Not Easily Spooked

By Ed Frauenheim

Jun. 24, 2008

It’s a scary time to be Monster.

    Not only is the online recruiting giant still dealing with fallout from an embarrassing stock option scandal, but it faces a host of other challenges. These include a less-than-stellar reputation among employers and job seekers, new competition, significant executive departures and, most frightening of all, an economic slowdown that is devouring jobs and the job ads that are Monster Worldwide’s lifeblood.

    Monster managed to survive the tech bust and recession at the beginning of this decade. But some observers argue that the end may be near for the job-board pioneer—at least as a stand-alone company. Gerry Crispin, a consultant with recruiting advisory firm CareerXroads, predicts Monster will be sold to one of a number of large media companies in the months ahead. “I would be shocked if it took a year or two,” he says.

    But Monster Worldwide chief executive Sal Iannuzzi says rumors of his firm’s doom are off the mark. Iannuzzi, an outsider to the staffing world who took the reins at Monster a little more than a year ago, conceded in an interview with Workforce Management that Monster has work to do to improve its customer experience and that his firm is not recession-proof.

    Yet he’s anything but fearful. A native of Brooklyn, Iannuzzi says through his thick hometown accent that a restructuring launched last summer has streamlined the company and re-energized the 5,200-person staff. Confronted by competitors with highly focused job boards and advanced job matching, New York-based Monster is fighting back with its own industry-specific sites and technology upgrades. It has fast-growing international operations. And even in face of a recession, Mon- ster is investing in its business. The firm just spent $31 million to market its brand, and by the end of the year Iannuzzi hopes to more than triple a sales force of 62 that is devoted to larger clients. There’s been speculation that Iannuzzi, 54, came to the company simply to spruce it up and sell it. But he has laid out a vision for a much bigger Monster, imagining the firm could provide hubs for people to connect both on professional matters and personal hobbies.

    Never mind that these social networking plans would pit Mon­ster against Internet titans like Yahoo and Facebook—Iannuzzi and crew are undaunted. “Monster not only can survive independently, but I think it can broaden,” Iannuzzi says. “That’s what keeps me and 5,000 other people pumped every day.”

Company’s rise
    Monster effectively cre­ated the category of the Internet job board—Web sites where job seekers can post résumés and employers can list openings and search through those résumés. In 1994, the “Monster Board” was just the 454th commercial site on the Web, according to the company. During the mid- to late 1990s, the Monster Board—later renamed—was part of TMP Worldwide, a marketing firm focused initially on Yellow Pages ads. But the job site grew to be the best-known brand in the company, which changed its name to Monster Worldwide in 2003. Monster has since sold off assets, including its North America recruitment ad agency business.

Monster not only can survive independently, but I think it can broaden. That’s what keeps me and 5,000 other people pumped every day. —Sal Iannuzzi, CEO,
Monster Worldwide

    Today, Monster’s business includes—a community site focused on members of the armed services, military families and veterans—as well as FastWeb, a scholarship search service for students. Monster has expanded into the growing area of talent management software and does work for the U.S. government, such as providing technology for, the official federal government job site.

    The company also has pushed hard into overseas markets. Monster now operates in 36 countries. It entered India and China in 2005 and is in talks to acquire Chinese recruitment site The parent firm of ChinaHR .com already is 40 percent owned by Monster.

    In the quarter ended March 31, Monster’s “international careers” revenue—which reflects all of the firm’s career-related services in Europe and Asia—leaped 44 percent year-over-year to $153 million. That was the driving force behind the company’s overall revenue growth of 13 percent, to $370 million. Monster’s “North America careers” revenue was flat at $184 million. Monster’s net income for the quarter dropped 43 percent, to $22.6 million.

Backdating, matchmaking
    A less-beefy bottom line is just one of the problems the company has wrestled with in the past few years.

    The most glaring of its difficulties has been a flap over backdating and improperly accounting for stock options. That prac- tice, which took place at a number of technology companies, inflated Monster’s earnings by $340 million from 1997 through 2005, according to the Securities and Exchange Commission. The scandal has tarnished the reputation of former Monster executives including ex-CEO Andrew McKelvey. Iannuzzi, who worked on the company’s investigation into backdating, is untouched by allegations of wrongdoing.

    But even if its corporate image is on the mend, Monster faces other challenges. For one, its effectiveness for both job seekers and employers has been questioned. From the employer side, Monster has come to be seen as a kind of recruiting fire hose—spraying out too many résumés and not targeted matches.

