I commented on this also, although not from the point of view of startups.
I know little about the US recruitment market but in Europe and Australia, traditional recruitment agencies work like this:
- For casual/contract work, the agency will earn 10-20% (or more, but that's borderline criminal) on top of what the contractor does; or
- For permanent/salaried work, the agency will earn typically 10-15% of the annual salary of the recruit. Usually there is a part-payment on hiring and full payment after a probation period (typically 3 months) or if the employee leaves before three months there can be a partial refund.
Now as much as I hate recruitment agents (95% of them are utterly useless and actually impede getting the right person) they do do something: they filter candidates (often badly but still...), act as an umbrella (for insurance purposes and payroll) for contractors and the like.
It seems SO Careers has positioned itself more at this end of the market than the "job board" end, which (imho) is all that it really is. And what does an ad on a job board cost? A few hundred for a popular one?
Something like this lives or dies by reaching critical mass of job seekers using and employers use it. With SO Careers making money on both ends, one wonder if it will reach this.
Consider the Joel on Software job board, where you pay ~$350 for an ad and nothing as a candidate. Will the market on SO Careers be sufficiently bigger or better? I have my doubts. After all, what does SO Careers offer really? A link to your profile? I can put that on my CV in any case.
All up, it's all just a little odd.
Edit: just to add a few points (and hopefully bring it back a little to the topic of startups):
- Recruitment agencies are expensive in part because the risk is borne by the agent not the employer. If no one suitable is found, there is no or little outlay so they're getting paid for results;
- Advertising is cheaper both because it involves less work and the risk is borne by the employer;
- Advertising costs scale based on the implied conversion rate, which is a factor of both the size and the quality of the audience. In it's hey day, the West Wing may have had under 10 million viewers but they were a particularly lucrative set of viewers (eg higher socioeconomic status, more disposable income).
Point (3) is worth exploring. Size SO (Careers) obviously doesn't have (yet), both in terms of candidates and employers. The candidate cost is nominal but you have to compare it with most other options being free (for candidates), including dealing with recruitment agents. In fact, depending on your jurisdiction it can be illegal to charge candidates (I wonder if anyone has thought about this yet?).
Obviously Jeff and Joel think they've got a fairly lucrative audience (for employers) with tie-ins to the already successful Joel job boards. I think they may be overvaluing the association with SO because ultimately that association is simply a URL to your profile. I haven't seen the employer's search but if it also includes searches that use your contributions against different tags as some kind of criteria then obviously that isn't something easily reproducible elsewhere.
Lastly: startups. Not an area I'm particularly familiar with but if HN is to be believed, it works to a much greater degree on word-of-mouth than traditional recruitment. That being said, I kind of agree that if you're going to spend $100k+ (including on-costs) on employing someone for a year, spending even $5k to find the right person is cheap. But I guess cash flow can be an issue too.
Personally I signed up in the beta just because if it flops I'm only out $30, which is about the cost of 2 trips to Nando's for lunch.
I do have to question the strategy of pricing on the basis of having an audience and a conversion rate that you don't have (or can't prove) yet.
One last thing about job ads: you can often get more than one job filled from one ad. You might put an ad up that says you're looking for X, Y and Z. An agent once told me that at least 90% of the CVs he receives can be thrown out. A certain other number are possible candidates that just aren't right for that job. Perhaps they have too little or too much experience or not quite the right experience. But it happens where the company thinks you might be right for a different position.
Also, companies tend to keep CVs for people who have applied to them. With the ability to search on SO Careers, what's to stop a company basically harvesting CVs in the time they have access?