Seek founder Paul Bassat speaks to AMANDA GOME about the direction his business must take to continue on its enviable growth path.
By Amanda Gome
Internet jobs site Seek has grown from a tiny start up to listed company worth $2 billion in 10 years. But the share price during the last few months has fallen from a high of $9.36 to about $6.70. Analysts say the industry is competitive and the company’s growth opportunities are limited.
Amanda Gome talks to Seek founder Paul Bassat about Seek’s growth plans, the impact of new competition, the business after the exit of founder Matthew Rockman, and life at 40.
Amanda Gome: Your share price has dipped from around $9.30 in November to about about $6.70. What happened?
Paul Bassat: We listed early 2005, so we’ve been listed a little bit under three years. We had a very good run with the shares from $2.10 up to, as you say, above $9. Obviously the market has come back a little bit in the last few weeks, and we haven’t been immune from that.
There genuinely isn’t that much of a focus within the business on the share price. The focus is very much around what we’re doing with the business and all the things that are necessary to continue to grow the profits and grow the market share, and the share price is something obviously that we can’t control. We just focus on running the business as best we can.
For financial year 2006-07 you had revenue of around $157 million. And you haven’t reported your half yearly results yet, but what are you looking at?
We report in a couple of weeks, so it’s difficult to go into any details. I think what we indicated to the market at our four year results presentations in August, as well as at the AGM in November, that we expect continuation of the strong growth. People who are coming to the site would see that the ad volumes continue to build. They’re around 220,000 ads at any point in time, so we see a continuation of strong growth, both in the employment business and also in Seek Learning, which is a newer business and is growing very strongly as well.
Some analysts are saying that you’ve got a massive website now with a huge number of vacancies. There’s not much unused capacity left in the market. What do you think of that?
The online employment market (and these numbers are relevant to the year ended 30 June 2007) is about a $200 million in Australia. We’ve got probably about a 70% share of that market. The print market is still a $600 million market, so we expect over the next few years that a large chunk of that $600 million is going to come across in segments like the government market, the education market, the blue collar market, the regional market. All of those markets are still very ‘newspaper’, and much smaller online, so we still think there’s a fairly significant opportunity over the next few years.
You’re strong in government and education. Are you boosting the blue collar and regional?
Government and education are still primarily print markets, so we think there’s a lot of opportunity in those markets and also in health care. Government has been on the whole a little bit slower than the corporate sector in terms of moving their spend from print to online, so we’re very aggressively focused on government and education and hopefully over the next 12 months we’ll increase our focus on the blue collar market as well.
What will you do?
What we’ve done, without wanting to go into detail, hasn’t just been about specific sales and marketing. It’s been a very much integrated approach, so we’ve launched new products, we’ve had specialised sales teams that have focused on those markets, specialised service offerings because the needs of clients in those markets are a little bit different. So it’s been a very much holistic approach to ensure that we really build the marketplace from the ground up.
So you’re going into new areas. What else are you going to do?
We’re going to continue to focus, as well as boosting our presence, in those particular markets – but continue to invest in new product development. We launched a product called ‘standout ads’ literally a few weeks ago, just before Christmas, and that’s a product that allows clients to stand out a little bit more in the search results by including more information and their organisation’s logo.
So there are opportunities to expand the product range as well as the volumes within the employment business. In Seek Learning, again continuing to really grow our presence there. We made an acquisition or an investment of a 50% interest in a company called Amadeus late last year, and that’s focused on the private education market. It owns some private training colleges, a number of different brands including the Billy Blue brand, which is quite well known in Sydney, and then internationally continue to grow our presence through our investment in Zhaopin in China. Obviously we think that’s a really really exciting opportunity for us over the next few years.
What’s the rationale behind Seek Learning?
First, we’ve got a very very large and relevant audience, so lots of people are coming to the Seek website. They’re interested, they’re thinking about career change, they’re thinking about new jobs, and part-and-parcel of career change is obviously the whole concept of upskilling and developing your skills and taking on training opportunities. So it’s an opportunity for us to work with our training partners to promote their training courses.
We partner with organisations on a best-of-breed basis, and we’ve got about seven or eight different partners within Seek Learning and offer visitors to the site a really comprehensive range of courses, which we then sell to the candidate. So it’s a fairly integrated relationship with out training partners.
We’ve also made two 50% investments. One in a company called Amadeus I mentioned, and secondly in IDP that we made about 18 months ago. IDP brings in about 20% of the foreign students that come into Australian universities each year, and our partner in that business is the 38 Australian universities. We own half the business, the universities own the other half. So it’s about leveraging our audience, but it’s about also trying to bring the strength of our brand and our sales and marketing expertise to what has historically been a very large but quite a fragmented market, with a lot of sub-scale players.
Do you see big growth in Seek Learning?
Over a five year view we think that we can grow that into a really significant business. Both the wholly-owned part of the business as well as the IDP and Amadeus businesses, which we own half of each.
What’s it been like operating in China?
