A closer look at Recruit Holdings, the largest Japanese conglomerate you’ve never heard of, and parent company of Indeed and Glassdoor.
Anyone that has applied for a job knows about Indeed, the largest job site in the world. Anyone that has gone looking for answers to the question: “What is it like to work at Company X?” knows about Glassdoor, which has employee reviews of over 600,000 companies. But, did you know that both Indeed and Glassdoor were fully owned subsidiaries of Recruit Holdings, a Japanese conglomerate founded in a rooftop prefab unit in Tokyo in 1960?
Recruit Holdings (RH) started out as a media company, and throughout the 1960’s distributed free job guides to university students filled with paid content from companies looking to hire new talent. Their products eventually expanded to paid real estate listings with more accurate calculations of walk time to nearby train stations, then travel brochures, and now myriad other offerings in the job placement and work space.
The modern iteration of Recruit Holdings was initiated in 2010, when RH began an aggressive series of acquisitions, including the 14th largest U.S. staffing firm Staffmark for $300M in 2011, the 11th largest global staffing firm Advantage Resourcing for $410M in 2012, and the #1 job website, Indeed, for $1B, also in 2012. In 2014 the company listed on the Tokyo Stock Exchange. In June, 2018 RH completed its latest major acquisition, purchasing Glassdoor for $1.2B in cash. Today, RH owns 357 individual companies.
Recruit Holdings is structured as a holding company, with 3 subsidiaries: HR Technology, Media & Solutions, and Staffing.
- HR Technology (Indeed & Glassdoor): This business unit (BU) is synonymous with Indeed, and following the recent Glassdoor acquisition, is definitively the world’s largest job site. The combined Indeed / Glassdoor web properties will have ~260 million unique monthly visitors. Prior to acquiring Glassdoor, Indeed had ~$780M in revenue in FY 2017, and is the smallest BU of the company.
- Media & Solutions: This BU offers marketing and recruiting support to multiple business segments in Japan, such as wedding venues, restaurants, and beauty salons, with ~$6B in revenue in FY 2017.
- Staffing: Finally, the Staffing BU provides temporary staffing services in Japan and internationally, with ~$12B in revenue in FY 2017.
The Indeed & Glassdoor Stories:
Indeed itself has a fascinating history from a startup perspective. The company was founded in 2005 by Rony Kahan and Paul Forster, who raised one and only one VC investment, led by Union Square Ventures for $5M. Rony and Paul had previously founded jobsinthemoney.com, a job site for finance professionals that they exited to Financial News in 2003. The company was inspired by Google’s pay-per-click business model, Google itself having just gone public in 2004. Google inadvertently contributed to Indeed’s success, by indexing jobs listed on the site and oftentimes enabling Indeed’s job listings to be a top search result. Google became Indeed’s largest source of organic (i.e. unpaid) web traffic.
Glassdoor is equally fascinating from a startup perspective: it’s the third in a string of successful startups, preceded by Expedia and Zillow, that were co-founded by the same entrepreneur, Rich Barton. The company was founded in 2007 and launched the Glassdoor website in June, 2008, alongside a Series A investment from Benchmark Capital where Rich was already ensconced as a Partner. The company was build on a simple premise: share data about how much money you make, and then you can find out how much everyone else makes at your company! Less than 6 months after launching, Glassdoor had gathered 115,000 contributions from employees at over 14,000 companies. Glassdoor also has a Google connection: a direct investment by Google’s growth equity fund “CapitalG” in 2016.
Clash of the Titans:
Recruit Holdings has always been involved in significant tech competition. Indeed has competed for many years with Monster.com, LinkedIn, and ZipRecruiter. However, these competitors were all of a similar kind: successful tech startups within their space, but similarly funded and sized compared to Indeed. Over the last two years, however, the competitive environment has changed dramatically. Whether it likes it or not, Recruit Holdings has been dragged into a three-way fight with the largest tech titans in the world: Microsoft, Facebook, and Google. Check out the timeline below to see how fast things have changed for RH.
- June, 2016: Microsoft announces a deal to acquire one of Indeed’s largest competitors, LinkedIn, for ~$26 billion in cash. The transaction closed in December.
- February, 2017: Facebook, in a nod to over 50 million businesses that have created Facebook pages, launches Facebook Jobs to enable applicant tracking and job posting services.
- May, 2017: Google launches Google Jobs, an integrated search results widget aggregating jobs from numerous job boards into Google’s main search engine. Indeed is no longer the “Google for Jobs”, now that Google is the “Google for Jobs”.
- July, 2017: Google launches an Applicant Tracking System (ATS) called Google Hire, which is integrated with G-Suite (e.g. Gmail and Google Calendar) as well as Google Jobs. (Indeed primarily relies on 3rd party ATS integrations.)
