdown and global recession. As a result of the strengthening U.S> dollar, the international segment was negatively impacted by approximately $16 million of currency effects. On an organic basis, our international revenue declined 38% and the operating margin was 2.2% in the quarter.
IAF revenue of $33 million in the second quarter was down 2% year-over-year and up 4% over this year’s first quarter. The largest single contributor to IAF’s top line in the quarter was Military.com. A slight sequential increase was driven by Military, our educational properties, and Affinity Lab. Across all of the IAF properties, lead generation and display advertising were up 7% and 8% year-over-year respectively in the second quarter. The IAF operating margin was 16% in the quarter.
As you know, a top priority for us during this ongoing global recession as been to manage the business for cash and preserve liquidity. On a pro forma basis, EBITDA was $35 million in the quarter compared with $27 million for the first quarter of 2009, an improvement over the outlook we presented on last quarter’s conference call.
The pro format EBITDA margin was 15.5% compared to 10.5% in the prior quarter and 28.4% in last year’s second quarter.
Cash from operating activities was $14 million in the quarter and capital expenditures were $11 million. While we continue to invest in new products and technology, this lowest level is a result of the completion of a number of our investments.
Working capital absorbed $40 million of cash, a function of a decrease in deferred revenue, largely offset by a reduction in accounts receivable and a reduction in accounts payable, following a normal seasonal path. In the quarters ahead, when business improves, we expect working capital will become a source of funds.
As the financial crisis has receded, the company paid back a total of $157 million under its current credit lines and currently has $97 million classified as total debt on the balance sheet.
Deferred revenue was $290llion, a 38decline over the comparable quarter last year and a 16% sequential decrease reflecting lower volume in the global career’s business. As a result, we ended the quarter with net cash and securities of $235 million, a slight decrease over the $247 million reported at the end of the first quarter. We believe that our liquid balance sheet provides a solid competitive advantage in this difficult operating environment.
So to summarize our financial performance in the second quarter, operating expenses decreased significantly, allowing us to generate a profitable quarter on a non-GAAP basis. Pro forma EBITDA increased over the first quarter of 2009. We preserved cash and the balance sheet remains strong and liquid.
Looking forward, we are providing the following comments with respect to the third quarter of this year. As we commented earlier and as Sal has reflected in his comments, we continue to see encouraging signs of bottoming. Our Monster employment index, which measures online recruitment activity, has stabilized since January of 2009.
Our new job postings have leveled off in the U.S. and in some key international markets.
New activity in Monster’s e-com channel is actually up slightly, an encouraging sign. Renewal rates are showing signs of firming. Forecasted sales trends in the U.S. remain at a low level, but are becoming more favorable against prior quarter.
Finally, as we’ve said, the overall tone of our discussion with customers is certainly more positive. Of course, there will be a lag due to the timing of deferred revenue and sales converting to revenue. Also, while we’ve seen some stabilization in the sales decline in Western Europe, we expect to continue drag on revenue from the international segment in the near term. With respect to the third quarter, on a sequential basis, we expect consolidated revenue to be down in the low single digits with non-GAAP operating expenses being relatively flat. As a result, we anticipate pro forma EBITDA to be slightly below the $35 million reported in the second quarter and our cash position to be flat to slightly up.
I will now hand the call back to Sal for his closing remarks.
The aggressive actions we’ve taken as Monster’s long-term strategy and corporate objectives to first provide greater seeker experience possible. Second, to offer the most sophisticated tools and best search technology for our employers. This means helping our employers maximize the bottom line by providing the most relevant search results in the business. Third, increase our presence more deeply into media markets. And finally, expand and develop Monster sites and vertical niche communities.
We’re well on our way to meet these objectives on a global basis. The markets of recruiting talents goes far beyond the common job board. With great improvement operating and deliver enormous value to our customers. We believe this enables us to win the greatest share of market and over time deliver a superior rate of return for our investors.
We’ve successfully separated Monster from the pack and will continue to widen the gap. Our intent is to continue to revolutionize the recruitment market. We believe our value proposition is superior and Monster is unbeatable and unmatched in our industry.
I’d like to as usual thank our customers for their trusted support, particularly during these difficult times, our associates for all their hard work, and most of all to our shareholder for their continued confidence in Monster. Thank you very much.
Operator, we’d like to take questions.
