Tribune's Employment Agency forecasts millions in new revenues

The team also launches real estate pay-for-performance ads

Alisa Cromer

Posted 7/16/12

Click to enlarge, and see the Progenuity Recruitment web site.

Company: Tribune Company

Initiative: Develop beyond-advertising marketplace revenues from employment and real estate franchises

Key Executive: Eddie Tyner, Vice President of Classfiied Marketplaces

Challenge: With classifieds flat or declining, Tribune Company wanted to leverage classified franchises (it now calls marketplaces) in new ways.

Tribune developed a new team - including a strategy manager and marketing director - to focus on marketplace strategies in addition to advertising, using the Newspaper Next model.

"We asked a different question: How do we set ourselves up to solve problems in other ways (than advertising). We needed to focus on real problems businesses are trying to solve."

By looking at the entire continuum of the what advertisers were trying to accomplish, the team could see more ways to help businesses achieve the end result. In addition Tribune could take advantage of considerable competitive assets already on hand:

* Existing infrastructure avoids normal start-up operating costs
* Existing relationships and people "enable new idea introductions without adding resources"
* Existing brand gives instant legitimacy to new endeavors
* The audience that drives response

"Advertising, in general only begins the cycle of a transaction, however, and businesses are increasing interested in completing the transaction," Tyner told the audience at NAA's MediaXChange, 2012. Whether housing or employment picks up is essentially irrelevant to the slide in merchant interest in classifieds. Here's a slide from his presentation showing the overall trend in classifieds over time:

"We needed to change how we think about solving problems. If we think about the business differently there will be a lot of revenues, even at lower levels."

The employment marketplace

The first franchise Tyner's team examined was employment.

To build the new business model, they outlined the hiring process that employers go through in a flow chart, deciding to provide employers with sevices much further down-funnel.

"Advertising space is only a means to an end...Employers' problem is that they have too many resumes, with shrinking HR resources. Advertising is only effective at the very beginning" of the continuum but does nothing to solve this addiitional problem."

Strategy

The team began adding services to its employement classifieds, ultimately launching a full employment agency, Progenuity Recruitment in Chicago. Progenuity is powered by the Chicago Tribune, but, like other recruitment agencies, paid a percentage of each hired employee's salary.

The concept of the inhouse employment agency evolved over time, starting with adding a few services. Here's how the initiative played out over time:

Phase 1

Initially, Tribune simply re-deployed existing staff to provide additional services such as looking through resumes, conducting initial interviews and supplying employers with solid candidates. This process generated some incremental revenue.

However, ultimately the redeployed newsaper staff "didn't have the expertise and we reached a point where revenue leveled off. So we took another step back."

Phase 2

The next attempt to increase sales involved a white-labeled contract with an employment agency, to resell services that were more robust. This partnership had other problematic issues, including lower margins.

Phase 3

Ultimately, the team decided to create its own full-service inhouse employment agency inhouse, hiring a Director of Recruitment Services from within the industry to outline a path that leveraged the newspapers strengths to create a separate division they named "Progenuity."

Key components of the vertical agency structure include:

*The ability to use some existing infrastrucure. From office space to administrative support, using as much infrastructure as possible allowed a more competitive pricing structure.

*Pricing competitively at both the low and higher end. While most recruitment agencies charge 20 to 35%, the new agencies priced its services at 10 to 15% of the first year salary. Since most companies in Chicago use recruiters for higher end employees - in the $75,000 to $150,000 range - the savings is significant: "$10,000 on a $100,000 salary," Tyner says.

*Hiring staff from within the industry. The new team includes two recruiters and two business development people with the sole responsibility of building the agency, all of whom were from the recruitment industry in Chicago.

Results

Today more than 20 companies have agreements to pay commissions on new hires delivered by Progenuity Recruitment, which specializes in IT and Healthcare. Each of these companies has about ten to 15 jobs open; so that's 200 to 300 jobs to fill, each of which could command an average of $15,000 when filled. "In reality we will fill only a percentage of these, since companies often sign-up with multiple agencies," Tyner says.

Still, "We expect to fill 10 to 15 jobs a month with the current resources dedicated to the business. Once we are billing 10 to 15 jobs a month consistently we will look at adding resources to the team."

LMI estimates their target revenues at $150,000 to $225,000 a month, or an annual revenue stream of $1,8 million to $2.7 million in new revenues. Even if the team averaged $100,000 each in salaries; this is potentially a highly profitable initiative, especially in areas where professional salaries are high and skills in demand.

"There was a time when comanies were routinely paying us over $10,000 to help them find qualified people. We are just getting back to those days in ways that are more likely to be sutainable.""