There’s a few keys to being successful in the Chinese market, and obviously for us it’s playing itself out. Not when you’ve got to take a long term view, it’s not about a quick profit or a big buck. It’s about taking a long term view and it’s about investing in that marketplace.
How long do you think before you make a profit there?
The business would probably be 12 to 24 months away from profitability. Now bearing in mind that it’s been going for seven or eight years, that’s obviously a reasonably long haul for the original investors. We’ve only been in the company for a little bit over a year, but it’s about the correct measures or the appropriate things we’re focusing on. At the moment that isn’t profitability or even revenue, it’s about building the sales and marketing presence across the various cities in the Chinese market.
And of course when we started expanding we had to focus on five or six key markets in the Australian market and two or three in New Zealand. In China there’s a minimum of 30 markets to focus on with a population of several million or more.
The second aspect to China I think is having the right local partners. We wouldn’t pretend that we could run that business day-to-day or be hands on. We can provide input at a strategic level, and a lot of the challenges of the Zhaopin business is similar. What they’re facing are similar to the challenges that we faced three, four or five years ago. So we can help provide them with a road map and some input, but you need the local knowledge, you need the local relationships.
It’s absolutely not easy, but the reality is that we’re competing in an environment where there are two other players competing against us. It’s three players competing for market leadership in a market that’s going to be very very significant over a five or 10 year view, so we think the risk return is definitely there.
Are there very strong players?
It seems to be a pretty competitive market. I don’t think it is any more competitive than say the Australian market was five or six years ago. Over time clear leaders will emerge. Where it may be a little bit different in China is because the different individual geographic markets vary so much. It may well be that you end up with different players winning different individual markets rather than having one player winning all of the markets on a national basis.
So you’ll seek to dominate particular areas?
We’re going to do as well as we can in as many markets as possible, but the reality may well be that you have a number of different players. The three players have different regional strengths already, and that could continue to play itself out over the next few years.
What about other regions? What are your criteria?
We’re very much open to other opportunities. There’s a number of different criteria that we’ve got in place. Number one is a market where no clear winner has yet emerged, a market where we think we can add some value, where there’s an opportunity to either invest in or buy an existing player who has a reasonably strong franchise. So there are a number of different aspects to that.
Are you looking at anything in any particular country?
We’re always looking at different opportunities. There’s nothing particular for us to talk about publicly or report to the market on, but we are always assessing and looking at opportunities.
Have you seen much effect from a new relaunching of CareerOne?
Not to date. I mean our share continues to grow. We had record traffic of about 2.8 million unique browsers to the site in January, so it’s a record level of traffic. Our daily unique browsers according to Nielsen net ratings is running at about three times that of CareerOne, and our other main competitor, so the competitive position continues to be very strong, but at the same time we’re not complacent about the competitors.
You’ve got some new competitors, like Jobs Jobs Jobs. And a number of others coming in.
We’ve seen a number of new players enter the market in the last few months. We haven’t seen an impact of that in terms of negative implications for our market share or anything like that, so it continues to be for us a really good story. But we spent a lot of time focused on both existing and potential competitors to make sure that we are maintaining our market share position, which is very important for us.
What are the challenges ahead for you?
I think the challenges are to continue to maintain the growth in employment business. Continue to be very aggressive about maintaining a market share.
How are you going to do that?
It’s about all of the key elements of the business being in place and doing them better than the other guys. It’s about having a better product. It’s about selling that product better. It’s about marketing to consumers better. It’s right across the board and is about providing better service to our customers. So that’s the first challenges with an employment business, maintain that growth, and then I think secondly and thirdly is pursuing the right international growth opportunities as well as the right opportunities within the Seek Learning business.
With marketing, what do you find works best for you?
The mix hasn’t changed significantly. We’ve historically used both online and offline in slightly different proportions, but the online and offline serve their purposes. We think they’re very complimentary. We are continuing to increase our marketing spend year-on-year as our revenue base grows, and that allowed us to increase our awareness and get into more markets.
What percentage of revenue is your marketing?
We don’t specify the particular percentage, but it is a fairly significant spend, and after salaries and wages it’s the biggest buck in our business.
What about you personally? I mean you’re 40 and you’ve been doing this now for almost 11 years. What sort of role have you defined for yourself in the business and is it one that you enjoy?
You know, the enthusiasm doesn’t change. If I wasn’t enjoying what I was doing I’d be doing something different. Either finding something different to do in the business or something outside the business, so the key criteria for me are around (a) enjoying what I’m doing and (b) hopefully adding some value to the business.
The role has evolved rather than changed radically. I mean over the 10½ years we have been going, from day one it’s changed a lot to what it looks like today, but as each day goes along there’s just a slight evolution in the role, so it doesn’t change radically but it’s exciting. I mean it’s fun to be part of.
What have you had to change personally? What have you added?
There’s a number of aspects. As the organisation grows there are more people, there is more complexity, there is more layers to it – so inevitably you are going to be less hands-on in particular areas of the business than you were able to 10 or 11 years ago. So it’s a natural evolution you have to manage, otherwise that’s going to constrain the growth of the business.