(Operator Instructions) Your first question comes Mark S. Mahaney - Citigroup Smith Barney.
Mark S. Mahaney - Citigroup Smith Barney
This is James Sanford for Mark Mahaney. Just a quick question. On the site relaunch, now six months into it.
Mark, I don’t know if you can hear us, but you’re coming through very choppy.
Your next question comes from Monica DiCenso - JP Morgan Securities.
Monica DiCenso - JP Morgan Securities
Can I get a little more color on international margins?
It’s really just a function of the decline in revenue, nothing special on the cost side.
Your next question comes from Toby Summer - SunTrust Robinson Humphrey.
Toby Summer - SunTrust Robinson Humphrey
I was wondering if you could give a little color around the apparent momentum in terms of market share and speak to it geographically, whether you’re seeing the best traction in the U.S. markets or also have some evidence in international markets.
Our strategy from the beginning was to stabilize and move aggressively forward with regard to market share in the U.S. I think any action we’ve taken to date, everything from customer service to product to sales to marketing, etc. has been geared to accomplish that and what we’re seeing now is that we gained traction.
Customers are giving us more share of wallet. In some cases, total wallet. Others are just spending more. That’s not showing in the numbers simply because the amount of spend is significantly lower than it was a year or two years ago.
In Europe, we’re starting to see the same phenomenon. Some of the changes that we’ve made, in some cases happen simultaneously, some of those a few months behind say the rollout here in the U.S. So it’s probably a little bit slower; however, having said that, I think the same holds true particularly in western most Europe where the slide is somewhat stabilized and we’re seeing that the spend has stabilized and more of the spend is going to Monster than to our competitors.
As a matter of fact, we see a number of our competitors really disappearing in a number of markets. So that gives us further evidence.
In Asia, in some countries, for example, Korea, we enjoy a preeminent position and that just simply continues.
I think in China, as we gain more into working our business and converting it more to I’ll say the Monster methodology and that will expand considerably as we go into the fall and into the first half of next year. We’re seeing both stabilization and I think gain much more dialogue with our customer base than we had been.
So I think it’s pretty much around the world and I think it’s obviously it’s product, obviously it’s sales, improvement in sales force. Obviously it’s improvement to customer service. In other words, it’s a little bit of a bunch of things that we’re all coming together to just give the customer more value and a better experience and they’re repaying us with a greater amount of spent with Monster. There’s nothing really mysterious about the formula; it’s really starting to take shape now.
The next question comes from Mark Mahaney with Citi.
Mark S. Mahaney - Citigroup Smith Barney
You’re six months into the site relaunch at this point and I think last quarter you mentioned you had some improvements. I was wondering if you could walk us through. I think you said some of those functions have maintained themselves. Any particular learning that you had from those improvements that you expect should provide advantage as you roll out throughout the country and you also have the adequate resources at this point to roll out or will you be needing to add to technology resources as part of the rollout?
What we found from the January launch. As we track different statistics across the board, all of the numbers in the high range that I talk about on the latest call. So revenues per visit globally on average of 32% post readout. Search is up 65% post readout. Supply is up 100%. Profile is up roughly 20%.
We also rolled out Trovix to a selected number of beta customers, roughly 130 customers or so. We’ve also expanded beta to run to an additional 2,500 customers in the last week or so and we are seeing some really really good stats.
We also found, we did a lot of surveys over the last couple of months, and we found that it’s very important to train customers with new technology. We are finding a quarter of the customers trying to go back to keyboard search. So we are beefing up our training online and offline, but I can tell you we found that in a beta version of Trovix, roughly half of the customers got trained. 63 to 65% immediately liked power search, which is a Trovix product, more than the classic search.
When we trained the ones that didn’t respond immediately, almost 100% of the customers liked Trovix significantly better than the classic search. So one of the learnings for us was we do need to retrain customers.
Some of the learnings we went through on that Trovix data search, we found five or six areas that customers want us to enhance. The five or six areas that we knew we needed to enhance. (inaudible).
Extremely positive and gives us confidence that we’re up-to-date in what we have in the future releases is the right direction for our customers.
I’ll take the second half of the question which was do we have sufficient resources to roll out the new products and consistent with my comments that we expect third quarter operating expenses to be roughly flat. We don’t from an overall point of view require any significant up-stamping at this juncture. There may be some shifting inside the company as we put more resources to training, for example, but from an overall point of view, we’re retained the sales force and built up the sales force both here and in Europe to get the product to the market and the technology resources is in place.
