How the HeadHunter service grew from a recruiting agency to the hottest IT company in Russia worth more than $ 1 billion

How the HeadHunter service grew from a recruiting agency to the hottest IT company in Russia worth more than $ 1 billion
How the HeadHunter service grew from a recruiting agency to the hottest IT company in Russia worth more than $ 1 billion

Recruiting service has gone from a modest project of Runet pioneer entrepreneurs to a serious business with revenue of more than $ 100 million per year and a capitalization of $ 1.2 billion on the NASDAQ exchange. What do investors appreciate HeadHunter and how was it influenced by billionaire Yuri Milner, Mail.ru Group holding and ambitious competitor startups?

“I remember trying to reap very hard [on the display, the“ bell ”, marking the start of bidding]. Probably, I wanted to finally let this whole stressful process go forever. Applause, flashbulbs, smiles, confetti rained down ”, the memories of the IPO on the American NASDAQ exchange still evoke lively emotions from the director general of the Russian recruiting headHunter service Mikhail Zhukov, although almost a year has passed since the placement – May 9, 2019 .

On the last Victory Day, HeadHunter became the first technology company from Russia in six years to venture to offer itself to Western investors, and it did not fail: the high demand for securities made it possible to raise $ 220 million and obtain a capitalization of $ 675 million, which has since almost doubled to $ 1.2 billion

The exchange success was preceded by almost twenty years of the evolution of the service from an online recruitment agency to one of the flagships of the Russian IT industry, a participant in the Forbes rating of the 20 most expensive Runet companies.

During this time, HeahHunter went through all the landmarks for the local segment of the network: development by enthusiastic founders, partnership with Runet investment demiurge Yuri Milner F 31, falling into the tentacles of Mail.ru Group holding (and slipping out of them), long development of an effective business model , difficult going through crises, gaining strategic investor-shareholders and – like a cherry on the cake – IPO on NASDAQ.

Forbes recalled the history of the development of the hottest technology company in Russia in the 2019/2020 season and studied the ecosystem of national online recruitment, in which competition is tightening year by year under the onslaught of other major players and ambitious artificial intelligence startups.

Carpenter, chemist, five apartments

As expected of a successful technology company, HeadHunter emerged as a project based on the enthusiasm of the founders – Mikhail Frolkin and Yuri Virovets.

Frolkin, who did not graduate from high schools twice — Fiztekh and a linguistic university — managed to work as a carpenter in his youth at the dawn of the 1990s, and later got a job at the Ankor recruitment agency, because, as the entrepreneur recalled in an interview with the YouTube project Russian Norms! “, Possessed a combination of competences, rare at that time, -” knew English and a computer. “

For two years, he pumped out skills in the field of recruiting and decided to establish his own recruitment agency People You Need. The established contacts helped – the initial capital for the company, according to the entrepreneur, was “prepayment” from Mikhail Fridman F 7: the billionaire allegedly asked Frolkin to help him find the chairman of the board for Alfa Bank. The order was not fulfilled, but Frolkin, by his own admission, still “worked hard” for the co-founder of Alfa Group. Friedman, in turn, told Forbes that he was not familiar with Frolkin and “never contacted strangers about the selection of the chairman of the board of Alfa Bank.”

Co-founder of HeadHunter in an interview with Russian Norms! He also stated that on such “high-level” orders his business developed in the early years – by the end of the “dashing” decade the agency earned $ 200,000-300,000 a year.

Virovets, a native of a family of chemists and holder of diplomas of the chemical and psychological faculties of Moscow State University, got a job at People You Need in 1998 – before that he had built a career in education and lived in Israel for several years. A year later, Frolkin attracted him to the development of a new project – an online database of resumes of predominantly white-collar workers, access to which could be sold to corporate users. The base was based on the system for storing and searching resumes created by Frokin for the clients of his agency. In addition, “a lot was copied from monster.com,” the world leader in online recruitment for the dot-com boom era, admitted Virovets Inc. Due to the fact that the stake was initially made on monetization through the sale of access to the database, the company secured itself from dependence on unstable advertising revenues.