    “It is an issue,” says Andie San­chez, manager of recruiting for Real Mex Restaurants, the parent of Chevys and other Mexican restaurant brands. Sanchez uses an applicant tracking system to help screen candidates, but she still wishes Monster had a more finely tuned matching system akin to the one found at dating site eHarmony.

    Other job sites, such as Jobfox, have been rolling out new matching methods designed to better fit candidates with openings.

A year ago the time to bring a new product to market globally was 44 weeks. Our goal, by roughly the end of this year, is to cut that in half.
—Sal Iannuzzi

    Monster concedes it has stumbled on the matching question, but Iannuzzi says the company has improved its technology. A year ago, employers received an average of 13 responses for each job posting. That figure has doubled, Iannuzzi says. “Not only do they get them, but they’re much more on target,” he says.

    Monster also has turned away work-at-home ads that cluttered job seekers’ searches and pushed out pop-up ads. It even has decided to bring back about 100 customer service positions it had outsourced. Iannuzzi says he’s not satisfied yet with Monster’s customer service, but “the trend is positive.”

Data compromised
    One thing that threw a wrench into Monster’s customer service goals was a major data breach last summer. Monster said employer client login credentials had been compromised and used to download information such as names, home addresses and e-mail addresses for 1.3 million job seekers with résumés on In the wake of the incident, Monster said it upgraded its security through steps such as new user authentication technology.

    Jim Hammock, co-founder of recruiting site Itzbig, has argued that Monster’s data breach amounts to an indictment of the traditional Internet job board model, where candidates post résumés with personal information. Itzbig was designed to allow job seekers to remain anonymous, with résumés passed directly from job seekers to employers if a match seems likely. “Be Found—Not Found Out” is the company’s tagline.

    Monster, though, seems to have emerged from the data breach incident without major harm to its reputation on privacy. Sanchez doesn’t regard Monster as a particular risk. “It’s not just Monster,” she says. “People are hacking into so many different Web sites.”

    In fact, despite her concerns about Monster’s matching technology, Sanchez sees the site as a crucial piece of her recruiting strategy. She also uses CareerBuilder, Yahoo HotJobs and Craigslist to find workers, but Monster is king of the hill. “We’re still finding a majority of our candidates on Monster,” she says.

    Timothy McHugh, equity research analyst at investment firm William Blair & Co., says that “Monster remains an excellent brand.” He adds that Monster benefits from a continuing trend toward more online recruiting activity.

Monster will be sold to one of a number of large media companies in the months ahead. “I would be shocked if it took a year or two.”
—Gerry Crispen, consultant, CareerXroads

    On the other hand, shifts within online recruiting pose potential problems for Monster. These include the rise of candidate sourcing on popular social networking sites such as LinkedIn and Facebook—an approach seen as better able to land higher-quality “passive” candidates. “Job boards must continue to evolve,” Crispin says. “There’s no question that social networking has to be integrated into how job boards connect people and jobs.”

    In addition, companies are focusing attention on their own career Web sites. And organizations are turning to niche Web sites that concentrate on a specific region or industry. At Dice Holdings, which provides specialized career sites for fields such as technology and financial services, revenue for the first quarter of 2008 grew 30 percent—more than twice the rate at Monster.

    The niche competition comes on top of Monster’s traditional job board rivals, CareerBuilder and Yahoo HotJobs.

    Monster is “facing increased competition and an overall decline in the value proposition that they’re offering,” says Nate Swanson, an analyst at investment firm ThinkPanmure. “Similar to the way they have displaced newspaper ads, Monster is running the risk of being displaced by a handful of new competitors or new technologies.”

Taking action
    Monster, though, has a game plan for the shifting Internet recruiting landscape. Iannuzzi says Monster can coexist with LinkedIn and Facebook, and he doesn’t rule out moving into social networking.

    And Monster has its defenses against the niche trend. For one thing, narrowly focused sites have an uphill climb to lure job seekers. “Not everyone who is posting their résumé may know of the niche boards,” says Jacqueline Kuhn, a consultant who also serves as chair of the International Association for Human Resource Information Management professional group.

Monster benefits from a continuing trend toward more online
recruiting activity. “Monster remains
an excellent brand.”
—Timothy McHugh, equity research analyst, William Blair,& Co.

    Meanwhile, Monster snagged its own stable of industry-specific sites through its January acquisition of Affinity Labs. The San Francisco-based company has created online communities for professions including education, nursing and law enforcement.