Let’s take a closer look at these competitive threats:
LinkedIn v. Indeed is the oldest competitive pairing of the bunch. For its part, LinkedIn has focused on building the world’s largest social network of professionals, and knows that most employees are passive job seekers who aren’t visiting job boards regularly, but are nonetheless open to new opportunities. LinkedIn has therefore tried to create continual engagement with its users by providing notifications about the people in a user’s network, and providing a Facebook-esque feed of shared updates and likes. The idea is that higher engagement with the platform by users will enable them to charge higher prices to companies that post jobs on the site.
LinkedIn also attempts to quantify the skills of its users so that companies can target job postings to users with the best match of skills for a particular position. However, for LinkedIn users that are active job seekers, there are no employer rankings, salary data, or any other critical information about the employer, except whatever the employer has posted to their LinkedIn profile page. Despite this lack of employer data, there is no better site for finding referrals for job postings by searching for 1st and 2nd degree connections to a particular company.
The Microsoft acquisition doesn’t change the competitive dynamic much with Indeed. The reason is that the acquisition was driven more by Microsoft’s desire to integrate LinkedIn user data into its products. Going in the opposite direction, employers that use LinkedIn will soon be able to market across Microsoft web properties. This will expand the reach of LinkedIn job postings more broadly to active job seekers, but not enormously since LinkedIn job postings are already listed with Google.
Facebook v. Indeed is another example of a social network looking to leverage its existing user engagement to monetize job postings from employers. Unlike LinkedIn, however, Facebook’s users are on the site to engage about their personal not professional lives. And, while Facebook has a huge amount of data on users, none of it pertains to their skills and qualifications except where they went to school. Hence, the low hanging fruit for Facebook Jobs is to enable better matching for job postings where skills and qualifications don’t matter: low-wage, entry-level jobs in food service, transportation, sales, etc. For businesses whose Facebook page serves as their primary web presence, the tool is ideal.
The competitive threat to Indeed is that active, low-skilled job seekers are siphoned off by Facebook before they start searching on Indeed. Similarly, small employers in particular may find that it’s easier to post a job to your Facebook page to see if it can be filled, before opening up to hundreds of job applications by posting on Indeed.
Google v. Indeed is all out, head-to-head competition. Let’s start with the fact that a large portion of Indeed’s internet traffic comes from an internet search that originates on Google. Google has for years shown Indeed job listings in its search results. Now, however, if a job is visible to both Google Jobs and Indeed, Google’s result will have the highest search placement. The direct competitive response from Indeed has been simply to prevent Google from indexing its website (although Glassdoor is still participating in Google Jobs for now, given that it started working with Google before being acquired). This means that for active job seekers, job postings are on Google Jobs OR Indeed, but not necessarily both.
Google Jobs is also a huge boon to LinkedIn, which has partnered with Google Jobs. Why? Because Google will expand the reach of job postings on LinkedIn from passive job seekers to active job seekers. LinkedIn gains traffic without giving up really any of its own territory. On the other hand, Indeed would have to cede its entire business territory to Google to accomplish the same thing.
Indeed’s competitive response to all of the action above was to acquire Glassdoor in June, 2018, which provides substantial value-add to its core competency of providing information on job opportunities to active job seekers. Whether Indeed will remove Glassdoor as a participant from Google Jobs, its primary competitor, remains to be seen. The benefits would be to remove some of the best known salary and company review data from Google’s search results and force Google to use other, inferior services, such as Paysa for salaries, or InHerSight for reviews. However, this move would come at the cost of obtaining organic traffic from Google.
Indeed’s second, and lesser known competitive response, was the launch of Indeed Assessments in May, 2018. This services provides over 50 tests that employers can use to filter the deluge of job applications into a more manageable stream. Tests include computer skills (e.g. Excel), psychometric assessments (e.g. critical thinking), and job skills (e.g. business math). This is clearly a benefit to employers designed to ensure they continue to list new job postings on Indeed. This is also a shot across LinkedIn’s bow, by enabling employers to evaluate a job applicant’s skills. LinkedIn offers a similar capability with skill-based tags that come from users voting on the skills their peers possess. Whether employers will take the time to outline assessments for specific job openings vs. creating simple filters based on job applicant’s peer reviewed skills remains to be seen.
In the final analysis, Recruit Holdings has a huge job ahead: it must defend its dominance in the active job seeker market from Google. On the other hand, it must continue to deliver high quality applicants to employers without having its own network of passive candidates to leverage like LinkedIn. The Glassdoor acquisition will help it maintain its dominance in the job seeker market for a time. However, Indeed still needs an answer to employers hunting for passive candidates. Building its own social network seems unlikely. A better path would be to become the best tool for processing job applications effectively. Indeed Assessments is a step in this direction, but is on a par with scheduling efficiency Google will achieve with Google Hire, and similar skills assessments provided by LinkedIn.
We should expect more M&A activity to build Indeed’s capabilities in the passive job seeker market, such as the acquisition of an innovative Applicant Tracking System provider such as Lever. Stay tuned for deeper analysis of Recruit Holding’s post-Glassdoor financial performance in the future.