The harbinger of HeadHunter – the site of the National Job Club – was launched in 2000. Virovets became the CEO of the online subsidiary People You Need, and later received a 20 percent share and the status of co-founder in the project.

Frolkin invested about $ 250,000 in the platform – an amount at that time similar to the cost of “about five two-bedroom apartments in Moscow,” recalls Virovets in an interview with Forbes (Frolkin did not respond to Forbes request). By 2002, the site “grew” a new important function – private users were able to post resumes on their own.

The project turned out to be one of the pioneers of not only the Runet, but also the entire HR industry on the network – even the current flagship of the LinkedIn industry was founded only in 2002. Lack of experience and established business models has benefited, I am convinced: “There were already people on the Internet who knew how to catch up with the audience, but it’s good that we didn’t have such competency – we immediately tried to do serious business without junk traffic.”

In 2003, the National Job Club sign changed to HeadHunter. This happened after Frolkin and Virovets agreed to merge their assets with RBC: instead of the nj.ru and job.rbc.ru portals, the headhunter.ru domain earned. According to Virovets, the revenue of the combined company, which thanks to RBC sharply increased traffic, amounted to approximately $ 100,000 per year.

Initially, the partners agreed that RBC would get 49% of HeadHunter, but quickly realized that they had different ideas about the development strategy of the project. Then Frolkin and Virovets bought back the share of RBC. “In fact, the division was conceptual and not legally formalized. We could not pay anything, but we didn’t want to spoil karma, ”the former HeadHunter CEO admits. The amount was agreed with the then head of RBC Soft Andrei Kuzovkin, and the buyback transaction took place in 2006-2007 (the money of the new investor Yuri Milner helped – more on that in the next chapter). “In fact, it was a buyback of a domain,” Virovets notes today.

While negotiations were underway for a “divorce”, the founders of HeadHunter bought the hh.ru domain, moved to it and began to move hehe.ru as the main brand – they were afraid of a deal breakdown with RBC. They purchased a capacious address from a cybersquatter for about $ 15,000. “Of course, we did not say that we were from HeadHunter and sent another person, so we managed to buy cheap enough,” Virovets recalls with a laugh.

Milner, Volozh, Mail.ru Group

Another eminent People You Need client from the Forbes list was IT entrepreneur and venture investor Yuri Milner F 31. In the early 2000s, he actively launched local counterparts of Western online services in the Russian market and could not help but pay attention to the rapidly growing recruiting project Frolkin and Virovets.

The founders of HeadHunter at that time managed not only to “divorce” from RBC, but also to repel the attempt of takeover by Yandex. In an interview with Russian Norms! Frolkin claimed that the team of Arkady Volozh insisted on buying all 100% of the company, but this option did not suit him. In addition, in parallel, the search giant acquired the My Circle social network, which the main shareholder of HeadHunter also claimed.

“Then Milner came and said:“ I don’t need 100%, I don’t need any share: sell 10% – I’ll be satisfied, ”Frolkin recalled. It was not possible to get Milner’s comments at the time of Forbes publication. In 2007, the businessman’s company Digital Sky Technologies (DST), from which in the future the eponymous venture fund and holding Mail.ru Group grew, became the owner of 24.5% of the recruiting site. The entire HeadHunter business was valued at $ 61 million.

“No one at HeadHunter was eager to merge with the Mail.ru Group, and the company understood this.”

Milner’s money was used by the service to buy several smaller competitors in Russia, the Baltic countries and Israel (for example, the promising career.ru domain was “eaten”). The company’s revenue reached $ 5 million a year, the database – 1 million resumes, and the customer pool was filled with new important customers – Philips, Microsoft, Wimm-Bill-Dann, oil corporations, etc. Revenues were able to sharply increase thanks to the introduction of publication plans vacancies. “We were afraid that there would be an outflow of customers, but it turned out to be insignificant,” says Virovets.

