**Genesis of the Idea
Before starting Snaptalent in October 2007 the founders and I had spent the summer working on an idea for contact management software that was very similar to 37 Signals' product Highrise. We stopped working on this soon after Highrise launched, but kept exploring ideas around what people find such software useful. This led into a lot of discussion about recruiters and the recruitment market. From our analysis we determined that recruitment was a large market with very little technological innovation, ripe for disruption. We thought it was big problem was that there were a lot of places to post jobs on the internet, but knowing the right place to post was difficult. We decided that we could add value by helping people find the best place to post their jobs. We wanted to make a site where people could upload a job posting and would be told where to post it based on past performance of given sites in filling similar jobs. The tricky part about this was actually figuring out what job posts were successful and which ones were not, which is why we decided to build our own network. We needed to have more complete data in order to measure and optimize the distribution of postings. This is what became the first version of Snaptalent. (Techcrunch Review -
http://www.techcrunch.com/2008/03/12/snaptalent-targets-job-candidates-where-they-work-and-spend-time-online/)
**Post-Launch
We were able to get a fairly good number of blogs signed up initially to cover programming verticals, which is the market we decided to tackle first. However, as a few months passed the novelty of a different type of display ads wore off and our click through rates started to drop off. We initially started at around a $1.50 eCPM and fell off to well below $1.00 after a few months (calculated based on a 75/25 split of the revenue if my memory serves me right) as our CTRs dropped dramatically. We also experienced the inability to convert the clicks we did get into actual candidates. We were charging $500 for 1000 clicks ($0.50 CPC) and delivering on average only about 2 candidates per position, a completely unsatisfactory number amongst an audience of recruiters who often measure the success of a channel by the bulk number of candidates it generates per dollar spent. We had a funnel with a less than 1% conversion rate from view to click and again from click to candidate. Even when we did acquire candidates we still got a resume only 50% of the time and often emails to the submitted email address would go unanswered. After 3-4 months our numbers were at the point where we would have almost needed an order of magnitude improvement on total conversions in order to keep our current customers happy and to further grow the ad network the way we had planned. There were certainly some notable successes, both Justin.tv and Weebly found hires through Snaptalent ads, however these were unfortunately only merely happy exceptions to the bleak economic picture that the aggregate numbers painted.
**Mistakes
Before starting Snaptalent we completely failed to evaluate what was going on in our market. We thought there was a problem that could be made better with technology and decided to tackle it without talking to *any* potential customers about if what we were doing was even useful or necessary. We did not have a deep understanding of what recruiters did on a day to day basis, none of us had ever recruited or even really talked to anyone who had. We decided to attack a market because it appeared to be inefficient, without gaining internal understanding of what was actually happening in the market and possible reasons for that inefficiency. We didn't understand what recruiters based their decisions on when making vendor purchasing decisions, we didn't even know who the decision makers and budget holders were within the organizations we were targeting. We were completely blind from a market perspective.
This problem was not only limited to the recruiting side of the market. We also had very little understanding of online advertising. For example, at the time we raised money, we didn't even know it was possible to purchase inventory from bigger networks like advertising.com to run our own ads. Our misunderstanding of online ads also led us to very largely overestimate certain parts of our business model, our clickthrough and conversion rate assumptions were incredibly high leading to overestimation of number of candidates we would generate and underestimate of what our payouts to publishers would have to be in order to maintain acceptable eCPMs.
One of the few firms we pitched to who passed on the Snaptalent deal was First Round Capital (I now have a lot of respect for them because of this). They basically predicted how the first version of Snaptalent would go down in flames, but at that point we were not ready to listen. The following email and attached spreadsheet (sent to our lead investor then forwarded to us) are pretty telling:
"I think we are going to pass on SnapTalent. I like the guy and the concept, but the model we put together just doesn’t play out the way we would like it to. I’ve attached it here, and you can see that if we assume $5k cost per hire, we get to a very reasonable $2.50 eCPM. But I don’t believe $5K is the right number. I believe it is somewhere between $75 (what Craigslist charges) and, say, $2K. At the high end, that leads to an eCPM of $1 which is not going to get over the bar of most publishers. As the low end, the eCPM and the CPC converge....way bad ;) I’m sure we screwed something up and you are going to make a ton on this deal, and I thank you for giving us time to look at it, but it is not going to work for us right now."
