Online recruiter StepStone made 500 employees redundant earlier this month.
Paul Nelson examines its impact on the future of Internet recruitment
The closure of online recruiter StepStone in the UK has sparked a heated
debate about the future of Internet recruitment.
Employers are tightening their recruitment belts as the global economic
slowdown continues and experts believe that the online market is set for a
period of consolidation.
One view is that the online market can only accommodate a small number of
big all-purpose recruitment sites.
Chris Hermannsen, chief executive of the UK, Ireland and Nordic region of
TMP Worldwide eResourcing, which owns online giant Monster, explains,
"Only the strongest and the largest will survive in an environment that
demands size and reach as the criteria for success – this is the future of
"What we will see is the creation of a cluster of online super brands
that will act as online recruitment hubs for the growing number of virtual
Along with the largest online players, smaller niche recruitment companies
will strengthen their positions. "What will happen in a couple of years’
time is that there will only be two broad-based online recruitment sites, with
many others concentrating on niche industries," said Johnathan Lines,
sales and marketing director of Fish4jobs.
There are going to be winners and losers as the market evolves and online
recruitment companies restructure.
Shaun Collins, head of marketing at TotalJobs, explains that the current
market is overcrowded. He believes that "defensive players" – those
recruitment companies that are using a website to defend their established
market share – will lose out over the next three years. In time, the big online
players will dominate the whole recruitment sector.
When StepStone closed in the UK on 2 November and made 135 staff redundant,
it sent out some strong messages to the rest of the recruitment community.
Many of the experts in the field believe that StepStone tried to grow too
much, too quickly.
Collins commented, "It was a classic dotcom story, not a classic
recruitment site story. StepStone had a set amount of money in the bank with a
set amount of time to make X amount of profit.
"It was very bold move in the beginning, going for rapid expansion with
a huge brand awareness and hoping that everything would follow."
Some questioned its massive marketing outlay, which included spending a
reported £8m on sponsoring Channel 4 sport. Keith Potts, managing director of
GoJobSite, said, "Big advertising campaigns do not work in the recruitment
industry. They will capture some people, but recruitment is not like
advertising a Mars bar, it works on a cycle of anything from two to five years.
An advertising campaign cannot retain brand awareness for that length of
Potts believes that a proliferation of Internet links from other sites is
more important than a massive marketing budget. GoJobSite has 5,000 weblinks
posted on other sites to drive traffic. Furthermore, recruitment website
structure is vital. It has to be easy to use and interactive.
Collins agreed, "We feel that the secret [to a successful recruitment
website] is to offer a focused tool for job seekers and recruiters. The trick
is to keep it simple. Human interaction and advice are both distractions.
"StepStone made its mistake by buying existing sites, which led to
technological problems as they had numerous different platforms," Collins
To succeed in Internet recruitment organisations must be in both the big and
niche recruitment market. "Companies must be able to offer both the sector
site and the big generalised site. We believe in both models online recruitment
is no different to offline," said Potts.
"Reed Business Information, for example, has been very successful in
recruitment via the trade press and online. The Sunday Times has also
successfully used both models in its recruitment drive."
Developing partnerships is another approach to developing scale and
competitiveness. Last week, Monster announced a deal with AOL Europe. It
reciprocates the companies’ relationship in the US and will give users access
to over 1 million jobs as well as Monster’s career resources, including its CV
"Being big is good," said Peter Croasdale, European product and
content director for Monster. "The search engine is there so that job
seekers can find exactly what they want. In two clicks they can go from a
possible scope of 1 million jobs to narrowing it down to five vacancies."
For the smaller operators, providing high quality customer service is vital
to a strong niche position. "We restrict our database to 1,500 senior IT
staff and we look after our candidates, unlike the big sites," said Paul
Smith, chief executive of IT recruitment site FirstPersonGlobal.
StepStone’s investors have agreed to bail out the firm to the tune of £13.4m
– most of which will be spent on redundancy payments. It has made over 500 of
its 876 staff redundant and is focusing on its core markets in Belgium, Denmark
It provides a salient reminder of the dangers of trying to develop brand. As
Fish4Jobs’ Lines explained, "StepStone tried to build a significant market
brand and this takes considerable financial backing just to break even. There
is a danger that backers will run out of patience and call it a day."
How online recruiters can prosper
Online recruiters have been warned
that to prosper they must expand their job-hunter base and improve corporate
Research by Forrester concludes that online recruiters should
target local firms with specialised staffing needs and include lower management
jobs if they are to compete in a slowing economy.
To keep HR departments’ revenue, online recruiters must also
improve their success rate.
The study, released earlier this month, suggests the best way
to do this is to pre-scan applicants.
According to the research, only 6 per cent of UK Web users have
applied for a job online because online recruiters focus on middle and upper
management jobs, which excludes over half of the population.
Forrester claims that online recruiters should either
concentrate on the localised approach taken by firms such as Fish4Jobs or think
big and provide the worldwide coverage offered by companies such as Monster.