Real estate marketplaces starting another initiative

The second initiative is in the real estate space, which Tyner calls "The biggest challenge and biggest opportunity. That business is going to get better at some point."

To prepare for the launch executives visited MediaOne Utah's inhouse agency (see our case study onUtahMore.com here and How to Launch a Real Estate Agency here).

Tribune's approach is more conservative than UtahMore.com which conceded all of its brokerage relationships in order to start its agancy. "We asked, 'How do we set our selve up to be a player, while we still need to maintain existing client relationships?'" Tyner says.

"Our basic challenge is that agents and brokers stopped believing we can provide them qualified buyers and sellers. We have the assets, but how do we establish the value that we might deliver when the first marketing is 90 days before the result....we're way over on the front end and don’t track and attribute the value. How can we set ourselves up to be more tied ot the results?"

For the real estate continuum, Tyner and his team built the following model:

As part of the research, they also talked to 20 local brokers. Several were interested in partnering to receive leads - rather than advertising - in return for a share of the sale price.

That put the responsibiltiy back on the Tribune to figure out what kinds of advertising did work for real estate.

The model is different than UtahMore.com, in that instead of hiring a broker (to collect commissions for real estate, Tribune still has to have an inhouse broker ) they partnered with a brokerage in Orange County in June, 2012.

Also different from the Utah model, is that rather then branding the inhouse agency separately with its own web site and multiple listings bot, the ads that run for its own brokerage look no different from other real estate ads in newspaper and web site.

"The campaigns don't say Tribune, they say name of the broker, but have a special phone number. It looks like a normal real estate advertising."

A key benefit of this strategy is that other real estate advertisers do not perceive the initiative as a competing brokerage. In contrast, UtahMore.com aggressively positioned against other brokerages at the outset, conceding that it would lose the rest of its already declining brokerage and agent business, but retain and even grow FSBO's, new construction, and related advertising businesses such as mortgage comapanies.

Partnering with external realtors also meant solving an additional issue: How do you know when a particular lead has made a purchase?

"The tracking piece is complicated because we have to trust the broker. So we decided on only a limited number of brokers."

To track the activity, Tribune negotiated with the broker to share how the leads come in, and are tracked. "It's not something we can do with everyone. It has to be a broker who let's us see behind the curtain and shares some of the database with us."

"It would be ideal to have a third party, but its an expensive component to add to the process," he ads. PrecisionDataMarketing is one company that remains under consideration in the eventuality that the match works out.

Results and Lessons learned

*By mid-July, four weeks after launch, it was too soon to tell what kinds of revenues will be driven by this initiative, however, generating leads has not been a problem. The difficulty in predicting this early is that "that is takes a long time to prove" the sale.

"Someone calls about a house on Sunday, but they are not going to buy the house they called about. The agent takes them by 20 houses, over several weeks. Then you have to wait for the closing process. It's going to be 60 to 90 ays before we see revenues, even if its working."

*"We have to be careful and run campaigns in sections, then optimize the mix. ... we will learn a lot about how our media works in general. We don’t have the data now because the ads are detached from the result, " Tyner said. "We want to be able to say, we ran ads the in money section, and sold a $500,000 to $700,000 house, and, take that to the next realtor, broekr or builder as an example for how to use our media optimally."

Our take

Tribune Company was approved to emerging from bankruptcy this week, so congratulations is in order. These models because they take pay-for-performance one step further and result in a higher percentage of the final sale than would otherwise be possible.

As far as we know this is the first high end employment agency launched by a media company (we've talked to a Spanish language weekly that is working out how to build one for the low end of the market). The revenues look significant - $1.5 to $2 million against the salaries of five employees, even with a price point 40 to 50% less than competitors.

Real estate is another high-end marketplace in which the power of local media has been under-rated in favor of search marketing. We think the best way to power-up leads is still putting the multiple-listing bot on the real estate section, where it recieves both direct and search traffic, however, the value of keeping these brokerage relatonships invisible to the community may outweigh the value of the additional leads source.

While these models are in major markets (LA and Chicago), they may also allow small market media to build additional revenue streams powered by audiences and leveraging existing organizations.

Many thanks to Eddie Tyner, Vice President of Classifieds Marketplaces for presenting these initiatives at the 2012 MediaXChange.

The author, Alisa Cromer is publisher of a variety of online media, including LocalMediaInsider and MediaExecsTech, developed while on a fellowship with the Reynolds Journalism Institute and which has evolved into a leading marketing company for media technology start-ups. In 2017 she founded Worldstir.com, an online magazine, to showcases perspectives from around the world on new topic each month, translated from and to the top five languages in the world.