The Slaying of a Monster: How Monster Lost its Way

The monster of online job search has wasted away. In 2010, job postings aggregator deposed Monster[1] as the top online job site as measured by number of unique visitors. In the two years since, has cemented its position as category leader with 13.7 million unique visitors per month on average, as compared to runner-up with 9.8 million. Monster, meanwhile, trails behind in third place with 5 million.[2] Compare this to April 2002, when Monster boasted over 47 million unique visitors per month.[3]

Monster’s market valuation tells a similar story. Its parent company, Monster Worldwide Inc., peaked at $7.5 billion market cap in 2006 and is now at $718 million.[4] Professional networking site LinkedIn has a current market cap of $11.66 billion.[5]

What happened?

Understanding Monster as a two-sided network and the implications thereof helps identify the missteps that led to the site’s undoing. Online job sites typify a two-sided network, composed of two discrete user groups, the employers and the job seekers. Monster’s positive cross-side network effects mean that the value of the network to each group grows with the size of the other group.

I would argue that Monster’s early exponential growth relied on the effective exploitation of these dynamics. I would also argue that its decline in the face of new entrants can be traced to five critically related issues.

1. Negative same-side network effects: While the value of Monster to job seekers increases as the number of employers posting on the site grows, it arguably diminishes as the number of job seekers (at least those in contention for like jobs) grows. Marc Cenedella, founder of online executive search site TheLadders, calls this a tragedy of the commons. He points out, “Too man unqualified applicants prevent a listing from reaching the strongest candidates.[6]” While he saw this phenomenon and used it to his advantage by being one of the first to charge job seekers to weed out unqualified applicants, Monster fell prey to the ill effects of this reality. By making it incredibly easy for job seekers to apply to any posting, Monster shot itself in the foot, I would argue.

2. Platform multi-homing: With minimal costs associated with multiple platform association by job seekers, Monster might have been the first to market, but this market is not winner-take-all, and there was nothing stopping Monster’s users from joining multiple sites. The numbers suggest that they did just that.

3. Outsized, outmoded?Today, companies receive one to two hundred applicants per job, or roughly three million applicants for a 100,000 employee company.[7] When Monster was the only competent player in the job site market, employers found value in its large applicant pool. As soon as alternative sites’ user-bases reached critical mass, however, what was Monster’s customer value proposition? What was its competitive advantage?

4. The free stuff effect: As fellow blogger Nate Leung wrote so succinctly in a recent post, “…I think most people like free stuff.[8]” Employers can post job listings freely on Indeed and corporate social networking site, LinkedIn. The aggressive (smart?) job seekers will be on at least one of those sites. Because of the aforementioned positive cross-side network effects in this market, Monster loses its value as employers abandon ship.

5. No one ever said monsters were social creatures: LinkedIn, founded in 2003 as an online professional network, grew at lightning speed, with users now upwards of ninety million.[9] More recently, Facebook utility BranchOut cropped up, offering more or less the same features as LinkedIn but built on top of Facebook, thereby allowing its users to leverage Facebook’s five hundred million users as they search for friends and friends-of-friends who work at certain companies.

It took Monster until late 2011 – over eight years after LinkedIn appeared on the scene – to join the party. It built BeKnown, its own Facebook app. In May of this year, Monster integrated the Facebook app into its core site, allowing users the same functionalities offered by BranchOut. Late to the party, BeKnown had about 190,000 users according to recent estimates, as compared to BranchOut’s 11.5 million.[10] The utility of monster’s version pales in comparison to BranchOut’s by virtue of the fact that it limits its job listings to those posted by Monster’s paying customers; BranchOut, on the other hand, provides its users with job postings drawn from several job aggregator sites.[11]

Lessons Learned

Lest I state the obvious, titans oughtn’t rest on their laurels. Just as Sears stood idly by as Wal-Mart, with its innovative value proposition, drew in customers like bees to honey, Monster did not change course as LinkedIn,, and others moved onto its turf, transforming it with their innovations. Arguably all of the above-mentioned pitfalls could have been avoided with a forward-looking, defensive strategy. At the very least, Monster could have been quicker to react to competitors’ integration of social components, even if it was unable (however baffling) to foresee such a move.

