diverse segments,
including women, Asian-American, LGBT (lesbian, gay, bisexual and transgender),
differently-abled and military professionals. We currently have over two million
members and, as of the date of this prospectus, more than 3,000 companies and
organizations, including 60% of the Fortune 500 companies, have listed job
postings on our websites. Most of these listings have come to us through our
exclusive agreement with Monster Worldwide for our recruitment services. Our
agreement with Monster Worldwide began in December 2007, expired on December 31,
2012 and was not renewed. On November 12, 2012, we entered into a diversity
recruitment partnership agreement with LinkedIn, which became effective on
January 1, 2013. Pursuant to the LinkedIn arrangement, LinkedIn may resell to
its customers diversity-based job postings and recruitment advertising appearing
on our websites. Since January 1, 2011, we have had a strategic partnership with
the University of Phoenix (through its parent company, the Apollo Group, Inc.),
which advertises on our websites. Regardless of the strategic partner we are
working with, we believe that our networking platforms provide an effective
means to meet the career advancement needs of diverse professionals, the
employers that seek to hire them and the advertisers that seek to reach them.
Our major assets are two of our websites – iHispano.com, which has over
1.2 million members in its network and AMightyRiver.com, which has over 600,000
members in its network. In the nine months ended September 30, 2012,
iHispano.com had over 3.7 million unique visitors and over 4.3 million visits,
while AMightyRiver.com had over 1.0 million unique visitors and over 1.2 million
visits.
We define a member of one of our websites as an individual user who has created
a member profile on that website as of the date of measurement. If a member is
inactive for 24 months, such member will automatically be de-registered from our
database.
We calculate unique visitors for each of our websites as users who have visited
that particular website at least once regardless of whether they are members. A
user who visits one of our websites, regardless of frequency, is only counted as
one unique visitor, based on data provided by Google Analytics, a leading
provider of digital marketing intelligence.
We define the number of visits for each of our websites as the number of times a
user has been to that particular website. If a user is inactive on the website
site for 30 minutes or more, any future activity will be counted as a new visit.
Users that leave one of our websites and return to the same website within 30
minutes will be counted as part of the original visit.
We recently launched additional online professional networking websites that
serve other diverse communities – including women (WomensCareerChannel.com),
Asian Americans (ACareers.net), LGBT (OutProNet.com), enlisted and veteran
military personnel (Military2Career.com) and differently-abled (ProAble.net)
professionals. Although each of these new professional networking websites is
fully operational, these websites are, and continue to be, in the early stages
of development. Since its inception in September 2011, WomensCareerChannel.com
has experienced significant growth in unique visitors, visits and membership. In
the nine months ended September 30, 2012, this website had over 700,000 visits
and over 600,000 unique visitors. By September 30, 2012, WomensCareerChannel.com
had over 75,000 members.
Our company is built on the philosophy of “relationship recruitment,” connecting
talent with opportunity within the context of a common culture or affinity. We
endeavor to provide an environment that celebrates the identity of our members
and fosters a sense of community and trust. We believe we provide value to our
members by enabling them to leverage their connections and share beneficial
information with other members and employers that participate on our platform,
providing access to employment opportunities and offering valuable career
resources. At the same time, we believe that our members and their level of
engagement is attractive to employers and advertisers that seek to target an
audience of diverse professionals for hiring purposes, to increase brand
awareness or to market products and services.
We believe our revenue model is aligned with our focus on serving our members.
We currently provide members with access to our websites at no cost, a strategy
which we believe will allow us to continue to grow our membership base and which
promotes high levels of member engagement for the mutual benefit of members,
employers and advertisers.
For the nine months ended September 30, 2012, we generated substantially all of
our revenue from two customers: Monster Worldwide, which generated approximately
63% of our revenue, and Apollo Group, the corporate parent of the University of
Phoenix, which generated approximately 32% of our revenue. For the year ended
December 31, 2011, we generated substantially all of our revenue from two
customers: Monster Worldwide, which generated approximately 72% of our revenue,
and Apollo Group, the corporate parent of the University of Phoenix, which
generated approximately 20% of our revenue.