In 2008, DST bought another 12.3% of HeadHunter for $ 11 million, and in 2009 – 54.6% for $ 38 million. In these rounds, the service estimate first increased to $ 89 million, and then fell to $ 69.3 million – affected the crisis. Milner also helped the company attract investors to the American Tiger Global Management Fund and initiated the HeadHunter to be audited by KPMG auditors. “He said:“ Guys, you need to do a completely white business, no cash payments, ”Virovets explains.

In 2010, Milner singled out a Mail.ru Group, an aggregator of services from Runet, from DST, which conducted an IPO on the London Stock Exchange. HeadHunter became part of the holding structure, and by 2012 it began to belong to it 100%.

The founders at that time no longer controlled the business. Frolkin “left” the shareholders before the crisis of 2008: he received shares of Mail.ru Group and earned about $ 60 million on the deal. Virovets also exchanged his share for the holding’s securities, but a little later – in 2010. The package was estimated at $ 12 million, the entrepreneur said.

Crisis, CEO, New Growth

“Both I and Mikhail understood that we would not work for the company forever, so we immediately looked for a professional manager,” recalls Virovets. In 2008, such a manager was found – Mikhail Zhukov was appointed CEO of HeadHunter.

It was he who became the face of the company in the next decade of development and determined its strategy: HeadHunter ceased to be a project related to its own founders, and transferred to the management of a hired team. “The founder quickly calms down when his brainchild becomes a source of income, he often does not have special personal ambitions. And the company of managers is a group that wants to take place and move on, developing their reputation, moving from managers to owners of the company, ”Zhukov described this fundamental difference between HeadHunter and other online recruiting platforms in an interview with Vedomosti.

A graduate of the Aviation Institute, he spent his entire career in the IT industry, and met the founders of HeadHunter back in the late 1990s, when he worked as Deputy Director General of the IT company Anatoly Karachinsky F 118 IBS. “HeadHunter helped us close difficult positions and find interesting people,” says Zhukov in an interview with Forbes. For example, it was Frolkin and Virovets who in the early 2000s “brought” to the IBS the position of financial director Olga Yeremeyeva, in the future general director of the Pandora jewelry network in Russia.

Directly at HeadHunter, Zhukov came from the position of the head of the Sibur corporate office. Milner at that time was already a shareholder of the service, and Frolkin rarely appeared in the office, preferring to spend time on his own projects.

“We immediately tried to do serious business without junk traffic”

“I saw that HeadHunter is developing correctly, and even began to wonder how I can help. But when the 2008 crisis struck, I realized what my role was, ”says the CEO of the company. The main decline in the stock market began in August, but at HeadHunter, the changes were felt back in May: sales stopped growing, and customers began to close their subscriptions with the words “our bosses have a bad feeling about it.” At the same time, online recruitment remained the “chip” of large companies, and even the departure of several customers hit the business painfully – according to the results of 2008, revenue slipped by about 25%, and the staff had to be reduced by a third.

Anti-crisis measures helped: by February 2009, sales had returned to growth and the business had “adapted”, Zhukov said. HeadHunter has now developed through a network of units in the regions and CIS countries, developing an audience of mobile devices and finding new customers, not necessarily the scale of a large business.

The stress lesson of the crisis, however, was learned, and in 2014, when the ruble fell off, and Russia fell under Western sanctions, the company used the worsened labor market conditions for its own benefit – the popularity of online recruiting only grew. HeadHunter didn’t arrange a feast during the plague: all bonuses were canceled (except for the sales commission), and even the management decided to sublet a part of the new office. “We paid zero growth for the 2014-2015 crisis, and before that we had grown by about 30% a year,” states Zhukov.

The main driver of HeadHunter development at the dawn of the “tenths” was the recruitment of small and medium businesses into clients. More and more companies were filling vacancies using the platform – “production personnel have not yet been hired, although they were looking not only for managers, but also for a wide class of office employees,” the HeadHunter CEO said. In 2015, he saw that the mass segment of applicants “had plenty of time at Odnoklassniki”, played a lot of computer games and began to see what was useful could be found on the Internet ”. So HeadHunter turned into a service for searching not only “white”, but also “blue-collar workers”.

