Atrae defines its business domain as “People Tech,” based on its aim of “creating businesses that expand people’s potential through technology.” It provides services in the area of human resources (dealing with job changes, employee engagement, and other aspects) using technologies such as AI and data analysis. Its main businesses are the Green success fee-based recruiting media, the Wevox engagement analysis tool, and new businesses.
Interactive Media & Services
Executive summary
Business overview
Business description: Atrae defines its business domain as “People Tech,” based on its aim of “creating businesses that expand people’s potential through technology.” It provides services in the area of human resources (dealing with job changes, employee engagement, and other aspects) using technologies such as AI and data analysis. Its main businesses are the Green success fee-based recruiting media (86.4% of revenue in FY09/20), the Wevox engagement analysis tool (12.1%), and new businesses (1.5%). In July 2020, Atrae established wholly owned subsidiary Altiri, Inc., so the group now comprises two companies (parent and one subsidiary) and uses consolidated accounting from Q1 FY09/21. Atrae has two reporting segments, the People Tech segment and the newly established Sports Tech segment.
Green success fee-based recruiting media: With Green, a service launched in July 2006, the company aims to replace conventional recruitment services by using data analysis and other technologies. It obtains information online pertaining to jobseekers and employers. A jobseeker applies for a mid-career position at an employer, goes through document screening and interviews, and once the employer hires the jobseeker, it pays Atrae a fixed success fee. What makes this service different from conventional recruitment services is that Atrae has built a matching system that analyzes data it has accumulated regarding both employers and jobseekers and provides both parties with information on their most suitable matches. This system replaces the work done by conventional career consultants to identify jobseekers and introduce them to employers and has achieved a screening pass rate (number of applicants passing the selection process divided by total number of applications) of 25–30%. This rate is similar to what conventional recruitment services achieve, and it does this at lower cost than when using career consultants. Another difference is that conventional ad-based recruiting media incur a fixed fee for the period of time a recruitment ad is posted, while Green uses a success fee-based system, meaning that there is no time limit on job postings and no wasted ad spending. Since there is no time limit on job postings, jobseekers can more easily access information on the most suitable jobs.
Low fee structure: Conventional recruitment services typically charge about 35% of a jobseeker’s annual salary as a success fee (so for a salary of JPY6.0mn, the fee is JPY2.1mn). Green’s success fee is a fixed fee that differs by region, but averages about JPY800,000. When first using the service, employers also pay an initial setup fee, which varies depending on the content of their job postings, but averages about JPY600,000. In addition to keeping costs low by eliminating the need for career consultants, Atrae mainly gains clients (employers seeking workers) through natural flow to the Green website, which means it spends less on sales staff than most recruitment services do. Conventional ad-based recruiting media rely on job posting fees as a source of revenue, so they have to maintain large sales teams to win clients, but Atrae has no such need.
User demographics: More than 90% of clients are in the IT, e-commerce, and Internet-related industries, and about 80% have no more than 300 employees (as of October 2020).
Green’s revenue and expenses: Green’s revenue comprises initial setup fees and success fees. Total success fees can be calculated by multiplying the number of people hired (the number of jobseekers taken on by Atrae’s client companies) by the success fee rate (the fixed fee differs by region, but averages about JPY800,000). Expenses mainly comprise advertising expenses and personnel expenses. Advertising spending, with a ratio to sales of about 40%, centers on online advertising to attract jobseekers. The majority of personnel are engineers and designers involved primarily in system development, and personnel expenses are largely fixed costs that do not vary in direct relation to the scale of revenue.
Green’s KPIs: The key indicator for Green is the number of jobseekers who find jobs via the service (number of people hired), which was 3,136 (+3.1% YoY) in FY09/20. In terms of factors that impact the number of people hired, there were 48,494 active users (+26.2% YoY), 7,362 registered companies (+8.9% YoY), and 15,971 job posting (-3.7% YoY).
Green’s recruitment market share: The market is valued at some JPY303bn, so with revenue of JPY3.0bn in FY09/20, Green had a market share of only about 1%.
Wevox engagement analysis tool: Atrae launched Wevox in May 2017. The service quantitatively analyzes employee engagement through surveys (questionnaires completed by the employees) and uses the results to help improve the organization. Companies with high engagement scores tend to have robust KPIs, low turnover, and better quality in products and services (more detail later). Atrae says Wevox is the first tool available in Japan for visualizing engagement and is characterized by convenience for targets (employees), low cost to client companies, and academic backing. Atrae has no need of a large sales team, since client acquisition centers on passive sales to prospective clients who request information.
Wevox’s revenue and expenses: Wevox’s revenue can be calculated by multiplying the number of survey targets by the monthly user fee (JPY300). Expenses are mainly personnel expenses. The majority of personnel are engineers and designers involved primarily in system development, and personnel expenses do not vary substantially in relation to the scale of revenue.
Wevox’s KPIs: In FY09/20, revenue totaled JPY416mn (+122.5% YoY), 1,690 companies had adopted the tool (+53.6% YoY), and the total number of user responses was 32.4mn.
Trends and outlook
FY09/20 results: Atrae posted revenue of JPY4.5bn (+30.1% YoY), operating profit of JPY1.0bn (+38.0% YoY), recurring profit of JPY1.0bn (+37.2% YoY), and net income of JPY646mn (+48.9% YoY). Revenue from the mainstay Green success fee-based recruiting media and Wevox engagement analysis tool increased.
FY09/22 forecast: For FY09/22, the company forecasts revenue of JPY5.9bn (+31.0% YoY), operating profit of JPY500mn (-50.5% YoY), recurring profit of JPY498mn (-50.5% YoY), and net income attributable to owners of the parent of JPY200mn (-69.0% YoY). The company expects higher revenue in the mainstay Green success-fee based recruiting media and Wevox engagement analysis tool. Meanwhile, it expects profits to decline on a rise in operating expenses. The anticipated increase in operating expenses is expected to come from advertising spending aimed at increasing the recognition of Green and hiring mainly to strengthen the Customer Success Team at Wevox.
Medium-term outlook: Atrae has not announced a medium-term management plan, but has indicated that it anticipates revenue growth at Green and Wevox in the medium term. Green’s revenue grew at a CAGR of about 40% over the five years through FY09/19. With Wevox, launched in May 2017, the company has realized a subscription model with strong growth potential. It is emphasizing future revenue growth over profits in the shorter term, so there may not be significant profit growth for the time being. The company aims for OPM of 30% or higher as cost fluctuations level off.
Strengths and weaknesses
Shared Research believes Atrae’s strengths are:
1) Ability to achieve low prices that conventional recruitment agencies cannot by replacing the matching process with a system and controlling costs
2) Competitive pricing and superior data accumulation of the Wevox engagement analysis tool
3) Data analysis and system development capabilities that support the core of its businesses
Conversely, the company’s weaknesses are:
1) Limited brand recognition as a latecomer to the recruitment market and lower jobseeker count (a key competitive factor) than larger peers
2) Lower ratio of large corporate clients, a large and growing market, at Green than at peers
(See the “Strengths and weaknesses” section for detail.)