Last week I spent some time on the west coast at both Affinity, Trovix, and Military, and it’s our job to assess the progress we’re making, the power of what we’re creating and delivering. We have to make judgments as to where it’s appropriate to invest some more resources just so that we’re not penny wise and pound foolish and we’re certainly doing that. In fact, have been doing that all along.
I want to be very clear on what Cambridge is all about. Cambridge is really not what we’re working on today, but we haven’t even started yet in terms of development. It’s to really build the next generation of products, building on what we’ll be delivering this fall, etc., and moving forward from there. We need additional resources, resources different than what we’ve had before. Monster has had a good amount of antiquated technology and platforms that simply, you know, we needed to get away from. That work has been done. Now we need some resources and we have the money to invest, rather than return simply, you know, we could take that money and return it to the bottom line, but we think that it’s short-sided and not in the best interest of the shareholders. We think that by investing now and preparing for what we’ll deliver nine months from now, a year from now, is the right investment for our shareholders.
So we’re doing some of that, but all within the perimeters of watching very closely what the economy is telling us and watching the bottom line while at the same time we don’t want to be cheap with our potential. We certainly don’t want to mortgage our future either. So we’re trying to strike a balance. I think we’re been doing a fairly good job of it in the past year and a half or so and we intend to continue to do that, but please rest assured, on the investment side and doing what we need to do to deliver value, we are continuing to move in that direction strongly.
We’ve had to face a lot of core product technologies the last couple of years. I think we have a strong innovation engine and now we are moving to a stage where we need a different level of innovation that will just take us to another level and the resources associated with that.
The next question comes from Christa Quarles - Thomas Weisel Partners.
Christa Quarles - Thomas Weisel Partners
My question is on this shift toward performance based offerings to your employers, getting away from the historical typical kind of classified job posting, but the move to driving quality candidates on a pure performance base. We’re seeing it out there in the market more, more than we have historically. I think you guys have talked about it a little bit, and just also to the extent to you can then better marry up your own marketing expenses with the type of quality and candidate that you’re getting in the door.
With regard to pay for performance, we are pursuing the pay for performance mile. We have actually a process of implementing it in a number of situations and we think particularly with the power of Trovix and that technology being introduced, that we will have a value proposition that will be very compelling to our users and we will be extremely comfortable in going to a pay performance model.
I think that what that model will do will make the user much more efficient than they have been in the past. I think the technology, the results, the results we’re seeing are so powerful that customers will see a tremendous amount of benefit. I think that will present an entirely new value proposition and I think that given the investment we’ve made and the power of the service and will give Monster an ability to open up a whole new arena as it pertains to pricing, competitive pricing, etc.
It’s one reason, and I know I’m going off course a little bit here, but it’s one of the reasons why when people talk about the price competitiveness that’s out there, we are convinced that if you offer the best value proposition, you will win the game at the end of the day.
So the pricing that’s going on now and the competition that’s out there, I think what we’ll be offering very soon is at the risk of over-selling it. It’s really a game changer that will put Monster in a different class and will allow the customers to be much more efficient, more effective in what they’re attempting to do, and therefore, price becomes a secondary issue, which really the issue are they getting what they need and are they being efficient in doing it? Take into account and we didn’t plan this. I wish we could take credit for that, but we didn’t create the recession that we’re in, but the recession actually gives us an opportunity. Many HR functions, many recruitment functions, have significantly reduced resources and the resource they’ve reduced is logically in the area of recruitment, because they simply haven’t had to recruit people.
As we come out of this recession, I think the value proposition and the model that we offer will allow people to keep those costs down, because of the efficiency of the tools, making them a little bit less assessable, certainly in the area of HR and overall costs of the recruitment company in terms of their fixed cost. Become more flexible. They won’t have to recruit as many people back, because this tool is much more efficient.
So I think that we’re looking forward to expanding our reach with regard to pay for performance. Trovix helps us do that in a very strong way and you’ll be seeing much more of that as we go towards the end of the year and into next year. Tim?
I just want to add one thought to that and we are clearly, as Sal said, moving in that direction, but I don’t think we would like anyone to take away that it’s going to be all or none. We think there will be an increasing segmentation of both product and pricing as we go forward. So you’ll see a number of different pricing options, including a pay for performance option as we go forward.