It should come as little surprise, then, that Monster Worldwide announced in March of this year that it had retained Stone Key Partners and Bank of America Merrill Lynch to identify and assess “strategic alternatives.” There is always the possibility of a turnaround play by some ambitious investor out there, I suppose.[12]

In Shakespeare’s Othello, Iago muses about the cat which plays with a mouse he intends to eat before killing it. He calls the cat, “the green-eyed monster which doth mock/The meat it feeds on.” LinkedIn, with its deep pockets, was recently rumored to have passed on a buyout of Monster Worldwide after an initial assessment.[13] Who’s the monster now?[14]

If that doesn’t belong in a corporate epilogue, I don’t know what does.

[1] Monster will be used to refer to the online job site,, subsidiary of Monster Worldwide Inc (NYSE:MWW).

[2] Acquire Media, “Comscore Media Metrix Ranks Top 50 U.S. Web Properties for January 2012,” February 7, 2012,

[3] “Monster Fact Sheet.”

[4] Google Finance, November 2, 2012,

[5] Thomas Vedder, “LinkedIn Corp. Stock Roars on Experts Topping Sales,” November 2, 2012,

[6] Professors Peter Coles, Ben Edelman, and Brian Hall and Research Associate Nicole Bennett, “TheLadders,” HBS No. 908-061 (Boston: Harvard Business School Publishing, 2008, 2009, 2010), p. 2.

[7] Eric Savitz, “Five Wars Semantic Search will Disrupt Business,” CIO Network, June 20, 2012,

[8] Nate Leung, “Live Your Life, Be Free,” October 26, 2012,

[9] “Baked In: BranchOut Lets You Manage YourClimb Up the Ladder from Within Facebook,” February 18, 2011,

[10] Christina Chaey, “Monster Seeks Fresh Mojo by Merging Facebook Networking App BeKnown with its Job Site,” May 21, 2012,

[11] ibid.

[12] Chris Stuart, “Monster Facing a Buyout,” October 26, 2012,

[13] Nadia Damouni and Soyoung Kim, “Exclusive: Monster Deal Heats Up, LinkedIn to Pass,” May 11, 2012,

[14] To be clear, I am not insinuating any malevolence on the part of LinkedIn – just that LinkedIn seems to be in the dominant position, as illustrated in this rumored event.



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I like getting stuff for free. I think most people also like free stuff. To paraphrase Professor Edelman, if you want people to use your product, make it look free. The internet has made it even easier to get stuff for free, as consumers. Some companies make money by giving away free products and services to customers and then charging some customers for add-on features, advanced functionality, virtual goods and/or premium services. This business model has been dubbed “freemium” – a term combining “free” and “premium” – by Fred Wilson, a notable venture capitalist and blogger in 2006. Many of us now associate this business model with companies like LinkedIn, which charges customers for premium accounts or additional features such as messaging un-connected contacts. Another notable example is dropbox, which gives users a limited amount of free storage and then charges for additional storage. While this business model has become very popular in the most recent generation of internet companies, it has been in use in the software industry since the 80’s, when “lite” software (limited feature) was given away on floppy disk (or preinstalled on computers) for free to promote advanced paid versions. This is not to be confused with free-to-try business model where full versions are given away for a limited period of time and then require payment to continue to use.

Freemium has been a successful business model for software for a number of key reasons. First, the marginal cost of serving an additional customer is equal to or near zero. Because infrastructure costs (storage, computing, bandwidth, etc.) have decreased significantly, once a product has been developed or new features released, there is very little marginal cost. Secondly, customers are fundamentally attracted to the idea of free and will try nearly anything because they have “nothing to lose”, which does not account for the value of time. Assuming the product is actually useful and creates value for the customer, adopting a freemium model can greatly accelerate user growth. Specifically in software applications, integrating data and being compatible / integrated with other applications increases switching costs for the customer, making the app even more sticky. For these reasons, many companies have successfully adopted the freemium model as a strategy for quick growth and user adoption. Dropbox grew from 0 to 50 million users in less than 3 years.