Key financial data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company established wholly owned subsidiary Altiri, Inc., in July 2020 and shifted to consolidated accounting from FY09/21. YoY figures for FY09/21 are for reference only, since they compare consolidated results with parent-only results.
Note: In April 2021, the company conducted a 2-for-1 stock split. The per-share data in this table takes this split into account.
Recent updates
Revisions to its full-year FY09/21 earnings forecast
Atrae, Inc. announced revisions to its full-year FY09/21 earnings forecast.
Revision of full-year FY09/21 forecast
Reason for the revision
The company expects full-year revenue for FY09/21 to exceed the previous forecast due to the continued acceleration of growth in Green and Wevox, with Green growing by leveraging its unique competitive advantage in the job market and Wevox being increasingly adopted by large companies.
In terms of profits, the company executed advertising investments mainly for Green to accelerate its future growth, although it has been thorough in making disciplined investments by assessing ROI. At the time of its Q3 results announcement, the company was considering further advertising investment to accelerate growth, but instead of investing the full amount in Q4 FY09/21 (July-September 2021), it decided to continue strategic advertising investment in Q1 FY09/22 and beyond.
Earnings trends
Quarterly performance
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company established wholly owned subsidiary Altiri, Inc., in July 2020 and shifted to consolidated accounting from FY09/21. YoY figures for FY09/21 are for reference only, since they compare consolidated results with parent-only results.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company established wholly owned subsidiary Altiri, Inc., in July 2020 and shifted to consolidated accounting from FY09/21. YoY figures for FY09/21 are for reference only, since they compare consolidated results with parent-only results.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The number of job openings per active user is calculated as number of job postings divided by active user count.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company established wholly owned subsidiary Altiri, Inc., in July 2020 and shifted to consolidated accounting from FY09/21. YoY figures for FY09/21 are for reference only, since they compare consolidated results with parent-only results.
Full-year FY09/21 results
Full-year FY09/21 results
FY09/21 results overview
Revenue grew YoY on the back of higher revenue from both Green success fee-based recruiting media and Wevox engagement analysis tool. The revenue breakdown was JPY3.6bn (+20.6% YoY) from Green, JPY802mn (+92.8% YoY) from Wevox, and JPY90mn (+73.1% YoY) from new businesses (Yenta).
Profits from the operating line down increased YoY as revenue grew 30.1% YoY while SG&A spending rose 27.5% YoY. SG&A expenses mainly comprised advertising expenses of JPY1.9bn (+17.1% YoY) and personnel expenses of JPY837mn (+47.9% YoY).
Achievement rates versus the company’s full-year forecast
Achievement rates versus the full-year FY09/21 forecast were 100.3% for revenue, 107.5% for operating profit, 108.2% for recurring profit, and 100.9% for net income attributable to owners of the parent.
In July 2020, the company established wholly owned subsidiary Altiri, Inc. and entered the Sports Tech business. As a result, it revised its segmentation in Q1 FY09/21, creating a new Sports Tech segment in addition to its existing People Tech segment.
Results by segment are as follows.
People Tech
Revenue was JPY4.5bn (+30.1% YoY) and operating profit JPY1.1bn (+45.2% YoY).
Green success fee-based recruiting media
Atrae implemented various measures, such as expanding content to improve efficiency in matching employers with jobseekers, improving recommendation accuracy through big data analysis, and conducting online marketing to increase the number of registered users.
In FY09/21, Green generated revenue of JPY3.6bn (+20.6% YoY). This revenue comprises initial setup fees employers pay when they first register with Green and success fees employers pay after hiring jobseekers via Green. The total amount of success fees rose thanks to a YoY rise in the number of people hired, and initial setup fees increased on an increasing number of newly registered companies.
The number of hired people, a key indicator for success fees, rose 14.2% YoY to 3,582. The number of new hires declined by 6.8% YoY in 1H FY09/21, but turned upward since Q3, posting YoY growth for the full-year. While the course of the COVID-19 pandemic and trends in economic activity remain uncertain, there were signs of a recovery in the willingness of companies to hire during the third quarter (April–June 2021).
Wevox engagement analysis tool
Wevox helps companies make organizational improvements by applying a scoring system to enable visualization of the state of the organization, and then recommending improvement measures based on the results. As of September 2021, the number of companies using Wevox numbered 2,140 (versus 1,690 in September 2020), and these companies operate in a wide range of industries.
FY09/21 saw growth in the number of companies using Wevox, including major corporations, and Wevox revenue grew to JPY802mn (+92.8% YoY). Atrae says that companies are becoming more conscious of employee engagement as they introduce teleworking in response to the pandemic.
Sports Tech
In this segment, the company posted no revenue, but operating loss of JPY56mn.
In July 2020, the company established wholly owned subsidiary Altiri, Inc., and in FY09/21 made preparations for the operation of a professional basketball team, aiming to enter Japan’s B3 League in the 2021–22 season.
Q4 FY09/21 (July–September 2021) results
Q4 FY09/21 overview
Revenue growth at Green and Wevox boosted total revenue on both YoY and QoQ basis. The revenue breakdown was JPY1.1bn (+62.9% YoY, +7.8% QoQ) from Green and JPY264mn (+100.0% YoY, +28.4% QoQ) from Wevox.
All profit categories from the operating line down fell YoY and QoQ due to higher SG&A expenses. SG&A expenses were JPY1.3bn (+104.7% YoY, +54.4% QoQ), with the main items being advertising expenses at JPY819mn (+137.4% YoY, +71.3% QoQ) and personnel expenses at JPY294mn (+102.8% YoY, +44.1% QoQ). Of advertising expenses, JPY378mn was for online advertising (+31.3% YoY, +27.8% QoQ) and JPY441mn was for TV and other advertising (+673.7% YoY, +217.3% QoQ).
People Tech
Revenue was JPY1.4bn (+69.5% YoY, +11.3% QoQ) and operating profit JPY62mn (-61.9% YoY, -83.8% QoQ).
Green success fee-based recruiting media
Revenue from Green was JPY1.1mn (+62.9% YoY, +7.8% QoQ). Revenue grew both YoY and QoQ on an increase in the number of people hired.
The number of people hired via Green, a KPI for success fees, was 1,043 (+50.1% YoY, +1.4% QoQ). The number of people hired bottomed out in Q4 FY09/20 and has been on a recovery trend, increasing both YoY and QoQ, thanks to the aforementioned recovery in hiring demand.
In terms of factors that impact the number of people hired, there were 51,567 active users (+6.3% YoY, -7.5% QoQ), 8,317 registered companies, 283 newly registered companies (versus 156 in Q4 FY09/20 and 265 in Q3 FY09/21), and 23,969 job postings (+50.1% YoY, +13.2% QoQ). In Q3 FY09/20, the COVID-19 pandemic caused the job posting count to fall to 14,401, but the count has been recovering since then.
Wevox engagement analysis tool
Revenue from Wevox was JPY264mn (+100.0% YoY, +28.4% QoQ). As of September 2021, the number of companies using Wevox rose to 2,140 (versus 1,690 in September 2020).
Sports Tech
In this segment, the company posted no revenue, but operating loss of JPY16mn.
