Monster generates the majority of their revenue from job listings. The MEI index allows us to get a very good sense of how job listings are trending; the data is released monthly, and is an excellent indicator of where revenue is headed. For the first time, the MEI (The Monster Employment Index) index dropped year over year, which increases the likelihood of negative revenue growth in North America in Q1. Even small revenue declines should impact margins negatively as costs remain relatively stable and as pricing is pressured. Because this data is released every month, its expected that future announcements to continue to pressure the stock.
Plotting the employment index, one can see that the Year on Year revenue growth is highly correlated to Year on Year changes in the MEI (for math geeks, the rsquared is a convincing .93!). One other item worth pointing out is the intersection in the graph occurring in Q2 of 07'. For the first time since 2005, revenue growth dipped below the MEI, which suggests either that MNST is discounting, or that their mix has shifted such that they get less money per listing.
Small businesses (who purchase one off listings at higher prices) have, according to MNST, been reducing listings at a faster clip than corporate clients (who buy listings in bulk). Continuation of this trend should continue to pressure margins. Assuming January MEI trends mirror those in February and March, MNST could see NA revenue fall 6-8% in Q1, and should likely see further margin contraction, too.
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