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IndeedLast year, when Brad and I were on the road raising our fund, we used to talk a lot about web services that should exist but don’t.

One of Brad’s favorites was “paid job search.”

Brad would say that job classifieds on the Internet worked like job classifieds in the newspapers, you had to pay for a listing. Then he’d point out that the business model of choice on the Internet was list for free, pay for clicks. And we’d wonder why nobody was doing that.

We did a little research and found out that Flipdog.com had tried it in the heyday of web 1.0 and had a hard time making it work and sold out to Monster.com in the spring of 2001. We looked at what Monster had done with Flipdog and it appeared that they hadn’t done much.

We noticed that there were a few small companies trying to make a go of the paid job search business model but none seemed to be getting much traction. So we just shook our heads and filed it away as something to figure out.

Then in mid December, as we were in the process of closing our fund, I read this post about Indeed on John Batelle's Searchblog. I emailed the link to Brad (we weren’t using delicious back then) and he called Paul Forster, the CEO and co-founder of Indeed.

That begun a seven month courtship that culminated last Friday in an investment by Union Square Ventures into Indeed. Not all of our deals take seven months but Paul and his partner Rony Kahan took a lot of convincing. They had built and sold their last business (another jobs business called Jobsinthemoney) without venture capital and had to be convinced that they should sell a meaningful ownership interest to people they didn’t even know.

I guess we did a pretty good sales job because we got them over that, finally. We were joined in our investment by The New York Times Company and Allen & Company, two top notch organizations that we’ve invested and built companies with before.

To Paul and Rony’s credit, during that seven month courtship, they have built Indeed into the leader in the job search market. Their competitors will probably take exception to that comment, but our analysis of traffic, jobs indexed, and name recognition indicates that Indeed is the leader in pure job search.

So, why did we make this investment, beyond the fact that this was one of the sectors that has always interested us?

For one, we are big believers in the fragmentation of the Internet. We don’t believe that there are going to be several large “destinations” where employers will go to list their jobs in the coming years.

We are a believer in what some of us are calling “sell side advertising”. That’s the idea that advertisers will put their ads on the Internet for anyone to find and display. And if the advertiser gets clicks back, they will pay for the clicks.

Job search is one of the first places that sell-side advertising is going to happen because most employers already put the jobs they are currently looking to fill on their web sites. Those jobs are the “sell side” ads. Indeed and others are crawling the Internet, grabbing those “ads” and displaying them.

It just makes so much sense. Most large employers have HR systems in place which allow managers to automatically post open positions to the web. Those systems then take the incoming applications/resumes they collect on their web sites and process them into the hiring workflow.

In our due diligence, we talked to these employers. They don’t really want to list their jobs in newspapers, job boards, or anywhere other than their website because that’s where they want to collect the resumes. What employers want is the ability to buy traffic to their website, and direct it to the jobs they most want to fill. And they want to buy that traffic on a paid for performance basis, not a fixed price basis.

That what job search does for employers. It’s really simple. Job search delivers traffic to employer’s websites more efficiently than any other method.

The value proposition for job seekers is equally strong. As Indeed says in its tag line “one search. all jobs.”

In the old model, a job seeker needed to scour all the major job boards, the local classifieds, craigslist, and the web sites of the companies they are interested in working for. That is because nobody had a comprehensive list of the open jobs.

Now, it’s much simpler. The job seekers just go to Indeed.com, they do a search, and they get all the jobs that are listed on the Internet, no matter where they are listed.

But on top of that, they get advanced search functionality, the ability to store searches, turn them into RSS feeds, and be alerted when new jobs show up in the index that meet their criteria.

This is a revolution for the job seeker and the traffic growth that Indeed has been seeing since launching in beta last November indicates that job seekers love the idea of job search.

So Indeed has a strong value proposition for both job seekers and employers. That’s critical.

But on top of that, there is something really interesting going on with paid job search. One of the central tenets of Web 2.0 is the notion of syndication of content and commerce. Indeed facilitates that in a big way for the existing job classified providers. Because Indeed and some of the other job search services “play nice”, job boards and other job publishers have been supportive of the efforts of these services.

In fact, one of the leaders in the job board market, Yahoo!/Hotjobs, recently embraced job search in a big way. Yahoo!’s implementation of job search is really interesting. They are backfilling their Hot Jobs service with a job search service that is similar to Indeed’s. It will be interesting to see whether job seekers prefer search results that are filtered exclusively by relevance (Indeed) or by paid/free (as Yahoo! is doing).

But regardless of the business model, the fact that Yahoo!/Hot Jobs is embracing job search means to us that this model is here to stay and is likely to be the front end for most job searches in the future.

It will also be interesting to watch Yahoo! to see if the leaders in traditional web search can do vertical search as well as the companies who are focused exclusively on vertical search. The requirements of job search or travel search or some other form of vertical search require different crawlers, different frequency, different results alogorithms, etc.  So Yahoo!'s entrance into job search is going to be interesting on multiple dimensions.

Another really valuable asset that the job search players own is an index of all the jobs that are available at any time. Indeed keeps jobs in its index for 30 days and currently has over 3.5 million jobs, a figure that is growing daily as new sources are added. That compares to Simply Hired, one of Indeed’s competitors, which keeps jobs in its index for 45 days which boosts their total jobs number. But whatever the policy of keeping jobs in the index, Indeed and Simply Hired have way more jobs available to search than the job boards. The largest job board has less than 500,000 jobs in the latest 30 day period.

Longtime readers know that I have been running an Indeed Jobroll on the right sidebar of this blog for about six months. Anyone can do that by visiting Indeed and doing an advanced search. The results of that search (in my case venture capital and web technology jobs in New York City) will be displayed in a job roll that can be run on any website or blog.

The jobroll is a good example of the way that the Indeed index can be syndicated to provide value to publishers and other operators of web services. In a Web 2.0 world, apps are built on top of apps, and at its core, Indeed is a web service. We look forward to lots of innovation in this area over time.

Like any early stage investment, there are lots of risks and challenges for Indeed and its investors in the coming years. But we are prepared for that because that’s our business.

We are really looking forward to working with Paul and Rony and their team to build the next big thing in the jobs business. Brad is joining the board and will be our point person on the investment, but our style is that every person at Union Square Ventures is involved in every investment and we certainly hope to be a “value added investor” in every sense of the word.

If you are interested in learning more about Indeed, I’d encourage you to go there and do a job search, subscribe to a job search or two with RSS, and put a Indeed job roll on your blog. I think you’ll be as impressed as we have been.

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