FY09/22 company forecasts
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The company established wholly owned subsidiary Altiri, Inc., in FY09/20 and shifted to consolidated accounting from FY09/21, so YoY figures are for reference only, since they compare consolidated results with parent-only results.
For FY09/22, the company forecasts revenue of JPY5.9bn (+31.0% YoY), operating profit of JPY500mn (-50.5% YoY), recurring profit of JPY498mn (-50.5% YoY), and net income attributable to owners of the parent of JPY200mn (-69.0% YoY).
The company expects revenue to increse, driven by Green growing by leveraging its unique competitive advantage in the job market and Wevox being increasingly adopted by companies.
The company forecasts all profit categories from the operating line down to decrease on an anticipated rise in operating expenses aimed at accelerating growth.
People Tech
The company projects People Tech revenue of JPY5.7bn (+26.5% YoY), of which JPY1.3bn (+55.9% YoY) is expected to come from Wevox.
Sports Tech
The company forecasts Sports Tech revenue of JPY200mn (none recorded in FY09/21).
Operating expenses
The company anticipates FY09/22 operating expenses of JPY5.4bn (+54.9% YoY). In People Tech, in addition to ad spending to increase Green’s recognition, it plans to hire personnel mainly to enhance the Customer Success Team in the Wevox business. In Sports Tech, the company plans strategic upfront spending aimed at creating new value in the sports business.
Medium- and long-term outlook
Atrae has not announced a medium-term management plan, but is aiming for revenue growth of about 30% each year. It expects revenue growth at both Green and Wevox in the medium term.
Green’s revenue grew at a CAGR of nearly 40% annually over the five years through FY09/19. Prior to the COVID-19 outbreak, the company had envisioned revenue continuing to grow at 20–25% YoY. However, the pace of growth temporarily slowed in FY09/20 due to employers’ diminished willingness to hire against the backdrop of uncertainty triggered by the pandemic. In the medium and long term, Shared Research believes that, although it will take time for Atrae’s pace of growth to recover to pre-pandemic levels, it will eventually be able to regain its double-digit growth momentum.
Wevox was launched in May 2017, and FY09/20 saw substantial growth in the number of companies using the service due to growing need to monitor employee status as they relied more on teleworking in light of the pandemic. Shared Research believes there is still plenty of room for growth at Wevox in the long term.
Atrae is in a growth phase, and is emphasizing future revenue growth over profits in the shorter term. Shared Research recognizes that profit growth may not be realized in the short term if the company invests for future sales growth, for example through ad spending or investing to launch new businesses. However, as the company’s operations expand, its ability to absorb costs related to growth and new businesses will increase. It is therefore targeting OPM of 30% or higher on the assumption that the ratio of strategic spending to revenue will level off. From FY09/16 to FY09/18, OPM was about 30%.
Growth of Green
Green’s targeted market (recruitment market)
Japan’s recruitment market is growing about 15% annually (please refer to the “Market and value chain” section). Although the working population has been declining, there has been greater movement of human resources and companies have been using recruitment agencies more and more. Shared Research therefore believes the recruitment market will continue to grow in the medium and long term.
In FY09/20, Green generated revenue of JPY3.0bn compared to the total recruitment market of about JPY303bn (source: Yano Research Institute’s “Human Resources Business 2019”). Atrae says that, based on the fees set for Green, which is about 60% of existing recruitment services, its potential market would comprise about 60% of the existing recruitment market, or JPY181bn. Green’s share of this potential market is 1.3%. Focusing on IT and web-related businesses, where the majority of the jobseekers and employers using Green are located, the market size would be JPY54bn (30% of total), and its share of this market subset was 4.6%.
Source of Green’s growth
The bulk of Green’s revenue comprises success fees (the number of people hired multiplied for the per-person success fee). Shared Research believes revenue will grow as the number of people hired increases in the medium term.
Number of people hired via Green
Past growth and FY09/20 stagnation: The CAGR for number of people hired via Green was 37% for the five years from FY09/14 to FY09/19. However, the pace of growth temporarily slowed in FY09/20 (to just 3.1% YoY) due to employers’ diminished willingness to hire against the backdrop of uncertainty triggered by the pandemic. In Q4 FY09/20 (July–September 2020) in particular, the number of people hired fell 17.2% YoY.
Virtuous cycle phase: The active user count and job posting count are the basis for the number of people hired. When these figures increase, the absolute number of matches increases, resulting in a greater number of people hired. In addition, Shared Research understands that the structure of recruiting media is such that the number of jobseekers and the number of employers looking to hire interact with each other to expand. In other words, when the active user count increases, the number of companies registering for the service grows because companies hear that they can hire good people at a lower cost than at recruitment agencies. As the number of registered companies grows, the job posting count increases. As the job posting count increases, the active user count rises even more. Once a virtuous cycle is achieved in this manner, it is easier to continue expanding. Green launched in July 2006, and maintained this sort of virtuous cycle for the five years through FY09/19.
Medium-term growth potential remains unchanged: In FY09/20, the pandemic led to a decline in companies’ willingness to hire, and the job posting count declined. However, the active user count continued to rise, as there was no change in the facts that Atrae has a large pool of IT and web-related jobseekers and that the Green service is cheaper than conventional recruitment agencies. Shared Research therefore believes the pace of growth in the number of people hired via Green will recover to double digits again once employers’ willingness to hire recovers.
Note: The number of job postings per active user is calculated as job posting count divided by active user count.
Success fee per person
As of September 2020, the average success fee per person was approximately JPY800,000.
Growth of Wevox
Wevox’s targeted market
According to the Ministry of Internal Affairs and Communications Statistics Bureau’s “Labour Force Survey,” the number of workers in 2019 was 67.2mn (+0.9% YoY). Wevox targets all employed people, so multiplying the number of workers by the monthly fee of JPY300 by 12 months indicates that its potential market is about JPY242.1bn. In FY09/20, Wevox’s revenue was JPY416mn, or 0.2% of that potential market.
Source of Wevox’s growth
Shared Research believes Wevox’s revenue will increase as the number of employees covered by the service grows along with the number of companies using the service. In addition, although Wevox’s monthly user fee is JPY300 as of October 2020, there is a possibility the company will raise the per-user fee as it adds functionality.
Increase in the number of companies using Wevox
Since its official release in May 2017, Wevox has seen a steady increase in the number of companies adopting it, with the number reaching 1,690 (+53.6% YoY) at end-FY09/20. Large corporations are also using the service, including Sumitomo Mitsui Banking Corporation (applied to some 28,000 employees at domestic offices) from February 2020, KDDI Corporation (applied to all employees at domestic offices) from May 2020, and Mitsui Sumitomo Insurance Co., Ltd. (applied to some 20,000 employees) from August 2020.
However, Atrae believes even more companies will seek to increase engagement to improve performance and employee retention. Given the size of the potential market, the company is therefore aiming for YoY revenue growth of around 70% over the medium term.
Potential for new businesses
Atrae launches an average of about one new business every five years. The company was established in October 2003. It went on to launch Green in July 2006, the JobShare social recruiting service in December 2012, the Yenta matching app for business professionals in January 2016, and the Wevox engagement analysis tool in May 2017.