It’s important to continue to bring in strong people. The first challenge you know, five, six or seven or eight years ago, was to bring in a strong executive team and then four or five years ago, identifying if we’ve got a really good layer at the top of the business. So it’s a constant renewal and refreshing of our capability and really really building the depth in the organisation.
Three of you started the business. Your brother Andrew is still there, but then you lost one of your partners. What was that like?
About a year and a half ago Matt Rockman decided was time for him to do something different, and obviously that’s a really big change. So you have to be quite objective about what you’re going to lose in the business and how you’re going to cover that gap. We were very lucky in terms of the person who came in to replace Matt. Joe Powell who has done an outstanding job leading our sales efforts since Matt’s left.
Matt was very talented at marketing wasn’t he, and advertising?
Absolutely. So there’s a whole lot of dimensions of capability that he brought to the business that obviously you lose, so it’s really important that both through the existing people you’ve got in the business and new people that you try to cover those gaps as best you can.
How many people did it take to replace him?
There was one specific hire that we brought in as a sort of direct replacement for Matt, but obviously some people take on different responsibilities and new challenges, which is really exciting for them that they get the opportunity to take on additional responsibilities in their current roles.
Can you see yourself doing this at 50?
I’m not sure. I’ve just made it to 40. I still feel pretty young. I still feel very energised and you know, as I said before, it’s not an age thing. Hopefully I’ll still be working for a lot longer. Another 30 or 40 years.
But at this?
Well I think it depends. I mean if I continue to be enjoying what I’m doing and passionate about it and feel as though I’m adding value, why not? If those things change, then it’s time to do something different. At the moment I’m loving what I’m doing. I’m very lucky.
What are some of the challenges that working with your brother has thrown up?
I think it always throws up challenges in a situation where partners set up a business together where there are family members and non-family members. What it’s been about is ensuring that there is a real clarity around what the role definitions are. I think that’s important both for Andrew and I, but also for the guys who report to us to make sure they’re clear about who covers what, and that actually gets much easier as the organisation continues to get larger. But it’s about ensuring that there is a very high level of engagement.
There’s obviously a very very high level of mutual respect and trust. So there’s actually significantly more benefits I think being in a partnership, whether it’s your brother or with someone else that you respect and have a fantastic relationship with, than there are disadvantages. But you just need to make sure that that dialogue is very open and it’s a very open relationship.
How do you solve any conflicts? What’s your mechanism?
Number one is you kick things around and you talk through things where you have a different view. But by and large we have fairly clear areas of responsibility across different areas of the business, and therefore in 99 cases out of 100 it’s either Andrew driving a decision or me driving a decision, because we’ve obviously got a high level of respect and trust for each other’s judgement.
What are you seeing technologically that’s changing things online or with social networking? What are the new trends that you really feel Seek needs to tap into?
There’s two aspects to it. One is about doing what you’re doing better. So for example search is the core activity, so making sure that we continue to invest in search and improve search, and that the search results that people find when they look for a job continue to improve.
The second aspect is adopting new methodologies and technologies. Take something like social networking, actually understanding what it means for us. Where we can play a role? What opportunity does it represent, or does it represent a threat? So for example rather than trying to compete with the likes of Facebook and MySpace, which frankly, (a) we don’t have the expertise and (b) it’s a very different business.
What we’ve tried to do is leverage the sort of social networking phenomena with a really tight integrated relationship with Facebook and utilising Facebook and working with them, I think in a very collaborative way. We’re promoting Seek within Facebook in a very contextual way, in a very appropriate way as well as looking at different sort of aspects of increased networking. Not necessarily social networking but increased networking components on the Seek site.
Is that working for you?
The relationship with Facebook’s working exceptionally well. We are getting traffic from Facebook and really good positioning. It’s working very very well.
Where do you see social networking going?
It’s difficult to make predictions. You’re talking about a market that’s still pretty young and emerging. I don’t think too many people saw 14, 15 months ago that Facebook would emerge in the way it has. Clearly it was a phenomena within the US college market, and the extent to which it became a phenomenon globally once they opened it up to non-college students and non-US residents was remarkable.
So no question, social networking is here to stay. But it’s probably like the search market in 1999, 2000, 2001; still a pretty young market. Potentially there is still room for people who come along with really clever and innovative business models. Obviously MySpace and Facebook are the dominant players generally, but interestingly in different geographic markets there are different players that are strong. In a market like New Zealand Bebo is the dominant market. In the UK it’s very strong.
Google has such enormous dominance and we’re starting to get real consolidation in that search sector. Does any of that concern you?
Obviously when one player has a very strong position in a particular market, you look at that and understand what the opportunities and threats are. But by and large, what we’re seeing is more opportunity than threat from Google. They continue to drive the significant traffic for us in a very cost effective way. They do that for many many other businesses around the world.
But at the end of the day I think that people do get a little bit concerned, a little bit troubled by it. But the reality is that if we look at our business, is it a better business or a stronger business having Google there, or without Google? There’s no question they’ve been a positive force in our business for the last three or four years, and we don’t necessarily expect that to change.