Seek chief executive Andrew Bassat tells Business Spectator's Alan Kohler, Robert Gottliebsen and Stephen Bartholomeusz:
Alan Kohler: Andrew, welcome to Business Spectator. Thanks for coming.
Andrew Bassat: Thank you.
AK: Now, when you put out your interim results in February the share price kicked 37 per cent, $5, in not very long, it was fantastic. And this time with your full-year results it rose $1, which was okay, but does the fact that since February the share price has kind of stabilised at a fairly high level, does that indicate that your business is mature now?
AB: Oh look, we hope not. I mean we don’t worry too much about the share price. But at the end of the day we see enormous growth in Australia, we see enormous growth in our international markets and we see growth in education, so I’m hoping our business in five years’ time will be a lot, lot bigger than it is today. And if we can do that, the share price should take care of itself.
AK: But within Australia, I mean you do seem to have all the jobs, right? Surely there’s no more than you can rip off newspapers?
AB: There’s a little bit left. There’s a little bit left.
AK: A little bit left.
AB: We’ve got sort of 70 per cent of the revenue and probably 90 per cent of the activity, so there is a little bit more to move we think to online. But on top of that we’re talking about our placement strategy and the fact that we’re actually doing a much better job at driving placements. Even though we have all the ads, we were only ever responsible for 22 per cent of placements in the country. We want to be responsible for a 100 per cent. Now, we’ll never get there, but there’s a lot of upside for us if we can drive more placements.
Stephen Bartholomeusz: Can you distinguish between the job ad strategy and the placement strategy?
AB: Sure. I think perhaps the best way to explain it is to talk about what I just mentioned in terms of the 22 per cent that we’re responsible for 22 per cent of placements, but there’s a lot we’re missing out on. And we’re missing out on it for different reasons. Sometimes quite simply, we’ve got jobseekers and we’ve got ads and they’re not matching very well because you don’t have good enough data or good enough search or we don’t have the right products or services for particular niches or segments, and a range of other factors. So really, fixing all those problems and turning from a very, very good marketplace to a perfect marketplace is what we’re trying to do with the placement strategy.
AK: So, by a placement, you mean somebody getting a job?
AB: That’s what we want to measure. So, I think we used to sort of say our marketplace was getting all the job ads, getting all the jobseekers. We’re now saying we actually care about the outcomes and when we start thinking about the outcomes for a hire or to actually get somebody in the position at a fair price and the right person and similarly on the jobseekers’ side, by thinking about that, there’s a lot of things we realise we should be doing that we weren’t doing before.
AK: That’s incredible though that if you’ve got 90 per cent of the ads, you’ve only got 22 per cent of the actual outcomes. That’s terribly low.
AB: Well, no, look, all of our competitors combined in fact are less than 5 per cent. So, if you take Indeed, if you take LinkedIn, if you take the newspapers, in total they’re responsible for 5 per cent, so they’re a long, long way behind. We feel pretty good about that aspect. But there’s a lot still word-of-mouth, there’s a lot still of inefficiency still in the marketplace, there’s a lot through just networking which doesn’t work that well. We think we can help with the market.
AK: I’m sorry. I would have thought that your competitors were responsible for 78 per cent in total. If you’ve got 22 per cent, everyone else has got 78 per cent.
AB: No. The way that metric comes out is there are things, as I said, like word-of-mouth, networking, corporate websites, other sources that are responsible for the other 78 per cent.
SB: So, how do you get more of that 78 per cent? What do you do differently?
AB: That’s really sort of saying let’s actually be a much better experience. So, you know, as I said, the person that used to use our site the least, with the person most in demand because they’re enjoying their job, they’re busy, so they still come to our site, but maybe they come every few weeks and they only use the job search product. What we’re now saying is they’re the guys we most want. They’re the most likely to miss out on ads and opportunities that match their needs. So really, working through all single problems like that and saying actually we’ve got to find a way to just get their data ones and make sure they’re seeing every relevant job.
SB: Right. So, outbound messaging.
AB: It’s a bit outbound. It’s a bit of everything. The perfect search process for any business, right, is that you see what’s relevant to you and only what’s relevant to you, in a relevant order. That’s perfection. No one’s there, but we’re striving to get there.
Robert Gottliebsen: But Andrew, you’ve been a bit weak on the upmarket end of a job with the higher executive areas. That’s where newspapers have still got a very big share. Why have you been so weak in that area?
AB: Look, it’s a fair question. I think we haven’t not been as strong in executive, particularly in terms of revenue capture. We’re actually driving a lot of executives, perhaps not the very high end with CEOs of listed top 50 companies, but we go quite hard and we’re actually getting a lot of outcomes, rather, at the executive level. I think the dollars haven’t really flowed to the same extent for a variety of reasons that we’re trying to fix at the micro level.