To the extent that the economics work out profitably varies dramatically across companies, products and customers. One thing is certain, to be sustainable, the free to paid conversion rate and lifetime value of the customer must be greater than the cost to serve all customers. On its surface, the relatively straightforward economic formula should be very clear for any entrepreneur, executive or investor to understand the sustainability of a freemium business. How one thinks about a few key questions will define whether freemium really works:

  1. Who is the buyer? It’s not uncommon for the person making the decision to pay or not to be a different person than the end user. For example, enterprise software where the buyers are IT professionals, but the users are other workers in the company.  Understanding both the user and the buyer is critical.
  2. What is features will be free and what will be paid for? Seems simple, but there’s a delicate balance between creating value for the user, the costs associated with developing and delivering each product / feature and providing significant value for the buyer.
  3. How much do you charge? Not to be confused with how much you can charge. Maximizing the value you create and capture depends greatly on how much value customers derive from the product and how sensitive they are to paying for it.

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Social media advertising – new frontiers?

Since Facebook’s fall from grace after its IPO earlier this year, the halo effect surrounding social media networks has somewhat dissipated. Questions are being raised around these businesses’ ability to create a new frontier in digital advertising, as public firms like Zynga remain under tight scrutiny as their growth starts to falter. There has also been growing talk of “Facebook fatigue” over the summer – when users deactivate their Facebook profiles because they want to get away from the incessant chatter, similar to how one would leave a hectic workplace for a beach vacation in an isolated destination.  

To sum these challenges up, the major questions seem to be: how will these networks monetize effectively and grow sufficiently fast to justify their valuations (implied or otherwise)?

In my mind, the best recent examples have come from Facebook, who surpassed the 1 Billion user mark recently. These include:

1.     Facebook Exchange, a real time bidding ad system where visitors to 3rd party websites are marked with a cookie and then shown real-time bid ads related to their web browsing when they return to Facebook. FB Exchange retargeted ads officially launched in mid-September

2.     Custom Audience ads, which target people using lists of email addresses and phone numbers

 3.    Facebook’s own mobile ad network, where advertisers can pay to target customers with ads for app stores or websites based on users’ Facebook data that appears while a user is on other apps and mobile sites.

The first example seems to have taken a leaf out of Google’s book – it worked before after all, didn’t it?

Meanwhile, the second example, ignoring privacy concerns, raises questions around whether there is a ceiling around effectiveness (spam email anyone?).

The third example? Still in beta launch, I believe that this might be the one that gets the ball rolling for social media networks that are pushing for a new breakthrough (though FB’s high valuations still don’t seem justified).

So what’s so great about starting its own mobile ad network? Effectively, Facebook can earn money on traffic to other apps and sites by using its massive and deep user data. It’s all about relevancy and accuracy here. For example, if the cost of delivering a relevant advertising campaign to a specific audience drops significantly with the use of this ad network, I can see an entire ecosystem being built by brand agencies and web developers to support its existence. And who would be in the middle of the action, collecting revenue and making the market? Facebook!

Of course, this path towards monetization is not without its risks – for one, there is almost an element of “if you build it, they will come”. Yet, Facebook has a size and reach that seems impossible to match or even surmount. If only 10% of active Facebook users could be reached effectively, that would be a massive market size that digital advertising agencies would salivate over.

Beyond Facebook, other models of success in social media do exist. If Facebook is the 1 Billion pound gorilla dominating the current landscape, then Linkedin provides the perfect foil: a niche player that has focused on growing a high revenue potential user base, hence the nickname “Facebook for people with jobs and recruiting dollars”. Twitter has also rolled out recent user experience improvements, with an approach that seems more balanced (than Facebook) between user experience and online advertising.

Coming back to the original question, I think it’s too soon for the pundits to call it a day for social media networks. As far as I’m concerned, Facebook, Linkedin and Twitter are not going away from our lives any time soon. Yes, valuations might need to come down, but these firms are innovating like crazy. I firmly believe that we have yet to even see the new frontiers emerging. Ten years ago, who would have thought that a search engine could dominate online advertising? In a similar vein, who knows what the not so distant future holds for online social media networks?