The share of large companies, which until 2015 brought 100% of revenue, gradually began to decline and now is about 30%, and more than half of the income comes from small and medium-sized businesses.

Despite the fact that HeadHunter remained a commercially successful project, Mail.ru Group in its strategy focused on the social media sector and was looking for a buyer for a non-core asset.

Buyback, Goldman and Elbrus

The recruiting platform fell into the Mail.ru Group ecosystem in many ways not of its own free will – it was simply that all the former Russian assets of Yuri Milner were on the holding, when he was re-qualified as an international investor and became a Silicon Valley venture star. At the same time, the HeadHunter business model, focused on income from corporate clients, did not fit into the strategy of the parent structure, which focused on user services.

As a result, the board of directors of the holding decided to sell the project. A source close to the top management of Mail.ru Group then explained to RBC that the company seeks to shed its core assets and focus on projects in the field of communications and entertainment: “Mail.ru Group is trying to turn from a solyanka team into something understandable for investors “. In addition, the holding needed money to pay off a loan at Gazprombank for $ 585 million raised to buy 48% of VKontakte from the UCP fund, the source noted.

Yuri Virovets believes that several factors influenced the sale, one of which is “purely psychological”: HeadHunter always maintained “a completely different corporate culture and even a separate office”. “No one at HeadHunter was eager to merge with the Mail.ru Group, and the company understood this,” recalls the co-founder of the service. In addition, according to him, HeadHunter “has less margin than the main services of [Mail.ru Group], so he pulled the group’s overall margin down, which is important for the exchange.” “In 2015, HeadHunter was a non-core asset for us, and we decided to focus on the development of other areas,” a Mail.ru Group representative succinctly said about breaking up with HeadHunter.

A potential buyer loomed on the horizon in 2013 – it was the Elbrus Capital private equity fund. It was founded in 2007 by former top managers of Renaissance Capital and Alfa Group Dmitry Kryukov and Alexander Savin, as well as Robert Tylen, founder of the Waterland Private Equity investment fund. Partners purchased the assets of the digital division of Renaissance Direct Investments from Renaissance Capital, among which, for example, there was a large share in Milner’s DST – the fund could earn more than $ 57 million from IPO Mail.ru Group. In total, Elbrus raised two fund – by $ 324 million in 2007 and by $ 550 million in 2014. Kryukov and his partners became guides in the Russian market for international institutional investors – Credit Suisse, the Finnish pension fund Varma and others. Among the objects of investment are CIAN, BlaBlaCar, PickPoint and other projects.

“When the 2008 crisis struck, I realized what my role was”

In the Elbrus portfolio, the recruiting service looked more organically. “We knew HeadHunter from the Mail.ru Group, which we invested in 2007, and we liked this business and its management,” recalls Kryukov, managing partner of the fund, in an interview with Forbes. The idea to buy an online recruiter came about when he realized that HeadHunter “for a number of reasons did not fit into the strategy of the Mail.ru Group.”

The first attempt at the deal came in 2014. Elbrus needed a partner. “[The deal] was big for us,” Kryukov explains. A syndicate of investors has already been collected, but in December a crisis erupted and potential partners “fell off”. “A number of investors called me and said:“ We are not ready to invest in Russia now, ”Kryukov complains.

For several months, the “deal died”, but a year later Elbrus finally carried away with the idea of ​​buying HeadHunter a major institutional investor – Goldman Sachs Bank. The parties managed to settle all the difficulties and agree on the amount of 10 billion rubles by February 2016. Elbrus received 60% of HeadHunter, Goldman Sachs – 40%.

“We have known HeadHunter for several years, and this gave us confidence when almost everyone was afraid to make investments in Russia,” Kryukov is proud of the work completed. After the purchase, the Elbrus team went to the recruiting service office at the request of Zhukov to tell the entire management about the new shareholders: “Already then we said that our goal was to make an IPO in the second half of 2020.”