In the People Tech business, the company utilizes various technologies to provide services not limited to the conventional human resources domain (job change and other personnel-related services), and also plans to launch new businesses in the medium term. Even just in the human resources domain, in addition to the mid-career recruitment and organizational improvement services the company is already engaged in, there are other services to be provided, such as new graduate recruitment, human resource development, personnel evaluation, labor management, and the planning and revision of personnel systems, and Shared Research believes there is a great deal of room for replacing manual work with technology in these areas.
In terms of investment in and expenses for new businesses, Atrae’s policy is to use technology in all of its businesses and avoid large capital investments or businesses that would require growth in headcount to increase revenue.
Overseas development of businesses
In August 2020, Atrae announced plans for global expansion of the Yenta matching app for business professionals, with India to be the first target. While the company is considering expanding other businesses overseas eventually, the timing and method of such expansion remains pending.
Business
Overview
Yoshihide Arai, Atrae’s current president and CEO, established the company in October 2003 with the vision of “creating a company attractive to people the world over.” The company defines its business domain as People Tech, based on its desire to create businesses that expand people’s potential through technology. It provides services in the human resources domain (services such as job change assistance and engagement assessment) using technologies including data analysis and AI. Its main businesses are Green (success fee-based recruiting media; 83.1% of revenue in FY09/20), Wevox (engagement analysis tool; 12.1%), and new businesses (1.5%). In new businesses, the company is currently developing the Yenta matching app for business professionals.
Note: Figures may differ from company materials due to differences in rounding methods.
Green success fee-based recruiting media (83.1% of revenue in FY09/20)
Launched in July 2006, Green is a success fee-based recruiting media service that aims to replace conventional recruitment services using data analysis and other technologies. The company acquires jobseekers and employers via the internet. The jobseekers apply for mid-career positions with the employers and undergo screening and interviews leading to job offers. Once the jobseeker has been taken onboard by an employer, that employer pays Atrae a fixed success fee.
The difference between Green and conventional recruitment services is that Atrae has built a matching system that analyzes data it has accumulated regarding both employers and jobseekers and provides both parties with information on their most suitable matches. This system replaces the work done by conventional career consultants to identify suitable jobseekers and introduce them to employers. Over more than 15 years, the company has accumulated data on the hiring process, taking into consideration the perspectives of both employers and jobseekers, and has developed its own algorithms for its recommendation system. This has enabled it to achieve a screening pass rate (number of applicants passing the selection process divided by total number of applications) of 25–30%, which is comparable to what conventional recruitment services achieve, and it does this at lower cost than when using career consultants.
Another difference is that conventional ad-based recruiting media incur a fixed fee for the period of time a recruitment ad is posted, typically two or four weeks, while Green uses a success fee-based system, meaning that there is no time limit on how long jobs can be posted and no wasted ad spending.
With Green, Atrae aims to replace conventional recruitment services. In FY09/20, Green generated revenue of JPY3.0bn compared to the total recruitment market of about JPY303bn (source: Yano Research Institute’s “Human Resources Business 2019”). Atrae says that, based on the fees set for Green, which is about 60% of existing recruitment services, its potential market would comprise about 60% of the existing recruitment market, or JPY181bn. Green’s share of this potential market is 1.3%. Focusing on IT and web-related businesses, where the majority of the jobseekers and employers using Green are located, the market size would be JPY54bn (30% of total), and its share of this market subset was 4.6%.
More than 90% of clients are in the IT, e-commerce, and internet-related industries, and about 80% have no more than 300 employees (as of October 2020).
Green’s KPI is the number of jobseekers who find jobs via the Green service (number of people hired), which was 3,136 (+3.1% YoY) in FY09/20. In terms of factors that impact the number of people hired, there were 48,494 active users (+26.2% YoY), 7,362 registered companies (+8.9% YoY), and 15,971 job postings (-3.7% YoY).
Merits of Green: Recommendation system
Atrae says conventional ad-based recruiting media derive their revenue from listing fees paid by employers, so in their sales activities they strive to understand the trends and needs of those companies. On the other hand, there is no need to understand the hiring process from the perspective of jobseekers, so it tends to be difficult to accumulate data regarding those jobseekers.
Unlike conventional ad-based recruiting media, Green relies on success fees from employers as its revenue source, so it is necessary to track the hiring process all the way to the jobseekers being hired by employers. To do this, the company accumulates data on jobseekers’ work history, professional skills, and years of experience, what kind of company they approached in terms of industry, job type, size, and corporate culture, whether they passed the screening process, how many interviews they had, and whether they received job offers or joined a certain company.
By analyzing these data, the recommendation system is able to deliver the most suitable job information to jobseekers and the most suitable candidate information to employers. This makes it possible to match jobseekers and employers in much the same way as career consultants do at recruitment agencies. Atrae says 25–30% of jobseekers using Green pass the screening process, a percentage comparable to that of recruitment agencies.
Realizing suitable matching of jobseekers and employers with a system based on data accumulation and analysis
Green’s recommendation system, as aforementioned, accumulates and analyzes past recruitment data on jobseekers, and matches jobseekers to employers based on those data. In other words, when a jobseeker uses Green to search for a potential employer, the system analyzes the jobseeker’s profile data, and displays companies the jobseeker would be most likely to join. It works similarly when an employer searches for candidates, displaying those jobseekers who would be most likely to fulfill the needs of the company performing the search. At conventional recruitment agencies, career consultants match jobseekers and employers based on their own databases and experience. Atrae replaces the work down by career consultants at recruitment agencies with data collection and analysis, but still achieves matching success comparable to that of the conventional recruitment agencies.
Another unique feature of Green is the “I’m interested/would like to meet” function. Either a jobseeker or employer can send the other a message saying “I’m interested/would like to meet,” so users can easily express their desire to arrange a meeting or interview.
Maintaining a screening pass rate comparable to recruitment agencies
As mentioned, at conventional recruitment agencies, career consultants match jobseekers and employers based on their own databases and experience. This reduces the burden on both jobseekers and employers, and improves the rate at which jobseekers make it through document screening.
Green replaces the work done by recruitment agencies with data accumulation and analysis, using a recommendation system to identify viable matches. The accuracy of matching is managed based on the screening pass rate. The company says a pass rate that is too high will lead to connections being made between only the cream of the jobseekers and employers, resulting in lost opportunities. In other words, an excessively high pass rate means that jobseekers will be limited in the employers they can view and apply to, and employers will only receive applications from a limited number of jobseekers, resulting in decreases in the absolute number of both parties. On the other hand, if the screening pass rate is too low, jobseekers can apply to a large number of companies but end up not passing screening, and employers will receive an overabundance of applications from jobseekers not necessarily suitable for the position in question, increasing the workload on those responsible for hiring, since they have to reject many applicants.
The company believes a 25-30% document screening pass rate is the appropriate level to improve the efficiency of the matching process and avoid inconvenience to both jobseekers and employers. This rate is also comparable to the rate at conventional recruitment agencies. In FY09/20, selection delays and stricter hiring practices at employers because of the COVID-19 pandemic meant the pass rate temporarily fell to 19.6%.