I think the menu for Monster will broaden and it really is dependent upon the customer which way they want to go. If the results we’re seeing currently and the beta Trovix is any indication, we think we will get a sizable portion of the business taking that option and using the power of those tools.
To some of our customers, for various reasons, that may not make sense. We will give them the value proposition that fills their need.
Your next question comes from Tim McHugh - William Blair & Co.
Tim McHugh - William Blair & Co.
I wanted to ask about your comment earlier that you said. You’re seeing clients switch to fewer providers. Just wondering if you can maybe elaborate more on that.
Then also your comment about the competitive win that you’ve had with your largest competitor. Were those clients getting a beta of Trovix? Was that part of the discussion?
Those two customers had nothing to do with Trovix. It had nothing to do with offering Trovix tools, if you will. It was just the organic business and that we have been offering, for example, the career ad network. So it is not Trovix related.
With regard to the first part of the question. I think that what we’re seeing is that it’s happening across the board. It’s both with the bigger job or bigger competitors, that more of the spend is being concentrated, when it’s being concentrated, most of the time we are gaining the lion share of that spend.
I think that there is with some of the niche sites, I think that you’re seeing people just, companies rather, just gravitate to where they have the greatest pool of resource and where they can pull from, and even there, I think that there’s more of a migration, if you will. We seem to be getting more of that part of the activity.
I think that the improvements that have been made and some of them are more than improvements. They’re just complete changes and our offerings to the customers and the customers’ experience. I think it’s causing customers to reevaluate and see who’s making the commitment both in preserving their brand and giving product and taking action, and they’re putting their spend there. When I’m involved certainly and I see in customer meetings, sales presentations to customers, what customers are looking for is support and they’re looking for companies that are investing to support them. They see what we’re doing is very, very closely aligned with that. There’s a cornerstone of our strategy and what we believe is the right thing to do.
I want to add a thought to that. First of all, market share information is very hard to get in this industry. The way we define market share is based on global revenue. We don’t look at the share personally, we do, but we don’t think that’s the most relevant measure and we don’t look at traffic share in the sense of market share of wallet.
So our analysis suggests that early on in the downturn, maybe the larger and more traditional job boards benefited at the expense of smaller and more peripheral ones.
In the last couple of quarters, our analysis suggests the anecdotal that Sal gave, but we are beginning more seriously to take share of wallet against the top competitors, will become evident in quarters ahead.
To have a significant, as an example, a North American company. We are holding our own and in some cases increasing as it pertains to postings; however, the different product mix that we offer, and as Tim was talking to, is also what’s winning.
They’re taking that one dollar of spend hypothetically that they have and hypothetically 20% of it, 30% of it, is posting, the things of that sort, but then they like the career ad network product. They like the diversity product. They like the mix. And so, they’re buying on a much wider berth. So it’s really a combination of things that’s coming together. It’s the fact that we do have the inventory of candidate. We do have the traffic that’s satisfying that need, but we also have a broader berth of product that’s allowing them greater reach and giving them greater service that many of our competitors simply don’t have and the completeness of the sell, if you will, that’s allowing us to succeed. You couple that, you know, to sell on that scale, you need a broader sales force that’s more capable. It’s more of a solution sell than it’s traditionally been.
The fact that we are the only company that has service in 40-45 countries is a clear differentiator from the rest. What allows a company like Microsoft or make them want to come to us so we can service them around the world is that reach, plus the product, plus the strength of the product that we’re introducing. And of course, you know, part of the product that we have, part of it is the fact that they hear and they know that there’s more product coming, that there’s a lot of investing going on in creating those products, and so they’re buying now and then in anticipation also of what’s on the come.
So it’s really the whole subtotal of all the things we’re doing. The geographic spread, the product, the sales force, the service, the marketing effort, how they’re tailoring our marketing to be different than just a great shot on TV, if you will, that was traditionally done is all helping to bring we believe the market share to us.
With that, I would like to thank everyone for joining us this evening for our second quarter 2009 conference call. You can access the call on the Investor Relations section of the Monster Worldwide website, and as always please feel free to call me a call, Bob Jones, at 212-351-7032 with any further questions. Thank you very much.
Thank you, everyone.
Thank you for participating in today’s conference. You may now disconnect.
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