Monster Roars Out of China 巨兽拟出售中华英才网

I’ve always wondered whatever happened to online job site ChinaHR since its purchase in 2008 by US industry leader Monster Worldwide (NYSE: MWW); now I have my answer with new reports that the tie-up has been more or less a failure and that Monster plans to sell its main China asset. This latest disaster shouldn’t come as a huge surprise to anyone, since Monster follows a long list of much better known US web giants that have also tried and failed in China, including Google (Nasdaq: GOOG), Yahoo (Nasdaq: YHOO) and eBay (Nasdaq: EBAY).

The case does seem to illustrate the fact that foreign web firms are often faced with a difficult choice when deciding to play in China. On the one hand, they can buy minority stakes in local firms and let the local management continue to run the operation — a situation that often leads to conflict and failure due to different management styles.

On the other hand, such US web giants can build up their own operations or buy a controlling stake in an existing company and install their own managers. But that formula also often ends in failure, as such western-trained managers often don’t fully understand the Chinese market and also can’t engage in some of the business practices of their China based peers, such as allowing piracy on their sites.

Monster didn’t give a detailed explanation for its decision, and would only say that it plans to sell its ChinaHR asset as part of a broader company reorganization. (English article; Chinese article) The China business was still losing money 7 years after Monster began buying into ChinaHR with a series of stake purchases starting in 2005. It ultimately paid more than $225 million for the stake, including its 2008 purchase of 55 percent which made it the company’s complete owner.

It’s unclear how much Monster might get for the company in China’s current economic downturn, which includes a relatively weak job market. Industry leader 51job (Nasdaq: JOBS) has a current market capitalization of $1.5 billion, though ChinaHR is probably much smaller. In an interesting development, 51job shares jumped 8 percent in Thursday trade. Most of that was probably due to a strong earnings report; but investors may have also been excited about the possibility that the 51job could consolidate its leading position with a purchase of ChinaHR.

Such a purchase could come at a bargain price, since Monster Worldwide has indicated it plans to sell off not only its China assets, but possibly other global assets as well as it focuses on improving performance at its struggling US-based operation.

The fact that Monster couldn’t make ChinaHR profitable or mold it into an industry leader after so many years looks like a familiar story for many US web firms. Both Yahoo and eBay bought companies that were previous leaders in their fields for more than $100 million in the early 2000s, only to see those companies rapidly fade and ultimately become insignificant players for some of the reasons I mentioned above.

Other companies like Amazon (Nasdaq: AMZN) and Expedia (Nasdaq: EXPE) are still trying in the market, though neither had been able to build its China acquisitions into an industry leader after years of trying. Monster clearly had other bigger problems that led to its decision to sell its China operation now. But the company’s bigger reorganization was also a convenient excuse to dump an underperforming Chinese asset that never really realized its potential.

Bottom line: Monster’s planned sale of its ChinaHR operation is the latest withdrawal of a western firm from China’s tough Internet market.

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