When the cost "to find a certain type of people" has dropped to a critical level, new intermediary will emerge, which will surely impact on conventional businesses.
[+] Online job sites has taken the place of newspaper job advertisements
There are two major sources of classified revenue for traditional newspapers: one is job advertisements, and the other is real estate advertisements. Both have been encroached by the Internet during the Web 1.0 period. Online job sites, which has grasped a significant share of job advertisements from newspapers, has managed to reap profits very soon and has become a model.
Long time ago, a job seeker needed to buy newspapers, and those companies in search for employees could only afford to post job advertisements on newspapers for usually several days. It took some luck to find a good job or a good employee. In other words, the cost for both parties to find their counterpart was relatively high.
Newspaper as media could charge higher for advertisements since they monopolize the channel for both parties to access information. Yet the emergence of online job sites has changed the phenomenon of information asymmetry. Companies looking for talents need only to pay a relatively small fee to post job advertisements even for months.
Through the automatic matching service by the system, a large number of CVs will be sent to you everyday for your screening. For job seekers, they can get the employment information from many companies. The cost to match jobs seekers and talent seekers used to be high, but the low matching cost on the Internet has changed this.
In the Web 1.0 period, we first tasted the cost-saving benefits brought forth by the Internet. Old intermediaries have been replaced with new ones coming onto the stage. The key behind this is that new intermediaries can provide more efficient matching service with a lower cost. And the information is liberated completely.
[+] Head hunters still good in business
Yet, after ten years of development, online job sites still can't make any breakthrough in one area - the market for middle and senior positions. Generally, companies will seek the assistance of online job sites when looking for basic level employees; but if they want to find suitable people for a position like vice president, online job sites are not their preferred channel.
For job seekers above a certain age or senior position, it is practically impossible to find a job through online job sites. This is because the market for senior positions has the following characteristics: First, senior level people don't like to be exposed, and they do mind their CVs being browsed freely by some companies.
Second, Companies too don't like to expose the information about their recruiting middle and senior level people, because competitors may detect their future developments. Third, as both sides are very cautious, recruitment for senior positions is often done through acquaintances.
So far online job sites can only address to the demand for basic level positions. Some online job sites have moved up to the segment of middle positions (like senior managers or experts with good salaries), yet they haven't posed a threat to head hunters that have been dominating this segment.
Based on the above characteristics, it may cost companies big money to find people for middle or senior positions. A head hunter may charge a company as much as several times the monthly pay of the talent it helps recruit as reward. This handsome reward comes from another form of information monopoly and is pretty.
[+] Personal references instead of head hunters
Companies are prepared to pay a good deal for recruiting people for middle and senior positions. Yet when the cost of storage and bandwidth continues to drop so as to enable the staging of Web 2.0, head hunters will start to be affected. Let's never forget about what really means by Web 2.0:
The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".
We have seen such a service launched by online job sites: users are encouraged to refer candidates for a specific middle or senior positions and will be rewarded for successful reference. Some social networking websites have launched trial runs of similar service. They also offered rewards for successful reference.
Instead of paying handsome money to head hunters, now companies need only to give away a reward of about one tenth the money for recruiting people. Everyone has her or his own network; to get the reward or to introduce good jobs to friends, s/he will refer suitable candidates naturally.
The reason why this model can work is that "the cost of interpersonal communication continues to fall," so it will cost less to find the people through people than through head hunters! As I have mentioned earlier, the arrival of Web 2.0 will force many B2C companies to be conquered by C2C.
[+] New business models and new intermediaries
As we have just entered the period of Web 2.0, it is still not clear whether the above models can work or not. The trend is clear, but there may be many ways to implement an idea. Yet it can be expected that middle level positions will be the first to be affected, and senior positions above the level of vice president will still be dominated by head hunters.
The most critical factor is the quality of people referred through social networking websites. Head hunters as intermediaries are responsible mainly for quality assurance as so to save the time of both parties - this is the value of their existence.
For online job sites or social networking websites, if they want to play a role in the middle level manpower market via their offering of C2C social networking service, they will have to work on the above mentioned details and ensure the quality of the talents recommended via this channel, so that companies will not have to cope with a large number of unqualified applicants coming through these websites.
Furthermore, online job sites or social networking websites may establish upstream/downstream relations with conventional head hunters in a supply chain. In other words, these websites will not directly charge companies seeking talents, but they can charge head hunters for offering a talent pool. Head hunters may do a preliminary screening and provide a shortlist to companies in need.
Head hunter can spare a part of their rewards earned for successful matching from the company, the talent seeker, to these online job sites. This business method is taking place in the current transition period. It may become a workable business model. But in the long run, this will surely have impact on the business of head hunters.
[+] Web 2.0: it's all about cost
Most people, when looking at Web 2.0, are dazzled by many fancy terms, among which social networking websites and classifieds websites are two most popular categories. The former attempts to practice the so-called Six Degrees of Separation, which is to allow any people to meet other people on the Internet and thus to expand their social networks.
The question is, how can social networking websites generate revenues once they succeed in helping people know each other? One critical factor behind the scene is: "the cost of personal communication keeps dropping." So it is a lot less costly to find a certain type of people through social networks of people.
Recently in the U.S. there comes a kind of loan websites which are to help people borrow money from other people instead of acquaintances or banks. Rules are set up to ensure the quality of both parties and to lower the risks of lending money to strangers. Imagine how high the cost would be to find a reliable stranger and borrow him money when such service is not available?
In fact, there are quite a few loan brokers who help people borrow money from banks and charge commission from loan takers for successful cases. If there is a website that can help matching individual loan borrowers and lenders at a lower cost, this will definitely affect the business of brokers.
Thanks to the falling cost of computer storage and network bandwidth, the cost of personal communication continues to decline as well. When the cost "to find a certain type of people" has dropped to a critical level, new intermediary will emerge, which will surely impact on conventional businesses. This is the approach to take what we think about Web 2.0.
2006/10/15 - By Digitalwall.com - Way to
China Internet/Telecom )
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