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I recently served as a judge for the Harvard College business plan competition elevator pitch contest, along with prof. Tom Eisenmann, fellow EC Jess Bloomgarden, and two others affiliated with Harvard.  We were blown away at the number of pitches (at least 10%) which were effectively re-creations of LinkedIn.  One student wanted to give her classmates the ability to upload resumes into a centralized “drop” area.  Another student wanted to help connect classmate who had similar interests, and package those groups of students for employers.  Yet another student idea was about building a standardized database of student skills (and affiliations) so that potential employers could easily find and sort candidates for contact.  All of these functions are served, and served well, by LinkedIn. And within the HBS community, none of these ideas would have passed peer muster and made it to the pitch state.  (These weren’t bad ideas — they served quite valuable functions.  But the needs were already met by LinkedIn.)

It seems as if this is a clear example of the power of network effects, and the danger to adoption and risk of abandonment when network effects are potentially strong but un-realized.  In the case of Harvard College, very few students were on LinkedIn to begin with, meaning there was little incentive for additional students to join.  Because students weren’t familiar with the platform, employers [evidently] didn’t make much use of it for screening or messaging, and thus, its value for students was limited.

This led to quite an interesting conversation on twitter, involving an undergraduate, Harvard’s Chief Digital Officer, and Jess and myself.

Original tweet

An undergrad (hidden account) points out that LinkedIn is making special efforts with the community.

via @PerryHewitt “. agree they don’t use but shd prob use what will connect them to ppl who will hire them. Better to work off API?

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Is being an MSP always a good thing?

Multi-sided platforms (MSPs) refer to platforms that facilitate two or more classes of entities to create value for each other via the platform. The classic example is a video game console, where the two sides are video game developers/publishers and video game players. In the case of LinkedIn, the two sides are recruiters (either companies or head hunters) and job-seekers (passive or active). There may be other sides like advertisers, but let’s focus on those two for this discussion. The value to job-seekers is the prospect of getting a job offer, which is enhanced as the number of recruiters grows. The value to recruiter is finding the perfect candidate for the job, which is enhances as the number of active job-seekers grow. The mode of communication here is LinkedIn’s InMail, which allows paying recruiters to email potential candidates using LinkedIn’s platform.

Ideally, LinkedIn wants to grow both sides of its platform, especially the paying-side (recruiters). However, as the number of recruiters grows, the average number of InMail emails to potential candidates (job-seekers) also grows. After some threshold, the increased number of InMail emails will annoy job-seekers driving down their engagement, which will ultimately reduce the value of the recruiters. The question here is whether equilibrium will be reached or will the value decline on both sides start a fast downward spiral.

The more interesting question is where this phenomenon can be observed in other MSPs. As the number of sellers grows on eBay, selling the exact same product, does the value of buyers increase or decrease. While there may be a greater variety or choice, the resulting indecision may frustrate potential buyers into moving away from the platform. This is the issue Amazon struggled with when they started to allow 3rd party sellers to sell via Amazon – repeat entries for the same product resulting in customer confusion.

In fact, this can also be observed in single-sided platforms that exhibit strong network effects. When I first started using twitter, I started by following my friends and news sites or blogs. Next, I began to follow twitter users in the industries I was interested and then ultimately anyone that followed me. As I amassed people I followed, I became overwhelmed with the number of tweets I would have to read for the ‘follow’ relationship to be meaningful. At this point, I quickly stopped using twitter, returning to it only once I had scrubbed the list of people I followed to a manageable amount.

As the size of a side in an MSP grows, so does the perceived value for the other side(s). However, those other sides may experience downsides as a result of that growth leading to the realized value for these other side(s) being lower than before the growth. As a result, the platform may lose engagement from those other side(s). Losing engagement is obviously bad for a platform as it will also reduce the value for the side that experienced the growth starting a downward spiral.

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