    In addition, Iannuzzi plans to increase Monster’s involvement in talent management software, the fast-growing field of applications for key HR tasks such as recruiting and performance management. Recruiting software tools can play a critical role in how job seekers interact with a company’s career site.

    Monster has a group of about 1,000 technology professionals, and they have become more efficient thanks to the company overhaul, Iannuzzi says. Business units that grew up independently made for bureaucratic gridlock, he says. “A year ago the time to bring a new product to market globally was 44 weeks,” Iannuzzi says. “Our goal, by roughly the end of this year, is to cut that in half.”

    But whether Monster has the talent to imagine, produce and introduce new products has come into question in recent months. Several prominent company officials have left, raising questions about the company’s capabilities and its morale. Among the losses was Steve Pogorzelski, who stepped down from his role as executive vice president for global sales and customer development in January. Other departures include Brian Corey, area vice president of sales, and Neal Bruce, vice president of Monster’s global innovation group.

    They are among the many Monster employees who have left—voluntarily or not—in the past year. As part of its restructuring plan, Monster decided to cut 700 jobs, a step that can undermine the esprit de corps of remaining employees.

    Recruiting industry blogger Joel Cheesman has painted moves out of Monster this year in dark terms. “The rats are apparently leaving the sinking ship in droves,” he wrote in April. Cheesman is founder of HRSEO, a firm that helps companies tap search engines for recruiting—a rival approach to job boards like Monster.

    Iannuzzi rejects the notion that Monster has been left shorthanded. He concedes that employees’ focus has suffered from lingering headlines about the stock options scandal, and that a gloomy climate was a problem when he arrived. But he says morale has improved in the past year, partly because the restructuring made it easier to get things done. Increasing the portion of employees receiving equity rewards from about 17 percent to nearly 40 percent also has helped, he says.

    As proof of a more committed staff, Iannuzzi says voluntary turnover has decreased from upwards of 35 percent a year ago to roughly 25 percent today.

Economy is key
    Any burgeoning hopefulness at Monster, though, could be severely strained if the company’s job-ad revenue dries up in an economic downturn. Eric Wolff, an investment manager and blogger who is betting against Monster’s stock, predicts Monster’s revenue could drop sharply should the economy hit a recession. Wolff says core Monster careers revenue fell steeply in the last recession. “[W]hen the employment market swoons, Monster gets creamed,” Wolff wrote late last year.

    Iannuzzi doesn’t deny that Monster’s financial fate is largely tied to the business cycle. But he says that while Monster hunkered down during the last recession, the company is going to use this downturn to expand its market share. In a recent 12-month period, Monster did business with just 25 percent of the 31,000 U.S. companies with more than 500 employees, and just 4 percent of the 1.7 million firms with between 10 and 500 employees.

    The company’s marketing push and plans to triple its sales force stem from a belief that Monster can snag many more of those companies. “This is not a time for us to retrench, but to build and seize the opportunity,” Iannuzzi said in a May conference call with analysts.

    Despite Iannuzzi’s optimism, predictions that Monster will not remain an independent company for long persist. Fueling the speculation is the fact that Iannuzzi parachuted into his last firm, Symbol Technologies, and later sold it. He will not rule out a sale of Monster, but notes Symbol is the only company he has ever sold.

    Iannuzzi has spent the bulk of his career in financial services. He says the Monster CEO post appealed to him for its challenge and for being an intriguing business model that included the prospect of growth in China.

    Iannuzzi’s grand ambitions for Monster are in tune with the company’s latest tagline: It “strives to inspire people to improve their lives.” Yes, the firm runs the risk of becoming too diffuse, Iannuzzi says. But he can foresee Monster becoming central for broader activities around work—think teachers sharing lesson plans. Beyond that, it can branch into hobbies like rock climbing, he says.

    This vision offers Monster a way out of its concentration on job ads and résumé searching. But it means new battles against established Internet giants such as Yahoo and Google, both of which have group networking features.

    Iannuzzi, though, seems determined to put the mettle back into Monster. He says he’s not fazed by competing with Yahoo and Google.

    “Like I said, I came here for the challenge.”

Workforce Management, June 23, 2008, p. 39-44Subscribe Now!

Ed Frauenheim is a former Associate Editorial Director at Human Capital Media and currently works as Senior Director of Content at Great Place to Work. He is a co-author of A Great Place to Work For All.

Schedule, engage, and pay your staff in one system with