Chapter 8: 51job and ChinaHR (controlled by Monster.com) – the online recruiters

In Chinese “51” is pronounced the same as “I want”, so 51job sounds like “I want a job”. The company was founded by management consultants from top tier consulting firm Bain & Company.  CEO Rick Yan had been at Bain for 11 years and become head of its China practice. CFO Kathleen Chien and vice presidents Norman Lui and Tao Wang came from the same firm.

While trying to decide if the formula of Monster.com, the worldwide leader in online recruiting, could be translated to China, they observed that unlike most of the developed world, there were few job-related classifieds in the local papers.  Newspapers in China were and still are government run.  For a very long time, they were propaganda tools of the communist party and needed not worry about where their revenue came from. 

At the same time Yan and his team noticed that Recruit, a job classifieds publication distributed free in the Hong Kong subway, was having a tremendous success. So instead of just setting up 51job as an online platform, Yan and his partners also began printing job classifieds in 25 cities in China. It has proved to be a winning formula.  In fact, in the early stages of 51job, revenue from its print advertising was double that of the online operation. Even today its print revenue is higher.  “Print ads are useful in China.  Imagine if you are a chef in a Chinese restaurant.  It’s far easier to pick up a paper and look for a job than it is to find a computer to search online,” says CFO Chien.

One problem, of course, is that the costs of the printed medium are higher. Therefore, 51job’s net profit margin is in the 10-15 percent range, much lower than other Internet companies.   

Its smaller rival ChinaHR, on the other hand, adheres strictly to the online model.  It was actually the first mover – ChinaHR was founded in 1997, two years before 51job, but it was quickly overtaken. ChinaHR’s 2004 revenue was just US$7 million, compared with US$58 million at 51job. In 2005, Monster.com acquired 40 percent of it by investing US$50 million.  It brought over a new CEO, Zhang Jianguo, from Huawei, the country’s largest telecom equipment manufacturer. After aggressively marketing its brand and expanding the sales force it has significantly narrowed the gap with 51job.  By last fall, according to market research, it had increased its share of online recruitment to 25 percent vs 32 percent for 51job.