Indeed Leads Employers Through the Next Evolution in the Job Advertising and Hiring Landscape With Launch of Pay for Results
This week Indeed made a major announcement in the world of recruiting and recruitment advertising. Indeed is changing its pricing model from cost-per-click (CPC) to performance-based pricing. This is a big move for both Indeed and its customers. To understand just how big, we need to step back and consider why the change is happening, how pay for results compares to cost per click, and the impact on Indeed customers, on operations internally at Indeed, and what this means for the Hiring Work Tech ecosystem and market.
Why Make This Change? And Why Now?
In Indeed’s announcement and an advanced briefing with WorkTech, it noted how difficult hiring is and stressed that even against macroeconomic headwinds, it isn’t forecasted to get any easier. They’re right. WorkTech global research shows that hiring and retaining talent remains one of the top three overall business concerns across the entire C-suite. We also found that employers are continuing to increase their budgets and extend their tech stacks for hiring and Hiring Work Tech to account for this. Budgets for Hiring Work Tech categories that enable the sourcing of talent and those that lead to an improvement in hiring quality are on the rise in both budget and adoption. And while the economic outlook is uncertain, the macro labor market trends result in projected declines of available talent in the workforce in most modern countries and a skills landscape that is changing faster than employers can keep up.
After conducting its own market and customer research, Indeed decided that the time is now to move from volume-based recruitment to a quality-based approach. A critical part of this move is the change in pricing from CPC to performance-based pricing, which it calls “Results-based Pricing by Indeed.” Performance-based pricing shifts the focus to outcomes, in this case, applications or pre-applications versus sheer volume or “clicks.”
How is CPC Different from Performance-based Advertising?
Businesses have several online recruitment advertising pricing models to choose from, including performance-based and CPC pricing. Understanding the differences between these two models is crucial for HR and Recruiting leaders to make informed decisions about their advertising and hiring strategies.
Performance-based pricing is a model where businesses pay advertising fees based on the performance of their ads. This performance can be measured in various ways, such as the number of clicks, impressions, conversions (applications), or hires generated by the ads. Performance-based pricing aligns the interests of advertisers and publishers, as advertisers only pay when desired actions are achieved.
CPC pricing is a model where businesses pay a predetermined amount for each click their ads receive, regardless of whether those clicks result in conversions or recruiting outcomes. CPC pricing is a widely used model in online advertising where businesses have become used to creating a bid for ad placements and paying based on the number of clicks their ads receive. The shift to CPC ads is what brought on the emergence of programmatic advertising solutions as employers try to manage their budgets across myriad destinations while paying for each click.
A third model, flat rate pricing, is a model where businesses pay a flat fee per job ad or a subscription-like monthly fee for a certain number of job ads. These ads stay visible for a defined time frame, and the customer receives all of the candidates that apply during that time frame. This is the online version of print display ads. This is the model that job boards first instituted as employers moved their ads from newspapers to the web in the late 90s and early 2000s. It’s still available today.
Risk Versus Control
The differences between CPC and performance-based pricing can be summed up as “risk versus control.” With performance-based pricing, advertisers have more control over their ad spend, as they only pay when specific actions are achieved, such as an application, partial application, or expressed interest from a qualified candidate. This facilitates better budget management and reduces the risk of wasting ad spending on clicks that do not result in desired outcomes.
With CPC pricing, advertisers pay for each click their ads receive, regardless of whether those clicks result in conversions. This means that businesses may end up paying for clicks that do not result in actual candidates or applications, which can result in wasted ad spend.
Flat rate pricing removes any variability from pricing but offers no controls over candidate volume or quality.
Indeed Features that Help Mitigate Risk and Increase Control
In the case of Pay for Results by Indeed, they’ve implemented a variety of features to help with a client’s control over what constitutes a “qualified applicant” and their ability to accept, reject, and replace candidates that apply but don’t actually fit in order to control costs. A few of these features are:
- the ability to reject a candidate within 72 hours of the application with no charge
- pausing or closing a job at any time and only paying for the applications received at that point, if any
- setting a custom limit for any/all jobs
- automated communications to customers when application goals or budgets are being approached and met and reminders to disposition applications
- Introducing qualifying or what Indeed calls “deal breaker” questions that can automatically disqualify a candidate from applying
Leading the Market Through Change
Indeed was one of the sites that disrupted recruitment advertising in the early to mid-2000s with the introduction of the CPC model. Those of us that were here to see that change remember how mixed the reactions were from the industry. There was a lot of fear, uncertainty, and doubt as recruitment ad buyers learned a new paradigm to budget for their ad spend. That previous evolution brought recruitment advertising up to speed with the norms in B2C and B2B online advertising.
While the concept of performance-based job advertising isn’t new, we haven’t seen it implemented successfully when the definition of performance is an application or even a hire. Most attempts revert back to CPC or flat rate pricing after failing to gain momentum. The variables across employers and online recruitment make it hard for job board marketplaces to take ownership of quality. But Indeed has two things that those other offerings didn’t have: scale and brand. Indeed is the self-proclaimed “World’s Largest Job and Hiring Site,” boasting 300M visitors and 3 million employers on their platform. They report to power 20 hires per minute, and this rate has doubled in the last three years. They also have the brand to go along with that scale. Most job seekers and employers know and use Indeed. The scale of Indeed’s operations, combined with the awareness of its brand, allows it to play a “long game” when it comes to strategy and pricing. This is a luxury most job sites and Hiring Work Tech can’t afford.
