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August 5, 2009 / Toby Dayton

Indeed’s Business Model

As a continuation to yesterday’s post about Indeed, I wanted to highlight in further detail a portion of the interview with Indeed’s CEO, Paul Forster. Later in the same interview, a question was asked by Jason Alba of JibberJobber regarding Indeed’s revenue model. By far the most discerning question of the day, Jason asked, “I am curious to know about the differences in business models….Indeed isn’t making the $400 or whatever per job posting like the traditional job boards. How really do these aggregators monetize and how sustainable is this business model?”

Paul gave the following reply:

“Our model, Jason is quite correct, is not pay-per-posting. It’s actually pay-for-performance, pay-per-click. So it’s similar to the general search engines. When you advertise using Google AdWords, you’re paying per click, You’re also specifying a maximum price that you’re willing to pay per click and that’s the same with Indeed as well. So our main product is sponsored jobs and it’s a very easy product for job advertisers to use. All you have to do is specify a budget and the maximum price you’re willing to pay and that’s literally all you have to do because we’ve already got your jobs in our index and when you do that, when you sponsor them, they will appear above the organic results, highlighted in blue at the top of the results. They’ll get a tremendous boost in traffic and you don’t have to pick key words and you don’t have to post jobs because we’ve already got your jobs from your website. It’s very, very simple to do. It’s actually much easier to do than keyword advertising on the general search engines and we drive the traffic directly to the jobs on your site so it’s quite good from a branding point of view and from a cost-effectiveness point of view it’s also very, very good. So that’s our revenue model and basically all of our revenue comes from pay-per-click advertising on our site.”

While of course the answer is absolutely correct (as one would expect from a CEO), it is also extremely misleading. In reading it, it would be entirely understandable if you came away with the impression that it is employers themselves who are paying Indeed for clicks. Paul refers to his clients as ‘job advertisers,’ and one would certainly be excused for thinking that this means employers who are advertising jobs. Indeed certainly has a few employers that are running paid search campaigns directly, but this portion of Indeed’s customer base represents a tiny, tiny fraction of their customers. The vast, vast majority of advertisers running paid search campaigns on Indeed are the job boards who feed their jobs to Indeed and pay for the traffic or job seeker clicks that Indeed delivers to those job boards. The job advertisers that Paul speaks of in his answer are JOB BOARDS. Re-read Paul’s answer again with that in mind and it becomes apparent how brilliant his answer is in being truthful but entirely misleading. He has definitely got a future career in politics should he decide at some point in life to pursue one.

I am highlighting this element of Indeed’s business model not because it is wrong or flawed. The site does offer a slight benefit to some job seekers by allowing them to search hundreds of job boards through a single site. For job seekers that want to search Monster, Careerbuilder, and TheLadders, for example, and all of the other pay-to-post job boards that are filled with both real and garbage job listings, Indeed most definitely offers some convenience. And for job boards, Indeed can be a terrifically effective, less costly way for job boards to generate traffic to their site. As the traditional job boards continue to fall out of favor with both job seekers and employers, they are increasingly desperate to buy traffic wherever they can get it, and Indeed absolutely fulfills that need.

What I take issue with is the fact that both Indeed and Simplyhired pretend to be serving job seekers and employers, when in fact they are primarily serving job boards. Again, this is a perfectly acceptable and most likely a highly lucrative business model. I also believe that Indeed and Simplyhired are extremely smart to embrace a pay-per-click transaction model. Paid search is, without question, migrating into recruitment advertising faster than most would have predicted (as well it should be), and those two job aggregators are certainly helping accelerate that trend. But I believe strongly that players in the recruitment advertising space, regardless of their business model, have an obligation towards the largest and most important stakeholders in the space – job seekers and employers.

By serving up scam jobs, phishing jobs, work-at-home scams, and other garbage listings, Indeed is failing to meet their obligation to job seekers. And by publishing duplicate job listings from the hundreds of job board customers that feed their jobs to Indeed, Indeed is failing to meet their obligation to both job seekers and employers. I certainly understand that few businesses can execute their vision flawlessly, and some amount of leeway should always given, especially to start-ups that are helping, to some degree, transform an industry.

I’d grant that leeway to Indeed were it not for the fact that they are appallingly disingenuous about their business model and who their real customers are.