Note: The screening pass rate is calculated as the number of documents that pass screening in a year divided by the total number of documents submitted for screening that year.
Merits of Green: Benefits of success fee-based recruiting media
With conventional ad-based recruiting media, employers must pay a fee to the posting media to post an ad for two or four weeks, regardless of whether or not they end up hiring anyone. By contrast, Green uses a success fee system, with no limits on how long a job can be posted or how many jobs can be posts, so employers can seek candidates on an ongoing basis. As there is no time limit, jobseekers always have access to the most suitable job information.
Employers can identify and hire candidates in specialty fields
The advantage of conventional ad-based recruiting media is that employers can post job info for a specified period and recruit from among a large pool of jobseekers. However, employers risk wasting the advertising fee if they are unable to attract applicants who meet their hiring requirements within the posting period. For this reason, rather than for specialty fields, conventional media is more suited to recruiting multiple candidates for general positions with less restrictive hiring requirements.
By contrast, companies that use Green do not risk wasting their ad spending. Green allows them to post and recruit for positions in specialty fields that might be difficult to fill using conventional ad-based recruiting media and would typically require them to approach a recruitment agency. On the other hand, for employers looking to hire multiple employees or part-time workers with annual salaries in the JPY2mn range, Green’s fees would be considered high and conventional ad-based recruiting media would be more suitable.
Continuous recruiting of excellent personnel is possible
With the success fee-based business model, many companies are able to post jobs on an ongoing basis, regardless of the strength of their hiring needs, so that they can hire excellent personnel as soon as they appear.
Merits of Green: Relatively low fees
Although there is some variation by region, Green’s success fee is a fixed fee averaging about JPY800,000 per hire. In addition, employers using Green for the first time must pay an initial setup fee of about JPY600,000, depending on the content of their job postings.
Success fee
The success fee is a fixed amount regardless of the annual salary or type of position, but with some variation by region. Atrae says that, with conventional recruitment services, it is customary for the employer to pay a success fee equal to roughly 35% of the annual salary of the person hired. If an employer hires someone at a salary of JPY5.0mn, they would typically pay a success fee of JPY1.75mn. By contrast, Green offers a fixed success fee averaging about JPY800,000 regardless of the annual salary for the position being filled.
Initial expense
Green offers several initial setup fee plans, depending on the content of an employer’s job posting, but the average is about JPY600,000.
Source of price competitiveness
Conventional recruitment agencies are expected to have specialist career consultants and counseling facilities. Green replaces those career consultants with data collection and analysis technologies, eliminating the need to hire career consultants or maintain counseling facilities. This makes it possible to offer lower success fees than conventional recruitment agencies can manage. Atrae mainly gains clients (employers seeking workers) through natural inflow via passive sales, which means it spends less on sales staff. In addition, unlike conventional ad-based recruiting media, which generate revenue from ad posting fees, Atrae does not need to hire a large number of salespeople to get employers to post job ads.
Attributes of jobseekers and employers
Jobseekers and employers centered in IT and web-related industries
Green has registered a large number of engineers and web designers, who are in high demand in the IT and web-related industries. More than 90% of clients (employers) are in the IT, e-commerce, and internet-related industries, and about 80% have no more than 300 employees (as of October 2020).
The reason for the high proportion of both jobseekers and employers in the IT and web-related industries is that in 2006, when Green was first launched, the companies that tried to lower their recruitment costs by using the new service were mainly IT and other growth companies. Major corporations had already included recruitment expenses in their budgets based on the assumption that they would use conventional recruitment services, so they had no incentive to use a new service like Green. In addition, President and CEO Yoshihide Arai has an ideal that talented people should move from conventional industries to new industries, and he specifically aimed to have companies involved in IT, the internet, mobile, and other growth industries utilize Green.
However, Atrae places no limitations on the type of employers who can use Green. The company says there is growing need for IT and web-related personnel even at companies in more traditional industries.
Size of clients (employers)
As of October 2020, 57% of jobs available through Green were for companies with no more than 100 employees, while just 21% were for companies with 300 or more. Typical clients are SMEs. By contrast, at Recruit Agent, the largest recruitment agency in Japan, only 18% of clients are companies with no more than 100 employees, while 46% have 1,000 or more (data for companies with 300 or more employees is not available from Recruit Agent).
Green’s operating structure
Green’s system of operation, method of acquiring clients, and structure are as follows.
Green’s operating structure does not require any large facilities or equipment. The focus is on systems, and the company’s own employees handle development and operation.
The majority of its operational staff are those who develop and operate systems, and changes in revenue scale or the number of clients using Green trigger no significant change in headcount. Atrae launched Green in July 2006 and still had only 14 employees in total in FY09/12, prior to launching services other than Green. In FY09/20, Green’s revenue and the number of people hired via the system were both about 10x the FY09/12 figures, and the job posting count was about 6x, but the number of employees operating Green did not increase nearly as much.
Green mainly gains clients through natural inflow via passive sales. Members of the sales team only visit potential clients who have made inquiries or requested materials.
Green’s revenue, expenses, and KPIs
Green’s revenue
Green’s revenue comprises initial setup fees and success fees. Atrae emphasizes revenue growth in the form of success fees, and it expects the ratio of success fees to keep rising. It does not focus on initial setup fees, since it considers them to be a result of the natural inflow of clients, so it expects the ratio to decline.
Success fee revenue is calculated by multiplying the number of people hired via the service by the success fee per person hired. In FY09/20, there were 3,136 people hired (+3.1% YoY), and Shared Research estimates the average success fee per person to have been about JPY800,000.
Initial setup fee revenue is calculated by multiplying the number of newly registered companies by the initial setup fee per company. In FY09/20, there were 601 newly registered companies (-24.7% YoY), and Shared Research estimates the average initial setup fee per company to have been about JPY600,000.
Green’s expenses
Expenses mainly comprise advertising expenses and personnel expenses.
Ad spending is necessary to attract jobseekers. Atrae mainly uses online advertising and keeps advertising expenses to about 40% of the revenue generated by Green. According to the company, while managing ad spending by using cost per action (CPA, in this case meaning the cost to acquire a new user) as an indicator, it will consider increasing ad spending where it deems it possible to increase the number of registered users, perhaps even pushing the advertising expense-to-revenue ratio above 50%.
Relationship between revenue and advertising expenses from jobseeker registration to hire: In FY09/20, the company spent JPY1.6bn on advertising and acquired about 120,000 new registrants (jobseekers). This places the advertising cost per new registrant at about JPY14,000.
Significance of TV ads: Starting in FY09/19, Atrae has been using TV ads to attract jobseekers it had been unable to reach through online advertising alone and to raise awareness of the service. According to Shared Research’s understanding, the ratio of click-throughs that lead to registration (click-through performance) is higher for online ads that show up first in search results, but if the product or company’s name is easily recognized, it is still likely to be clicked even if it shows up in the second or third position. For this reason, increasing awareness of the service through TV ads may lead to CPA improvement.
As mentioned, the operational staff headcount does not change in line with revenue scale, so personnel expenses are essentially fixed costs.