The new shareholders believed that the company was underinvested, so they invested in marketing, improving the mobile application, and also began to pay more attention to the development in the regions and the blue-collar segment. As a result, for several years the company has changed a lot: it began to work in all segments, regions and professions, Kryukov lists. In 2017, HeadHunter absorbed another major competitor – the portal Job.ru, previously owned by Pronto Media. At the end of 2018, the company had more than 250,000 paid customers, and most of them were no longer large, but small and medium-sized businesses.

Investors made a firm decision to go for an IPO back in the fall of 2017. The company was ready to go public on the stock exchange in the summer of next year, but the negative situation again got in the way: in April 2018, the United States imposed sanctions against Russian businessmen and heads of state-owned companies and “the market closed for several months,” Kryukov explains.

Circus, discount and H2O

“The IPO day was certainly exciting, but there was no fear or stress. Probably because there was no risk that something would go wrong either, ”recalls HeadHunter CEO Mikhail Zhukov.

The service team, as befits the management of the company preparing for the placement, went on an investment tour in advance – a road show. These tours, according to the rules of the NASDAQ and the US Securities and Exchange Commission (SEC), should have lasted two weeks. Inside the company, the “guest performers” were nicknamed Flying Circus – “Flying Circus”, by analogy with the cult sketch series of British comedians “Monty Python”. And the IPO project itself was given the codename H2O – an abbreviated version of the phrase HeadHunter to IPO, where instead of the preposition to – is the number 2.

“In our case, the road show spanned four cities. It started in London, then flew to the States. They met with investors in Chicago, Boston, San Francisco and spent a couple of days in New York just before the IPO, ”Zhukov said. In addition to him, the circus troupe included another old-timer manager, financial director Grigory Moiseev, as well as corporate development director Dmitry Sergienkov and marketing director Olga Metz.

The decision to include the woman Zhukov in the team was made personally: “Such a gender equivocation on our side turned out, although there was some surprise on the part of potential investors – women in the road show are even rare in the West. This is still more of a man’s story. I think the reaction on their part was even more friendly because of this. ”

“At the meeting, HeadHunter took an aggressive stance and a constructive dialogue failed”

A little more than ten employees came to the IPO from Russia – everyone who was maximally immersed in the project, as well as representatives of shareholders and underwriting banks.

Inside NASDAQ, Zhukov was most struck by how “a clear, perfect mechanism to enter the public market.” On the same day, three or four more companies were listing with HeadHunter, he wonders.

The entire bidding start ceremony lasted about 10-15 minutes. Exchange employees prepared Zhukov in advance and rehearsed the sequence of actions. At the right time, the HeadHunter CEO stood on a small platform, the countdown began, and on the number 1 Zhukov pressed a virtual button on the monitor – on NASDAQ this symbolic action looks modern today, unlike the New York Stock Exchange, where you must ring the bell in the old way. After the ceremony, the entire team moved to the trading zone to observe the first deals with HeadHunter shares.

This was the first IPO of a Russian company on the American stock exchange since 2013. “There are many investors in the USA who understand what online recruiting is,” Dmitry Kryukov explains the bold choice of the exchange.

The IPO result exceeded investors’ expectations, the managing partner of Elbrus Capital is recognized. Demand for HeadHunter shares was ten times higher than the supply, and starting capitalization of $ 675 million a day later grew by almost a quarter, to $ 837 million. “I, and everyone, I think, was confident that with such a re-subscription of the order book surprises with a price is hardly possible. Underwriting banks and shareholders felt calm, without unnecessary nerves, which was passed on to us. I don’t remember that I was very worried, it was rather a relief that the moment had come for which we had been preparing for two years, ”says Zhukov.

Today, HeadHunter shares cost almost twice as much as on the day of the IPO, but the reserve for market development is still large: according to Goldman Sachs forecast, the growth in earnings per share of the service in 2019-2023 will be 33%, and while securities are traded at a discount of 37% to world analogues.

