Everyone’s favorite podcast sponsor was actually in the news instead of interrupting it this time. Santa Monica-based ZipRecruiter went public in a direct listing on the New York Stock Exchange last month under the ticker symbol ZIP. The initial offering valued the company at more than $2.3 billion, but that increased as trading pushed the price up above its $18 reference price.
And that’s where I probably lost you.
Unless you’re an institutional investor or a ZipRecruiter stockholder, an IPO where billions of dollars change hands might not seem very relevant. Even though we’re talking about one of the most prominent job boards, the relevance to a recruiter can seem a little disconnected.
I’m not an investment wonk. I can’t tell you whether ZipRecruiter going with a direct listing versus a traditional IPO was the right move. But I can tell you as someone who watches the work technology space that you should pay attention to big moves like this.
You have to go back nearly 25 years to get to the IPO of one of the first big precursors to the modern job board. TMP Worldwide, the forerunner to Monster.com, went public in 1997 primarily as an advertising agency. In the next decade, the world of job advertising changed completely. After Taleo went public in 2005, they took a seven year sprint of acquiring every piece of the talent management software stack they could before being acquired by Oracle in 2012. LinkedIn had to wait only five years between their IPO and being acquired by another software giant in Microsoft.
These don’t always turn out well for those making the waves. Monster is a shell of its former self — though ZipRecruiter did list them as a competitive threat in their prospectus. Taleo is still Taleo-ing along. And LinkedIn, part of Microsoft’s broader strategy to own the workplace, is still very much TBD.
All of these were precursors to major shifts in categories, though.
While all the podcast advertisements may suggest otherwise, ZipRecruiter has actually been profitable. Yeah, even in 2020. They could’ve chugged right along as they’ve been doing, but maybe they had bigger ambitions.
For a company that’s making money in a rebounding category, there are many options available. For example, they’ve raised only two rounds of funding for $219 million total. Venture capital money is spilling into all areas of work technology. They could’ve gone for a very successful Series C round.
Private equity players would’ve been happy to take on ZipRecruiter, though executives tend to lose decision-making power there. M&A is certainly a possibility, too, but there aren’t a lot of natural fits.
You have to assume ZipRecruiter has some big product bets to make. And you have to imagine that Recruit Holdings, which owns Indeed and Glassdoor, is also going to match or beat ZipRecruiter at the job board plus positioning. Those moves are going to impact customers of both platforms. Just a pure market-share play is not enough.
Big IPOs attract new investors and ideas to the industry. With big IPO money that ZipRecruiter needs comes public scrutiny, though. Earnings reports and the pressure to meet expectations can push companies to overemphasize sales and marketing performance, especially in an industry where transactional, low-friction sales can be juiced by promotional pricing and advertising.
There’s no doubt in my mind that there are companies out there looking to be the next ZipRecruiter. As the glow of a positive IPO fades and ZipRecruiter gets to work on the quarter-by-quarter work of a public company, new, disruptive technologies will come to take pieces of their business.
It took just a few short years for Indeed to overcome a seemingly insurmountable advantage that Monster had built for itself as a first mover in online job search. Challengers like Indeed are, on the whole, good for job-seekers and recruiters. But they weren’t good for the company that had their cash-cow product chipped away. Your options for functionality that ZipRecruiter offers are going to expand, even if you never use them.
The reception that ZipRecruiter received for their listing has to make recruiters feel a little better about what lies ahead. Institutional investors that drove up the listing price don’t want to bet on losing categories, even if the company itself is fundamentally sound.
Recruiting technology is going to see major waves of investment and new, disruptive players. That’s good news for those who love or hate ZipRecruiter.
The only bad news? Those ads aren’t going away anytime soon now.