Green’s KPIs
The key indicator for Green is the number of jobseekers who find jobs via the Green service (number of people hired), which is affected by the active user count, number of registered companies, and job posting count. As the active user count increases, the number of companies registered and the job posting count also increase, which in turn increases the number of people hired (and vice versa). In FY09/20, the number of people hired was 3,136 (+3.1% YoY), the active user (jobseeker) count was 48,494 (+26.2% YoY), the registered user ID count was 790,000 and new user ID count was 120,000, the number of registered companies (employers) was 7,362 (+8.9% YoY), and the job posting count was 15,971 (-3.7% YoY).
Note: Active users are jobseekers registered at Green who login at least once a month.
Note: Revenue per person hired is Green’s revenue divided by number of people hired.
Note: The number of job postings per user is calculated as the job posting count divided by active user count. This is the number of jobs available via Green per jobseeker.
Green’s position in the recruitment industry
Registration-type and search-type services
Recruitment services can be categorized into registration-type, search-type, and outplacement-type. Green is a registration-type service.
A registration-type service identifies candidates who match an employer’s hiring requirements from among those jobseekers who, as part of their registration, have provided their work experience, abilities, desired occupation, and desired working conditions. It then introduces these candidates to the employer.
A search-type (headhunting) service will, based on a request from an employer, search for suitable candidates and negotiate a job change to the requesting employer. The candidates to be introduced are likely to be currently employed and in many cases are not actively seeking a job change, but are willing to change if the right offer arises. Candidates are typically highly specialized and have good positions and high salaries, so the resultant success fees are relatively large. In addition to the success fee, some recruitment agencies also charge consulting fees and advances.
An outplacement-type service assists employees subject to restructuring or other disruption to employment with finding new employment.
For registration-type and search-type services, the attributes of jobseekers are not clearly defined. However, Shared Research estimates that registration-type services usually handle jobseekers looking for salaries of JPY3mn to the upper JPY7mn level, while search-type services usually deal with candidates earning at least JPY8mn, so registration-type services handle about 70% and search-type services 30% of recruitment needs. This assumes that distribution in terms of annual incomes of people changing jobs is the same as for all salaried workers (please refer to the “Market and value chain” section).
General and specialized services
Recruitment services can also be categorized as general or specialized. Green is the former, but its early clients were mainly IT and other growth companies and, because the company has a track record of energizing growth companies, it still has many jobseekers and employers involved in IT and web-related industries.
General services handle job information from a wide range of industries and do not focus on any particular one. They are therefore suitable for jobseekers who may want to consider possibilities of which they were not even previously aware, and who are open to something entirely new.
Specialized services cater to employers and jobseekers in specific industries, so they can more efficiently conduct job search and recruitment activities. Specialized services can focus on industries such as finance, healthcare, mass media, or restaurants.
Green’s aim is to take over the recruitment work done by conventional career consultants, so Atrae compares the service to recruitment agencies.
Wevox engagement analysis tool (12.1% of revenue in FY09/20)
Atrae launched Wevox in May 2017. The service quantitatively analyzes employee engagement through surveys (questionnaires completed by the employees) and uses the results to help improve the organization. Companies with high engagement scores tend to have robust KPIs, low turnover, and better quality in products and services.
Organizations that use Wevox can implement improvement measures based on the results of analysis of the survey, and then perform another survey and analysis to check the effectiveness of the measures. In the past, for many organizations, identifying issues and verifying the effectiveness of remedial measures were limited to qualitative judgments. However, by obtaining quantitative measurements and implementing a plan-do-check-act (PDCA) cycle appropriately and efficiently, organizations can improve their employee engagement. Wevox also recommends measures to promote organizational improvement.
How Wevox works
Wevox sends 16 questions once a month (32 the first time only) to the registered email addresses of survey targets.
Wevox automatically aggregates responses, determines scores based on the distribution of all aggregated data, and summarizes the survey results.
In addition to the rank, distribution, trends, and overall evaluation of scores, the survey results show scores for nine key drivers (duties, personal growth, health, support, human relations, approval, ideological strategy, organizational climate, and environment) and indicates areas for improvement. Wevox can also provide data by category (including department, team, and age group) and analysis by group or attribute.
Organizations using Wevox confirm the survey results and implement improvement measures where scores were low for certain departments or key drivers. Atrae also provides information on examples of improvement measures and their effectiveness in other organizations.
Providing a survey package of questions to track employee mental and physical health
In April 2020, the company began offering a custom survey package of 21 questions for better understanding employees’ mental and physical health status. The survey can be created and distributed by client companies based on proprietary knowledge from Wevox to better track employees’ mental and physical health amidst changes in the work environment, such as the introduction of teleworking.
Information on Wevox
Characteristics of Wevox
Wevox is characterized by convenience for targets (employees), low cost to client companies, and academic backing.
Pulse surveys of 16 questions are conducted once a month on topics such as relationships with coworkers and satisfaction with duties. Employees respond using a scale of 1 to 7, completing the survey in about three minutes. Wevox is compatible with a range of devices, including smartphones and PCs, and its design, usability, and UX/UI are intended to encourage a high response rate. From a total of 40 questions, the system gives priority to items likely to see fluctuation over a relatively short period, but also automatically selects questions that have yet to be answered.
Wevox automatically aggregates and analyzes responses to the survey, allowing real-time tracking of issues facing the organization.
Since Atrae operates Wevox in a SaaS format, such that there is little change in the company’s personnel needs and expenses even when the numbers of client companies and survey targets changes, it has been able to offer the service at JPY300 per person per month, a lower price than its peers.
In terms of academic backing, the company has the cooperation of Professor Akihito Shimazu, one the foremost experts in engagement research.
Engagement-related tools from peers
Another Japanese company that provides a service similar to Wevox is Link and Motivation Inc. (TSE1: 2170), with its Motivation Cloud organizational improvement service. Compared to Motivation Cloud, Wevox is cheaper and has a larger number of clients. Shared Research understands that with this sort of data analysis service, the greater the amount of aggregated survey data and the greater the amount of verification data pertaining to issue resolution, the greater the accuracy of the analysis and the better the company’s ability to recommend suitable solutions. We therefore believe the number of clients using such services and the total number of survey responses a company can accumulate will lead to future competitiveness.
Motivation Cloud is a cloud-based service that includes consulting to build organizations’ PDCA cycles. The service comprises an “engagement survey” to calculate engagement between companies and their employees and an “organizational improvement system” to support the identification of issues, setting of goals, and implementation of remedial action. In addition, support from consultants is available as needed. The service costs about JPY100,000 for up to 50 employees, with an initial fee of about JPY1mn. According to publicly available documents from Link and Motivation, 770 companies were using products in the Motivation Cloud series as of September 2020, and the average monthly membership fee was JPY247,000.
Note: The monthly average price for Wevox is a Shared Research estimate.
Note: The number of client companies for Motivation Cloud is the number of companies using products in the Motivation Cloud series as of September 2020.
Similar tools developed by companies overseas include Employee Experience (EX) from Qualtrics (US company, NASDAQ: XM), Peakon from Peakon (Denmark), and Glint People Success Platform from Glint (US).