Kryukov agrees with this: according to his assessment, due to country risk, HeadHunter was placed at a discount of about 30%, and is trading 15-20% below the fair price. “If HeadHunter were an American, Chinese or European company, it would have cost significantly more,” the project investor is sure.

He attributes the success of the IPO to the fact that HeadHunter operates in a market that will be increasingly automated, according to the “fundamentally attractive” business model of the two-sided marketplace – a platform that unites corporate clients and end users. It is difficult to build an effective mechanism in this area: on the one hand, a large number of people need to constantly look for work, on the other hand, a large number of employers must offer it, argues Kryukov. “But when this platform was created [as in the case of HeadHunter], the business will work reliably. The more people look for work on the platform, the more attractive it is for the employer, and vice versa, ”he concludes.

Today Elbrus owns 37.5% of HeadHunter, the same number of shares is traded on the stock exchange, Goldman Sachs owns 25%. For shareholders, the deal to buy the service from Mail.ru Group became a “very successful investment”, their investments paid off, Zhukov told Vedomosti. In 2018, the company paid dividends of $ 0.36 per share, having spent 75% of adjusted net profit for this purpose, and, according to the CEO, plans to maintain the practice of encouraging shareholders in the future.

Market, Share, Superjob

“One of the features of our corporate DNA is hellish paranoia,” admitted HeadHunter CEO Mikhail Zhukov in an interview with Vedomosti. The company is the undisputed leader in the Russian online recruitment market, however, competition in the segment is tightening, and all new players, including those “armed” with influential shareholders with huge resources, are claiming their piece of cake.

According to Goldman Sachs, in the period until 2023, the share of HeadHunter, despite the efforts of the pursuers, will increase from last year’s 54% to 60%. In 2019, revenue, according to the company’s own forecast, amounted to about 7.7 billion rubles, 27-28% more than a year earlier. Three main revenue items today are charging companies for the publication of vacancies, integrated corporate subscriptions and paid access to the resume database, and small and medium-sized businesses prevail among customers.

The entire market will grow from 10.3 billion rubles in 2018 to 22.6 billion in 2022 – these are average annual “plus 28%,” analysts at J’Son & Partners predict. The segment is attractive due to low unemployment, stagnation of the workforce, lack of trade unions and high staff turnover, experts say. All this will attract more and more new strong players.

“The situation on the market is changing – more and more mid-level and high-level specialists have a profile on hh.ru”

Among the current competitors, the most famous is the Superjob service. It is also a site with a rich history – it was launched in 2000 and, as the founder of Superjob Alexei Zakharov assures, he became “the first person Yuri Milner came to” when he thought about the appearance of an online recruiter in his portfolio. Two sources on the market told Forbes that after the HeadHunter deal with Milner, Superjob shareholders were also looking for a buyer, but potential investors were scared off by the high price. “We are developing as part of our strategy and remain an independent player,” Zakharov told Forbes through a representative. In 2019, market participants and experts estimated the share of Superjob at 20-30%, and the revenue of the service, according to Forbes, amounted to 2.1 billion rubles. The valuation of $ 115 million allowed the portal to enter the Forbes rating of the most expensive Runet companies.

Other applicants for the destruction of the hegemony of HeadHunter are Sberbank owned and declared ambitions to become the market leader portal “Work.ru”, “Salary.ru”, as well as services “Maila Group” Yula and Worki. Goldman Sachs analysts advise HeadHunter to be particularly wary of Avito’s recruiting project. Since 2013, this service has been focused on “blue-collar workers” and small and medium-sized business clients whose HeadHunter competencies began to accumulate only in recent years, and the accounts of its parent holding Naspers have accumulated fantastic $ 8.7 billion (as of end of 2018). “Our strength is that most Russians have developed the habit of using Avito to solve everyday problems,” says Managing Director of Avito.Rabota Artem Kumpel.

