A Look at Some of the Potential Winners in the Online Employment Space during 2015

by Samuel Rae
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Submitted by Samuel Rae as part of our contributors program.

A Look at Some of the Potential Winners in the Online Employment Space during 2015

Between March 7, 2014 and December 3, 2014, Monster Worldwide, Inc. (MWW) stock lost nearly 57% of its value, falling from $8.32 per share in March to $3.65 per share at the beginning of December. Since that date, however, the company has recovered a large portion of these losses, and now trades at $6.28 per share at time of writing, slightly down from yearly highs at $6.72 per share recorded on March 3, 2015. A number of analysts have re-evaluated the company over the last quarter, and altered medium-term price targets to reflect what they deem an improved outlook for Monster. Here is a look that the factors that play into this improved outlook, alongside a look at a couple of other companies in a similar space that could be set to benefit from the same factors influencing Monster’s expansion.

As expected, the primary driver behind Monster’s expansion (and prospects going forward) is a strengthening job market, both US-based and globally. Since the middle of 2014, employers have added more than 200,000 jobs to the US job market every month, and — despite missing expectations of 245,000 added last month — we still saw another 126,000 jobs added in March. Further, the unemployment rate in the US now hovers around 5.5% — levels not seen since May 2008 and down by nearly half on the 10% we saw at the peak of unemployment in October 2010. It goes without saying that — at times of economic strength, as indicated by the amount of jobs being added to the market each month and the falling unemployment rate — companies that rely on the movement of a labor force experience growth.

How does this translate to financial activity for Monster? In February this year, the company announced its Q4 results 2014. The company reported a net loss of $288.19 million ($3.31 per share), an increase from a net loss of $20.12 million ($0.21 per share) year earlier. However, the company put these losses down to currency weakness, specifically weakness seen in the Euro. In contrast, the company experienced bookings growth of 8% in North America and 9% in Asia during Q4, with analysts arguing that this improvement in bookings, which represented the second consecutive quarter of improvements, strongly suggests that Monster is participating in the economic growth created through job creation alluded to in the previous paragraph.

So how does Monster expect to continue growth in its bookings going forward? One area of the company’s operations to which it is currently devoting a large amount of resources is social expansion. Social media is a hot sector at the moment across a large number of industries, and one of which Monster has yet to fully take advantage. This is about to change, however, as the company recently announced it will be rolling out its next-generation social recruitment advertising tool, Monster Social Job Ads. Through the tool, Monster users can integrate their job postings with a Twitter account, and the tool will automatically and immediately distribute selected jobs across the full Twitter audience, excluding the followers of the account in  question. The technology in question is proprietary targeting technology, and aggregates career specific data from more than 100 social sources and Monster’s resume database. It is this sort of expansion and embracing of social trends that will likely drive Monster’s growth over the coming few quarters, and present investors with a potential upside revaluation and a recovery of the losses seen last year in the company’s market capitalization.

Remaining in the social recruitment sector, what other companies have the potential to draw benefit from the fast-moving space?

One company is IZEA (IZEA). IZEA is a social sponsorship company that has recently launched its IZEA-X platform. In the same way that the Monster platform brings together employers and job hunters, IZEA-X brings together advertisers and online content publishers. For example, a company that wishes to promote a particular brand of sports drink might use the platform to connect with an influential athlete. Through the platform, the advertiser in question can then coordinate a campaign that involves the athlete promoting the product through his or her various social media and online publishing channels. The platform also compares to Monster in another way, in that it is not just a place through which celebrities can generate capital. Over the last decade, there has been a huge rise in popularity of blogging and content production across a spectrum of demographics, from “Mom and Pop” publishers to influential teen and twentysomething social media personalities. While Monster’s platform remains one of the leading online platforms through which job hunters can find traditional employment, IZEA-X offers these socially influential content publishers an opportunity to make a living through their social following. As more and more individuals gain high social followings, it is reasonable to conclude that these individuals will look to platform such as that offered by IZEA in order to monetize their content, and in turn, that companies like IZEA should benefit from this growth.

To illustrate the potential, consider the numbers. In January this year, IZEA reported a 40% year over year growth in bookings during Q4 2014 to $2.73 million — the highest quarterly performance in the company’s history. This reflects the bookings growth we have seen in Monster’s performance, and serves to solidify the correlation between employment trends and social interaction.

While these two companies offer investors a potentially rewarding way to take advantage of current workforce and social media growth trends, there is another company tagged as one to watch during 2015. That company is Elance-oDesk. Two companies, Elance and oDesk merged at the end of 2013 to form one, market leading online freelance employment site, and, during 2014, reported 30 million workers and more than $900 million in full-year billings.

In November last year, the company raises $30 million in funding, led by existing investor Benchmark, bringing total combined funds raised to more than $160 million to date. At the announcement, Benchmark partner Kevin Harvey described the round as the last bit of private support before taking Elance-oDesk public.

“With the companies now merged, the next step is to prepare for an IPO, and we think this financing gets us to that point,” Harvey said. “The company has the financials to be a public company.”

While neither Benchmark nor Elance-oDesk have provided any specifics about the potential IPO, the recent employment boosts across the US and worldwide (excluding Europe, for the moment), coupled with the rapidly expanding social and technological employment trends may be enough to push the company towards an IPO. Given market trends, an early stage investment in Elance-oDesk could be a rewarding allocation over the next four or five years.

To conclude, Monster has had a tough 24 months, suffering from a struggling global economy and waning employment conditions. However, over the last six to twelve months, we have seen a turnaround in global employment and — more specifically — a shift in social and technological trends towards online employment. Monster has positioned itself, with its new platform, to take advantage of this shift, and there are a number of other companies, one of which is IZEA, that also look to be in a position to draw benefit from current trends. Finally, a company that looks well-positioned to become a market leader in the online employment space — Elance-oDesk — hinted at an IPO at the end of last year, and is one to watch as we head into the second, third and fourth quarters of 2015.

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