Employee Experience (EX) is a tool developed by Qualtrics, a subsidiary of SAP (Germany, FWB: SAP, NYSE: SAP). With Employee Experience (EX), data on engagement, pulse surveys, reasons for departing the company, 360-degree assessments, new employee onboarding, optimization of benefits (salary and compensation), evaluations of training, and evaluations of IT-related tools can be collected via questionnaires for analysis. In the case of engagement, employees respond to a questionnaire prepared by the client company, and the tool aggregates the response data. In the case of pulse surveys, other questionnaires that are shorter than the engagement questionnaire are implemented more frequently with the aim of tracking employee status. As of July 2021, more than 13,500 companies worldwide were using the tool to track engagement, and more than 11,000 to conduct pulse surveys.
Peakon is an engagement platform developed by Peakon, a subsidiary of Workday (US company, NASDAQ: WDAY). It comprises Peakon Engage, which analyzes engagement; Peakon Include, which analyzes diversity, equality, and inclusion (DE&I); and Peakon Grow, which analyzes employee development. With Peakon Engage, client companies select questions from a database maintained by Peakon and ask their employees to respond. Question frequency can be set to “Always” for key questions. By obtaining responses to such questions over and over, the client companies can monitor engagement trends in real time. The Peakon platform has been used by companies including KFC (US company) and Ricoh (TSE1: 7752), and has collected 183mn responses as of August 2021.
The Glint People Success Platform is an engagement platform developed by Glint, a subsidiary of LinkedIn, which is itself a subsidiary of Microsoft (US company, NASDAQ: MSFT). It makes possible the analysis of engagement, human resource development, diversity and inclusion (D&I), and people success (enhancing the relationship between employees and managers, ensuring managers provide feedback, and encouraging employees to make learning from that feedback habitual). Companies using the platform can analyze engagement status by creating and administering questionnaires on anywhere from a quarterly to an annual basis. In addition, the Glint People Success Platform uses AI-for-HR™ technology to provide predictive analysis and real-time alerts related to employee groups that are experiencing changes such as increased turnover or falling performance levels. Glint’s clients have included UNITED (US company, subsidiary of United Airlines Holdings [US company, NASDAQ: UAL]), NVIDIA (US company, NASDAQ: NVDA), and LinkedIn (wholly owned subsidiary of Microsoft).
Effectiveness of Wevox
From July to August 2019, Atrae worked with transcosmos inc. to conduct a “Joint Study on Relationship between Engagement and Productivity and Effect of Promotion on Levels of Engagement” using data from some 1,900 participants from about 70 departments. This joint study showed that there was a correlation suggesting a causal relationship between engagement and productivity, and that the revision of standards for promotion improved engagement.
In Q1 2019, for every 10-point increase in managers’ engagement scores as measured by Wevox, there was a correlation of about 12.5% higher YoY revenue growth.
The study also found a significant correlation between engagement scores and revenue growth prior to Q1 2019, although no clear causal relationship could be established. Atrae says there appears to be an indication that increased engagement improves productivity.
Wevox’s operating structure
Wevox’s system of operation, method of acquiring clients, and structure are as follows.
Wevox’s operating structure does not require any large facilities or equipment. The focus is on systems, and the company’s own employees handle development and operation. The majority of its operational staff are those who develop and operate systems, and changes in revenue scale or the number of clients using Wevox cause no significant changes in headcount.
Client acquisition centers on passive sales to prospective clients who request information. The company does not actively conduct sales through phone calls or visits, so the sales team is relatively small. The Wevox website provides information on engagement, and explanations of Wevox’s functions, fees, case studies, and methods of use, and potential clients can download detailed explanatory material just by entering their company name. The company does little advertising, instead encouraging information requests via word of mouth and referrals.
Atrae has a Customer Success Team with a consultative role (providing guidance and customer support) to help clients get the most out of Wevox. The manner in which Wevox is implemented is important, since a low response rate from employees reduces its effectiveness. To raise the response rate, a company’s management team needs to explain to its employees why it is adopting Wevox. The Customer Success Team introduces case studies regarding how management can best explain the tool to employees to gain their understanding and what initiatives can improve their score.
Wevox’s revenue, expenses, and KPIs
Wevox’s KPIs
Atrae discloses the number of companies using Wevox and the number of user responses. Wevox was released in May 2017, and as of September 2020 there were 1,690 companies (+53.6% YoY) using Wevox, and the company had accumulated 32.4mn user responses. Large corporations are also using the service, including Sumitomo Mitsui Banking Corporation (applied to some 28,000 employees at domestic offices) from February 2020, KDDI Corporation (applied to all employees at domestic offices) from May 2020, and Mitsui Sumitomo Insurance Co., Ltd. (applied to some 20,000 employees) from August 2020.
Wevox’s revenue
Wevox’s revenue can be calculated by multiplying the user count by the monthly user fee (JPY300). In FY09/20, Wevox generated revenue of JPY416mn (+122.5% YoY).
In addition to an increase in the number of companies using Wevox, the number of users is trending upward as large companies with more than 20,000 employees are increasingly using the tool.
The basic monthly user fee is JPY300, but technically the fee is less than that due to 30-day free trials, discounted annual contracts, and special plans for large companies.
Wevox’s expenses
The majority of Wevox’s costs are personnel expenses. There are also advertising expenses and system-related spending, but the company says these are minor.
Personnel expenses: The majority of operating personnel are involved in system development and operation, and personnel expenses do not vary substantially in relation to revenue scale or the number of client companies.
Other personnel include those who provide explanations to potential clients who have requested information and Customer Success Team members, who assist in the adoption of Wevox and getting clients’ employees to use it.
New businesses (1.5% of revenue in FY09/20)
To maintain growth over the long term, Atrae plans to accelerate the growth of its mainstay businesses, Green and Wevox, while also creating and monetizing multiple new businesses. Based on this plan, in the past, the company created the JobShare social recruiting service (launched in December 2012) and the TalentBase talent mining service (launched in March 2015 as an update of JobShare).
As of July 2021, Yenta is the main service included in new businesses, but Shared Research understands that Atrae plans to add its service lineup.
Yenta matching app for business professionals (1.5% of revenue in FY09/20)
Service overview
Yenta is a matching app for business professionals that utilizes artificial intelligence (AI). Users receive 10 profiles recommended by AI, and if they find they are mutually interested, they can exchange information and interact with each other by exchanging messages or even meeting in person.
Atrae launched the app in January 2016 in the Tokyo area only, before rolling it out nationwide in May 2020. The cumulative number of matches topped 3mn by end-May 2020. The company says Yenta has actually been instrumental in creating connections between entrepreneurs, sometimes leading to business partnerships.
Yenta’s revenue, expenses, and KPIs
Yenta’s revenue can be calculated as the number of paying members multiplied by the average monthly user fee per paying member, but Atrae does not disclose these figures. Yenta generated revenue of JPY52mn (-24.6% YoY) in FY09/20. The majority of costs related to Yenta are personnel expenses.
Earnings structure
Note: Advertising expenses per newly registered user is total advertising expenses divided by number of newly registered user in one year.
Note: Advertising expenses per person hired is total advertising expenses divided by number of people hired.