AK: But they’re going through recruitment agencies, aren’t they, mostly?
AB: Yeah look, we work with recruitment agencies, so we don’t see them as a competitor at all. We work with recruitment agencies and we are getting all of those ads through the recruitment agencies. The more we do a good job of making those placements for the recruitment agencies, the more we’ll be able to capture revenue.
RG: Andrew, could I take you to a different angle? Around the world and certainly in Australia youth unemployment is an enormous problem. If I gave you a blank sheet of paper, what would you do to reduce it globally and in Australia?
AB: Again, it’s a very good question. I was involved, more on the periphery but I was involved, in the human capital taskforce with the B20 and yes, the biggest issue is where are the jobs going to come from, particularly for youth and there’s concern that lots of jobs are being lost, and even though there are some new jobs, they’re not going to make up for the ones being lost. That’s a very good question. The B20 did come up with some thoughts and some answers and I think actually Seek can play a role with where we sit in the value chain. Some of the answers come from education and perhaps a better match of education with the needs of the marketplace, a better match of education with what corporates actually want and need, rather than what education providers want to give, or a government thinks it needed. Better interaction between government and companies and education institutions is needed. There’s a whole lot of aspect about supporting entrepreneurialism and supporting investment in innovation and getting out of the way of investment. And I think there are real concerns in it probably for a different forum perhaps. I’ve seen real concerns in terms of conservatism of Australian corporates, probably forced on them by the conservatism of Australian investors. That means we’re just not investing and therefore the jobs aren’t coming and so I think there’s a bunch of things that need to happen I think to free up that investment, to free up that capability on that side and also the education side.
SB: Can Seek Learning play a role in that space?
AB: Yeah look, Seek Learning does. So, Seek Learning actually is quite important because Seek Learning really taps into mainly distance education. We do on-sell some classroom education, but the distance education opens up the working adult market. For somebody who wants to get a degree, wants to upskill themselves to improve their career, but can’t actually leave their job for the amount of time to do that, Seek Learning and organisations like Swinburne Online and the competitors with those organisations are playing an important role in giving people an education through the flexible learning they otherwise wouldn’t be able to get.
AK: Looking at the nature of the jobs that you’ve got and what you’re achieving with Seek Learning, do you think too many young people are going to university?
AB: Look, perhaps too many young people are studying the wrong skills and I think there are a lot of people sort of pushing into areas that perhaps will not have the jobs of the future. I think there’s one thing that’s perhaps a bit inadequate, whether it’s at university or vocational training. People talk a lot about the stem skills which are science, technology, engineering, etc, those sorts of skills. I think there are too few people studying those things. There are too many people perhaps studying law or other areas that aren’t necessarily going to generate jobs.
SB: You referred to the conservatism of Australian corporates a moment ago. You’ve criticised Australian corporate leaders for not being bold enough in their ambitions, particularly in expanding into Asia. How much courage did it take you with a relatively new business to make that first step into China and Zhaopin?
AB: Sure, sure. Look, and I need to clarify because I was accused of sort of calling Australian CEOs in particular ‘gutless’, which isn’t what I meant to say at all. I very much meant to say that it’s a very difficult environment for CEOs in terms of shareholders who are very short-term focused and shareholders who actually punish you if you make a single mistake and probably make you lose your job and a bunch of other factors including risk-averse boards. I never meant to criticise CEOs specifically, all these factors are adding up to a greater degree of conservatism in the Australian market.
But look[regarding China and Zhaopin], it wasn’t that difficult for us. I’m a long-term shareholder and I think Seek has benefited from the fact that we think on behalf of our long term shareholders and don’t worry too much about the short-term fluctuations.
We put $20 million originally into China. I made it very clear to the board there was a very, very good chance if you look at the history of Australian companies in China that we’d blow our dough and we’d make fools of ourselves. And if you can say that’s the worst that’s going to happen, we’re going to blow $20 million and I’ll look like a bit of an idiot, that’s okay. It wasn’t us betting the bank. It wasn’t us risking everything. We did it in a very careful, calculated way that said this is something we can afford to lose.
SB: And what’s that investment worth now?
AB: A lot more. I don’t know the exact number because I don’t follow the share price data, but the investment’s probably worth about $500 million or $600 million. We have put more money in, but we’re now starting to see very good financial returns. It took us seven years and a lot of perseverance and persistence through troubles, but the business is well and truly rewarding us.
AK: And do you think it will be a bigger business than your Australian business in time?
