Disrupting old-school industries with innovation

We have been shareholders of Recruit Holdings for many years. Recruit Holdings is a leading Human Resources (HR) and marketing media company, and the largest internet company in Japan by market cap. It also owns US-based “Indeed”, the world’s largest job search engine, which is available in more than 60 countries and has more than 250 million unique visitors monthly.

Although Indeed is in the early stages of monetisation it is growing rapidly in terms of user traffic. Its business model is similar to Google’s search engine, where advertisers (e.g. job boards and recruiters) are charged on keyword searches and cost-per-click (CPC).

Recruit estimates it has around 38% market share in the US (based on 75% of the USD4bn HR technology sales market and 50% of the USD16bn global online job ads market). We believe it can continue to increase wallet share with its highly competitive unit-hiring costs. While margins are still low when compared to peers, Recruit has been investing into its business to create a simplified and automated hiring process. Over the medium to long term, we believe that its HR technology segment (which includes Indeed) can reach similar margin levels to its competitors.

Recruit is well known for being an entrepreneurial powerhouse and has an impressive portfolio of cash-cow and high-growth businesses. It has a proven track record of successful overseas acquisitions and launching niche platform-based businesses, which has resulted in a network effect with low capital intensity and high returns on invested capital. We believe Recruit’s asset-light model, entrepreneurial culture and track record of achieving a leading market share in its domain bodes well for future growth.

Indeed and Glassdoor are disrupting the recruitment market

Source: Company data as at March 2022. Compound annual growth rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer than one year.

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