Revenue
Atrae’s revenue comprises revenue from Green, Wevox, and new businesses. In FY09/20, Green generated 86.4% of total revenue, Wevox 12.1%, and new businesses 1.5%. Factors that determine revenue for each business are explained in the business overview section.
New businesses revenue mainly comprises revenue from Yenta. In FY09/20, Yenta accounted for 1.5% of total revenue.
Cost of revenue
Green’s cost of revenue comprises writer costs and job change incentive costs. The cost ratio is about 2%.
Writer costs: The company outsources the preparation of company profiles for clients posting jobs on Green.
Job change incentive costs: The company presents Amazon gift cards to jobseekers who successfully change jobs via Green.
SG&A expenses
Main items included in SG&A expenses are advertising and personnel expenses.
Advertising expenses
Ad spending is necessary to attract jobseekers. Atrae mainly uses online advertising and keeps advertising expenses to about 40% of Green’s total revenue. According to the company, while managing ad spending by using cost per action (CPA, in this case meaning the cost to acquire a new user) as an indicator, it will consider increasing ad spending where it deems it possible to increase the number of registered users, perhaps even pushing the advertising expense-to-revenue ratio above 50%.
Green mainly uses online advertising such as search-linked ads. However, starting in FY09/19, Atrae has been using TV ads to attract jobseekers it had been unable to reach through online advertising alone and to raise awareness of the service. The significance of TV ads is that, with online ads, the ratio of click-throughs that lead to registration (click-through performance) is higher for ads that show up first in search results, but if the product or company’s name is easily recognized, it is still likely to be clicked even if it shows up in the second or third position. For this reason, increasing awareness of the service through TV ads may lead to improvement in CPA.
According to Shared Research’s understanding, when increasing its spending on online advertising, the company ends up having to select and bid on search terms with low conversion rates, which tends to reduce cost-effectiveness.
Personnel expenses
Personnel expenses comprise employee salaries and allowances and directors’ compensation.
Salaries and allowances are trending upward as the employee count grows. However, Shared Research understand that, since the company’s businesses are centered on technology-based services, the headcount is growing due to the launch of new businesses rather than because revenue is expanding. It was the launch of the JobShare social recruiting service in December 2012 and Wevox in September 2016 that led to growth in headcount thereafter.
At the mainstay Green and Wevox businesses, the majority of operational staff are those who develop and operate systems, and changes in revenue scale or the number of clients cause no significant changes in headcount. In addition, client acquisition centers on natural inflow via passive sales. The company does not actively conduct sales through phone calls or visits, so the sales team is relatively small.
The average employee salary is stable at just over JPY5mn.
Strengths and weaknesses
Strengths
Ability to achieve low prices that conventional recruitment agencies cannot by replacing the matching process with a system and controlling costs:
In the case of conventional recruitment services, career consultants use their own experience in matching candidates with employers. The bulk of recruitment agency costs is personnel expenses related to these consultants, and to cover these expenses, the agencies charge success fees equal to 35% of the jobseeker’s annual pay. Green, on the other hand, has accumulated and analyzed data on the hiring process from the perspective of both employers and jobseekers for over 15 years, and has developed its own algorithms for its recommendation system enabling it to achieve a matching rate (screening pass rate) of 25–30%, comparable to what career consultants at recruitment agencies can manage. This means that Green has no need of career consultants, so it can set relatively low fees. In addition, Green has a natural inflow of client companies via passive sales, allowing it to control its spending on sales personnel. Atrae says the strength of conventional recruitment agencies is the information gathered by their career consultants and salespeople. An automated matching system like Green would erode the business of those agencies, making it difficult for them to launch any sort of competing service.
Competitive pricing and superior data accumulation of the Wevox engagement analysis tool:
In addition to being less expensive than similar services, Wevox’s head start in the business means it has more companies using the service and a greater volume of response data. Competitor Link and Motivation offers its Motivation Cloud service for about JPY100,000 a month (for up to 50 employees) and focuses on consultant-led improvement services rather than quantitative analysis. Shared Research believes that, unless it changes its business structure, Motivation Cloud will not be to compete with Wevox in terms of pricing. Our understanding is that, with a service like Wevox, the longer the service operates and the greater the number of companies using the service, the more response data the company accumulates and the better it can verify the effectiveness of solutions implemented in response to issues faced by clients. Having more data improves the accuracy of analysis, allowing the company to provide optimal solutions.
Data analysis and system development capabilities that support the core of its businesses:
Atrae plan services such as Green and Wevox, performs statistical analysis of the data required for such services, and builds and operates the systems in-house using AI and other technologies. As of October 2020, it had 67 employees supporting these operations, most of whom are the engineers and designers involved in system development. It also has data scientists in its employ to handle statistical and impact analysis and calculations. Atrae has a unique organizational management policy characterized by a flat organizational structure and personnel evaluations based on 360-degree assessments. In addition, every employee owns stock in the company and the company’s hiring criteria emphasize sociable temperament and compatibility with existing employees. The management policy is intended to speed up decision making and bring out employees’ sense of satisfaction, cohesion, and belonging (in the 2019 edition of “Best Workplaces,” Atrae was ranked No. 1 in the small company category).
Weaknesses
Limited brand recognition as a latecomer to the recruitment market and lower jobseeker count (a key competitive factor) than larger peers:
Shared Research understands that recruitment services have a circular structure in which the more jobseekers there are, the more employers will join, and the more employers there are, the more jobseekers will use the service. For this reason, leading companies that already have both jobseekers and employers using their services, along with good brand recognition, have an advantage over Atrae, a relative newcomer. Japan’s largest recruitment agency, Recruit Agent, had 1.25mn newly registered jobseekers between April 2019 and March 2020, whereas Atrae’s mainstay Green service had 120,000 new users in FY09/20. In addition, Recruit Agent had 250,000 job postings, compared to 19,000 at Green (according to research by Shared Research).
Lower ratio of large corporate clients, a large and growing market, at Green than at peers:
Shared Research understands that the low cost of Green is an advantage for employers, and that many of its clients are IT and web-related SMEs that are cost-sensitive. However, according to the Ministry of Health, Labour and Welfare’s “Survey of Private Human Resources Business Status,” the top reason employers use recruitment services is “to be able to hire candidates with the desired skills,” while “low recruitment cost” is less important. As a result, when comparing Green with large recruitment agencies, Green has more job postings from SMEs with 100 or less employees and a lower percentage of postings from large companies with more than 300 employees. For instance, to compare Green and Recruit Agent (Japan’s largest recruitment agency), 53% of Green’s clients as of April 2021 were SMEs with no more than 100 employees and just 12% were companies with 1,000 or more employees, while a mere 18% of Recruit Agent’s clients were SMEs with less than 100 employees and 45% were large companies with 1,000 or more employees (according to calculations by Shared Research based on search results on the websites for the respective services). However, looking at the job change market, the number of workers moving to SMEs is falling and the number moving to large companies is growing, for reasons including “higher income” and “concern about the future of the company.” According to the Ministry of Health, Labour and Welfare’s “Employment Statistics,” the number of people changing jobs has been growing a CAGR of 1.9% over the last 10 years. This includes a 4.5% growth rate in the number of people moving to companies with at least 100 employees and an ev