In the “blue-collar” segment, the Worki and Yula services controlled by the former HeadHunter shareholder are also developing. Both are integrated into the Mail.ru Group ecosystem, and therefore have direct access to users in their usual habitats, for example, in social networks. So, last year Worki and VKontakte launched an application based on the VK Mini Apps platform in which you can find a job, create a resume, respond and get an interview without leaving the social network. The holding acquired control at Worki in 2019, and this “allowed to strengthen the position of Yula, which launched the vertical of work in June 2018, in the online recruiting market,” says a representative of Mail.ru Group. The holding’s current activity is not surprising: from the IPO of HeadHunter, it followed that the Mail.ru Group could not create a competing service for three years after the sale of the service. A Forbes source on the online recruitment market believes that HeadHunter investors were in a hurry to go public IPO because they feared the former shareholder would launch a new project.

Another challenge for HeadHunter is specialized resources for finding top personnel, who often build their own positioning on criticism of the market leader. “The point is not that looking for work at the Headhunter is a breeze. And the fact that the jobboard (job posting sites such as HH.ru and Superjob. – approx. Forbes) perfectly solves the job search task, and the task of building a career is a little less than nothing, ”the co-founder wrote in his Telegram channel service for the selection of “white-collar workers” Alexander Maslyuk. Mysearch managing director Maria Yankovskaya agrees with this: “Most of the vacancies we work with did not previously assume that candidates of this level would register at HeadHunter. Now the situation is changing – more and more middle and high-level specialists have a profile on this resource as well. ”

Skillaz, memes and AI

Another threat to HeadHunter could be the appearance of an unexpected competitor, Goldman Sachs analysts warn. In their opinion, such a status is claimed, for example, by Skillaz automated recruiting service, in which HeadHunter bought 25% in 2019 for 232 million rubles, and at the same time received an option to purchase control until June 30, 2021. HeadHunter acted prudently, recognizing the dangers of such ambitious startups, analysts concluded in a note to investors: “We assume that the emergence of new niche companies is the greatest risk to HeadHunter’s business growth.”

HeadHunter itself has always been primarily not a recruiting, but a technology company, so innovations introduced in the industry should not shake the leadership position, Yuri Virovets emphasizes. The service intensively spent resources at all stages for the development of technologies and sometimes even ahead of time – for example, almost no one used the video interview service launched in 2013 and had to be “cut out,” recalls Mikhail Zhukov.

According to the CEO, last year the company experienced a “revolution” – a transition to the mobile first strategy: all new functions are now introduced first for mobile users and, if they become popular, extend to the desktop.

In addition, in mid-2019, HeadHunter transferred the main product – the search – to an artificial intelligence (AI) algorithm. For this, the internal development team created a robot that analyzes the resume: now the algorithm approves about 70% of applications. The remaining 30% have to be sent for moderation to a person. “For example, a robot can reject a resume in which there is the word“ memologist ”, and we teach him that“ memologist ”is a specialist in memes in social networks,” Zhukov says. According to him, the system saves money at least by hiring moderators.

AI also changed the algorithm for issuing resumes to employers and job seekers. The traditional approach is when a recruiter enters a request for a position and receives a list of applicants by the date the resume was updated, Zhukov explains. But the most valuable are passive job seekers who are not looking for work right now. Thanks to the algorithm, HeadHunter gives the recruiter a ranked list and at the beginning offers a resume with the highest probability of response.

The most developed segment of what HRTech – digital technologies in the field of personnel selection – is now called is the automation of the search for candidates. HeadHunter has developed a virtual recruiter service, which makes the first screening of candidates for popular vacancies, asks them questions and assigns a rating. Then, the “living” recruiter receives a list of applicants with the maximum rating. “The routine of this process is that the recruiter has to ring up the hellish number of applicants, especially if we are talking about mass professions,” Zhukov explains. He is sure that in the near future most of the functions of selection for the positions of sellers, warehouse operators, drivers and other mass positions will be fully attributed to robots.