AB: Hopefully. It should be. You know, China should be the biggest employment classifieds market in the world. And if we can continue to hold or grow our share, it should be a very, very nice business indeed.
RG: In your education business, if you really expand that, do you think you’ll be a rival to TAFE and other education institutions?
AB: There’s a lot of competition already between education institutions and through Swinburne Online we’re effectively competing with the universities doing the same thing. But the biggest thing we’re seeing through Seek Learning and Swinburne Online is just that we’ve grown new markets. We’re opening up and recognising there are unmet needs in the marketplace and we’re trying to fill those needs, so we’re trying to do a better job through Seek Learning of matching people who need an education with quality education providers. There’s always been that need, but what wasn’t there is the ability to necessarily to find the good education providers from the bad. That’s what Seek Learning does by choosing providers on a best-of-breed basis. To some extent we fill the role we’re playing and why we’ve been successful in education has been one that’s been helpful to the marketplace and actually adding new services, rather than just competing with the old.
AK: And how much of a margin do you get to make on that business?
AB: We don’t focus too much on margins. We are making very good margins in those businesses in Australia that’s encouraged us to sort of say ‘we do a good job internationally’ and we’re starting to roll those businesses out internationally and we’ll get a good return on the investment we made. The original investment for Seek Learning was $3 million or $4 million, for Swinburne was $5 million, so the return on investment has been terrific and the margin strong, but the main thing is that there’s just a real need in the marketplace and our view of business is if you’re meeting a real need, you’ll eventually be rewarded for it.
RG: But Andrew, what you’re saying is that each of you… take that answer and the previous answers, the education institutions are not encouraging students to study areas where there are jobs and that’s going to be what your task is.
AB: Look, not really. Everyone’s working independently. One of the things that became obvious from the conversations I had recently is just how much education institutions do their thing, government does their thing, companies do their thing and a degree of coordination about what corporates really need in terms of skills or in terms of the type of education, what governments really see is happening and that information being fed through is not really happening. So, I don’t mean to criticise education institutions. The ability to provide distance education is relatively new and there have been some government hurdles to them opening up and really attacking those parts of the market, so I think we’ve seen and we’ve really pushed forward some opportunities faster than perhaps the universities have done, but I don’t want to criticise them.
AK: But it’s not criticising them to observe that there are a lot of arts degrees still being done.
AB: If people want to do an arts degree, I can understand why, but that’s perhaps not the best way to get ahead in their career, but I can’t criticise people if it’s important in their minds.
SB: Andrew, you referred to rolling out Seek Learning. You put together this collection of interests in developing economies from China to Southeast Asia, South America and more recently Africa. Is there a cohesive coherent strategy behind all this and the offshore investments or is it just opportunistic?
AB: No. There is. It’s very much it started from a cohesive strategy. It made sense to us to expand internationally once we had sort of excess capital. I think the starting point was firstly that online employment business is a terrific place to invest if you can get them right, wonderful, defensible businesses, high margin, high growth, firstly. The second piece was we really felt that particularly in early stage markets we could have a role to play in helping businesses get it right. So, they were the two pieces that led to our international strategy. First, China and then we rolled it out with encouraging results in our early ventures. The model is very much trying to be the best of both worlds; take a good local management team that would probably be successful anyway and saying what can Seek add to that and to get a one-plus-one-equals-three hopefully in terms of the operating, rather than saying we’re so smart; we can go into China and beat the locals or we can go into Indonesia and beat the locals. So, that’s the operating model and it’s been excellent. It’s really worked very well for our business. And so, it’s been very much that starting strategy and that’s why, if anything, we’re going into even less developed markets, rather than trying to go into more developed markets. Our purpose, if you like, is to help people in their working lives and a market like China with 1.1 billion people and relatively rudimentary services; we can help a lot more than the US with still a big population, but all sorts of people competing to provide pretty good services. So, I think that’s the starting point, which is why we’ve even gone to Bangladesh, Africa, where there are large populations and really poor service where we could really help.
SB: With the JobsDB merger, if it gets the regulatory clearances, where does that leave you in terms of positioning in the region? Are you the biggest?
AB: We think it’s really strong. We think we can just do a better job. There are really complementary capabilities between what the JobsDB team bring and what the JobStreet team bring. We think that if we can bring it together plus what we bring as well, we’re going to be just a much better service in the market place.
SB: Would you be No.1 for Southeast Asia?
AB: We would be No. 1 in pretty much all the markets we operate in, yes.
RG: Are there other areas where Australia can export or take its expertise in online advertising or other areas? You’re showing you can do it in employment. Could it be done in property? Could it be done in cars or wine? Are there are other areas where Australia is operating as you are going where companies can do the same thing? This is probably the only example I can think of where Australia’s taken the lead in a chronic area and been able to export it. But are there other areas where this could be done?