Change is Hard
Indeed may be one of the few brands that can pivot their pricing for all customers at once and, at the same time, move the entire industry toward performance-based pricing, but it won’t be easy. Consider the HR and Recruiting leaders executing in or at the edge of burnout, having led through hiring surges during the global COVID-19 pandemic and now leading through the most chaotic economic landscape any of us can remember. Factoring in the time to learn a new paradigm in budgeting for recruitment ads probably wasn’t on their to-do list as we entered 2023. They will be pressed to find the ability to evaluate and disposition applications within a 72-hour window. However, this change, as hard as it may be, could be exactly what HR and Recruiting leaders need. Planning, managing, and budgeting for outcomes is a much more strategic approach than casting a wide net for candidate volume. The early results of Indeed’s launch of Pay for Results report 23% fewer applications to review per job and 35% fewer to review per hire. Refining your talent pipeline metrics to this level is aligned with what happens in “performance marketing.” If this is successful, it could empower employers that get good at it to remove much of the variability from their ad budgets.
This is a monumental change for Indeed. The entire business is pivoting to this new model just as quickly as its customers. Small changes to business and pricing models can cause major change management issues in a tech business. Every part of Indeed, from marketing to sales to customer service, product, operations, and accounting, has to change. Everything is built, messaged, sold, supported, counted, and billed differently. Before formally announcing Pay for Results to the market, Indeed was communicating and implementing it across its customer base. Even though the changes were communicated in advance, many customers were caught by surprise when the bill came in reflecting the new model. The challenge that Indeed customers have in keeping up with vendor communications is the same as that which will impact their ability to master a new model: time. That said, in our advanced briefing, Indeed acknowledged the challenges and implemented some of the features listed above to help customers make the transition.
The Future for Indeed and Its Customers
Looking forward, we expect Indeed to navigate this change well. Just as HR and Recruiting leaders took some time to learn to master the CPC model, they’ll adapt and learn here. And they’ll be better off for it. While change is hard, Indeed has an opportunity to partner with its customers, educating and leading them to an outcome-based approach to recruitment advertising that can be extended to other parts of the recruiting funnel.
While the biggest part of this announcement is the evolution in Indeed’s pricing model, there was another message that points to the future of Indeed, its customers, and the Hiring Work Tech market overall. Indeed is positioning itself as a “Matching and Hiring Platform.” This isn’t just new messaging. The change from CPC to performance-based pricing required the core capabilities to deliver and measure not just applications but quality applications which Indeed has been working on for years. Moving away from a traditional transactional job site and toward a global matching engine, connecting employers with quality candidates that are ready to be hired.
In our advance briefing, Indeed displayed the obligatory slide with a competitive landscape overview. Of the seven competitors listed, only three were job sites or candidate marketplaces. The remaining four were Hiring Platforms (ATS and talent marketplaces) that support all market segments. We asked if this represents the direction of Indeed’s matching and hiring platform. The answer was an emphatic “yes.” We’ve watched Indeed roll out myriad products and services over the years, always innovating toward being more than just a source of talent. They’ve done everything from “white glove service” to targeted RPO initiatives. The intellectual property and capabilities that they’ve developed along the way could take them well beyond the application.
Tips to Best Leverage Performance-based Recruitment Advertising
- Define Your Hiring and Advertising Goals Clearly: Performance-based recruitment advertising requires you to have your goals clearly defined. If you’re coming from an environment where you don’t have the data or analytics to establish these goals, you need to set them conservatively at first and be sure to be monitoring the data to adapt based on your experience.
- Develop the Right Quality Hire Metrics: In the case of a model like Indeed’s, be sure to establish the right “deal breaker” questions that help screen candidates in without introducing any bias. You’ll also want your criteria for accepting or rejecting applications defined upfront.
- Watch Your Post Application KPIs: Be sure to align your “mid-hiring funnel” metrics with your sources of hire. Are candidates coming from performance-based campaigns accepting offers and getting hired at a higher rate? Is your process experiencing less friction as a result?
- Test and Optimize: Put your marketer hat on. Look at all elements of your recruitment ads to see how to drive better and more economical results. Consider your job ads, “deal breaker” questions, screening criteria, and post-application experience and process as you look to optimize hiring.
- Mind Your Budget: Leverage every capability offered to help you manage your spending effectively. Saving money in a performance-based advertising campaign could be dollars used to invest in other parts of the experience or contribute to a larger return on investment (ROI).
- Lean On Your Partner: Leverage your relationships and points of contact at your performance-based recruitment providers. In the case of Indeed, where this is a new launch, you can expect the Executive, Strategy, and Product teams to closely monitor customer feedback and market sentiment. Especially now, immediately post-launch.
Disclaimer: Indeed has been a customer of LAROCQUE, LLC