Robot Vera, parsing, FAS

With one of the “robots” – the AI Robot Vera algorithm from the Stafori startup in St. Petersburg – HeadHunter has been fighting all the past months. “Faith”, launched in April 2017, was similar in tasks to the virtual recruiter HeadHunter, but it worked with the technology of “cold” calls. Its creators wrote a program that could ring up thousands of potential applicants and select those who are ready to come for an interview, explains Story Director of Operations Dmitry Kiselev.

The service turned out to be in demand: in a few months the number of its customers grew to 300, among them were MTS and Rostelecom, Dixy and the Alphabet of Taste, Russian offices of Coca-Cola and PepsiCo and other companies. For their convenience, “Stafori” released an extension for the Google Chrome browser: the recruiter integrated the HR-robot into the HeadHunter personal account, after which the virtual assistant automatically downloaded the database of applicants and the eychar did not need to enter data manually.

A few months later, Stafori co-founder Alexei Kostarev made an appointment with HeadHunter to offer cooperation. The negotiations were attended by Marketing Director Olga Metz, a lawyer and a specialist in web services. “We explained to the guys why it’s against this scheme [with the parsing of the HeadHunter database],” Mets recalls. According to her, according to the terms of the user agreement, Stafori indicated that she could leave the data with her and use it at her own discretion.

“At the meeting, HeadHunter took an aggressive stance and a constructive dialogue did not work out,” says Kiselev. In his opinion, HeadHunter then wanted to look like a monopolist in the market, as it was preparing for an IPO.

Inside the HeadHunter, the IPO team was nicknamed Flying Circus – similar to the iconic sketch series of British comedians Monty Python

Mets claims that Stafori could deflate a base for one client and then make a call for another. “Robot Vera did not take into account that some people hide resumes from part of companies, she doesn’t care that the candidates experience negative emotions when someone calls them without asking. This reflected on us: people began to delete the resume and refuse the HeadHunter service, ”the top manager complains. Kiselev, in response, insists that “Stafori” did not use data from HeadHunter for her own purposes.

HeadHunter also refused the offer to buy “Stafori”: in 2014, the company already had experience with robotic ringing, but the results were not impressive and this type of interaction with the applicant was recognized as ineffective, says Mets. And in early 2018, HeadHunter began to block customers who used Vera – they were offered to switch to a similar service from the platform itself – that same virtual recruiter.

The founders of Stafori decided to ask the state for protection and wrote a complaint to the FAS. By that time, customers increasingly began to refuse their service in order not to lose access to HeadHunter, says Kiselev. As a result, the startup has about 20 partners. “Why, in order to increase its capitalization, it was impossible to take service from a market that benefits customers? We at FAS submitted letters from customers who say: “We are interested in you, and HeadHunter, agree on cooperation,” he adds.

FAS opened the case six months later, the trial lasted nine months and as a result, the agency supported the developers of Vera. According to the regulator, a ban on the use of third-party software when working with hh.ru and subsequent blocking of users due to non-fulfillment of it can negatively affect both the employers themselves (for example, to efficiently search for employees and close vacancies) and software suppliers (client base may be reduced, and the goods will hardly get on the market). The agency decided that HeadHunter violated the law on protection of competition, and issued an order to stop the creation of obstacles “Stafori”. HeadHunter must pay a fine of up to 1 million rubles. The company has not yet decided whether to appeal.

The affected startup has already changed the development vector. The company, together with the team of producer and director Timur Bekmambetov, developed the Vera Voice neural network, with the help of which the site of the Europa Plus radio station voices the news with celebrity voices. “We are not currently developing new solutions in the field of recruiting,” Kiselev concludes.

HeadHunter, as part of the strategy of “hellish paranoia,” continues to predict the emergence of dangerous competitors and is “very afraid of missing or missing something,” Mikhail Zhukov admitted to Vedomosti. “We have such a saying that our main competitor is the one we don’t know anything about,” said the CEO, who turned the company into a public business worth $ 1.2 billion.

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