AB: It’s a very good question actually because I think going international if you don’t have anything special to bring probably will lead to failure, so if you go international and assume because you’re Australian you’re going to be smarter than the Chinese but you don’t really have any special skills, that’s going to be tough. You’re seeing the guys in other classifieds categories make the same sort of moves and those guys are certainly more advanced than what’s happening in this sort of Asian and South American market they’re operating in. And you’ve got guys like Veda for example, who have been in the news in the last two days who my guys say are doing some really interesting things in the credit-scoring area and a range of other areas. So, you know, a bunch of things and even the banks should… You know, the banks are now thinking very aggressively about what the new technology will do to their world and what that means for their business models. To the extent they feel they’re solving those problems, I think they’ll be ahead of the businesses in Asia and that might be something very powerful.
AK: Are you saying that our banks could become online banks in Asia?
AB: Well, no, not necessarily banks. But I think the question for all industries is how you use the data. You asked a question before about starting with a white sheet of paper. What’s the best way to run these businesses? And very often the answer isn’t how we run these businesses today. And that’s the right question for industry to be asking. When you ask those questions, you do things differently as a result. To the extent that industries in Australia are doing that well, they’ll probably be ahead of the game in markets like Asia.
SB: Is the competitive advantage that a Seek has, not necessarily the technology platform because that’s replicable and there are businesses in the States that have similar models to our online disrupters, is the advantage the proximity to Asia for you and the focus within Australia on Asia?
AB: Look, we’re in South America which is not proximate at all and to be honest our success in South America has almost been as good as our success in Asia, so I think what we bring isn’t proximity because whether it’s a 10-hour flight or a 20-hour flight, it’s a pain in the arse each way, but it’s… you’ve got to do it. It’s not so much that. And we do a lot from phone and email. What we bring is kind of more the high-level strategy, the understanding of business. I think Seek’s been relatively unique right from our start in terms of saying OK, we’re competing with big players, the newspapers, we’re competing with people like Monster and we need to build the marketplace first; we’re going to invest in that and we’re not going to let monetisation get in the way of building the marketplace properly. And we’ve always been very long term in our thinking. We’ve always been investing for the future. We’ve always been focussed on what we’re building and what we’re creating, the value we’re driving, not on making short-term money. All the businesses we’ve invested in are nowhere near that on the spectrum, so the big thing we’re bringing to some extent is that sort of thinking and enforcing that sort of discipline on the businesses and to the benefit of all of them.
SB: You’ve been a significant disrupter to a traditional sector. Do you worry at night that someone’s going to come along with a different model that will disrupt your business?
AB: Yeah. We have to. You know, we have to be paranoid and I think the reality is the pace of change is very fast. If you look online, I mean if you look in the technology space, no one’s the king for very long before somebody else comes along. I think our answer to that is the placement strategy. Our answer to that is that if we do a perfect job of meeting the deeper needs of jobseekers, the deeper needs of hirers, no one can disrupt you. The only way you get disrupted is if somebody does a better job at meeting needs.
AK: Can you see your disrupter? Can you see your disrupter now?
AB: Yes. We know who’s trying to disrupt our space. So, we know that the LinkedIns of the world, the Indeeds of the world are coming from different angles. And in the US they’ve been relatively successful in being disrupters. We think we have the right answers there.
AK: So, the disrupters are free. Is that right?
AB: No, not necessarily. LinkedIn is not. The aggregators are. The aggregators like Indeed come from a different model, but the aggregator model’s been there for 15 years, so Indeed, the latest manifestation, but the aggregators don’t give anywhere near the outcomes that we drive, even though they’re free.
AK: I thought Craigslist would be more successful.
AB: Craigslist absolutely, more in the US. In Australia, you’ve got people like Gumtree. You know, there are people coming from everywhere. You don’t have the sort of revenue and the sort of margins that employment classifieds have without having everyone scampering for the space. We think we’ve got the right answer at the moment, but time will tell. But we need to be constantly evolving and getting better and, as I said, obsessing about being better than anyone else at meeting the needs.
SB: And if you are the market, you are the market.
AB: It gives you a big start. You’ve got to evolve with that marketplace. If you sit there and say that’s all we need to do, somebody will take it from you. If you say we’re ahead and we’re going to spin faster, you should be able to win the race.
AK: Thanks very much for joining us, Andrew.
AB: Thank you. It was great.
SB: Thanks, Andrew.
RG: Thanks, Andrew.
AB: Great. Thank you.