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Peer analysis — learning from the competition

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Peer analysis — learning from the competition.

Portfolio company Seek dominates the Australian online employment advertising market with 37 million visits to its site annually, and a leading 22% share of Australian job placements. LinkedIn, however, is the global leader in the space, with 364 million members in over 200 countries forming its network. We follow LinkedIn's strategies and performance to develop insights about our investment in Seek.

In April, LinkedIn announced its acquisition of Lynda.com, an online education company that helps users develop the skills needed to get jobs. Jeff Weiner, CEO of LinkedIn said both company missions were aligned in seeking to help professionals be better at what they do. Seek already has a profitable education division, and uses data collected from job adverts to customise its education courses. This helps job seekers to develop marketable skills, and recruiters to better fill vacancies. Seeing LinkedIn imitate Seek by marrying an education business to its job advert business adds to our confidence in Seek's strategy.

Seek's share price recently fell when it announced that short-term profits would be negatively impacted by the costs of developing a new Talent Search technology. Talent Search will allow recruiters to search a database of candidate CV's to identify and reach all people who may suit a job vacancy, instead of only reaching people who view and respond to a job advert. We analysed LinkedIn's sales strategy to evaluate the wisdom of Seek's decision. In addition to selling job ads, LinkedIn also has a Talent Solutions business, which similarly allows recruiters to search a library of candidate CV's to reach all people who may suit available jobs. Critically, LinkedIn generates 2.6x more revenue in its Talent solutions business than it does from selling job ads. We quickly recognised that Seek's decision to invest in this technology could pay off handsomely in long-term growth, and we took the opportunity to buy into the company.

We invest in those businesses whose strengths are likely to see them larger and more successful over the medium term. Thoughtfully comparing the companies we own with their peers can deliver valuable insights and give us even more confidence when they are on the right track!

 

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