Recruitment
Direct Sales
Historically we have been dependent on Monster Worldwide for all of our
recruitment revenue pursuant to an alliance agreement that expired December 31,
2012. Because our agreement with Monster Worldwide was exclusive in so far as it
prohibited us from selling our recruitment services to anyone other than Monster
Worldwide, the growth of our company has been dependant on the growth of Monster
Worldwide’s diversity recruitment business. We believe that by expanding on the
sources of our recruitment revenue, which we are doing by entering into
non-exclusive agreements with new strategic business partners or an agreement
that provides for limited exclusivity, such as the one we entered into with
LinkedIn Corporation in November 2012 (as described below) and by establishing a
sales force to commence direct sales of our products and services, we have an
opportunity to provide better services to our customers and achieve revenues and
margins that are greater than those achieved during the term of our agreement
with Monster Worldwide. we have budgeted approximately 15% of the net proceeds
of the offering for sales and marketing expenses, including approximately 5% in
payroll for the addition of employees in our direct sales team.
Prior to the expiration of our agreement with the Monster Worldwide, we began
developing an internal capacity for direct marketing and sales of recruitment
services to companies seeking to hire diverse employees. We have transferred
existing employees with diversity recruitment experience from client services to
sales and we are hiring additional personnel to expand our direct marketing and
sales of recruitment services. Because our agreement with LinkedIn provides for
fixed quarterly payments that are approximately half of the fixed quarterly
payments we received from Monster Worldwide (as described below), our revenues
will decrease significantly unless we are able to generate significant revenues
through direct sales.
Monster Worldwide, Inc.
We have an alliance agreement with Monster Worldwide which expired on
December 31, 2012 and was not renewed. Pursuant to this agreement, Monster
Worldwide had been the exclusive seller of job postings on our websites. Our
agreement with Monster Worldwide provides for an annual fixed fee that is
subject to adjustment based on certain criteria. To date, since the commencement
of our agreement with Monster Worldwide in December 2007, our annual fixed fee
payments have not been adjusted, nor have we failed to meet the target number of
applicants to job postings each month for six consecutive calendar months.
Following the expiration of our alliance agreement with Monster Worldwide, we
expect to experience significant decreases in revenue for a period of time
because (i) our agreement with LinkedIn provides for fixed quarterly payments
that are approximately half of the fixed quarterly payments we received from
Monster Worldwide (as described below) and we cannot predict how much commission
revenue, if any, we will earn through LinkedIn and (ii) our sales force will
require time to generate sales because we could not and did not begin to market
and sell our recruitment services directly to companies until after our
agreement with Monster Worldwide expired on December 31, 2012. We expect to
experience such decrease in revenue until such time as LinkedIn and our sales
team are able to generate sufficient sales to replace the revenue previously
generated by our agreement with Monster Worldwide.
Under our agreement with Monster Worldwide, we have agreed to provide limited
support and access to data to permit Monster Worldwide to continue to meet
certain obligations to its customers in 2013. With respect to job postings that
Monster sold prior to the expiration of our agreement on December 31, 2012, we
are permitting Monster to maintain such postings on our websites until the
earlier of (a) the date that Monster Worldwide’s obligation to maintain such
posting expires or (b) December 31, 2013. In addition, we will continue to
provide Monster with access to our data until December 31, 2013. We expect to
incur only de minimis additional labor and de minimis additional costs, and will
not receive any additional payments from Monster Worldwide subsequent to the
expiration of our agreement.
LinkedIn
On November 12, 2012, we entered into a diversity recruitment partnership
agreement with LinkedIn, which became effective on January 1, 2013. Pursuant to
our agreement, LinkedIn may resell to its customers diversity-based job postings
and recruitment advertising on our websites. Our agreement with LinkedIn
provides that LinkedIn make fixed quarterly payments to us that are
approximately half of the fixed quarterly payments we received from Monster
Worldwide and a percentage commission for sales of our services in excess of
certain thresholds. The fixed quarterly payments are payable regardless of sales
volumes or any other performance metric. Although such fixed quarterly payments
are significantly less than the fixed quarterly payments that we received from
Monster Worldwide, we believe that we have the potential to exceed our revenues
from our previous agreement with Monster Worldwide because (i) we may earn
additional commission payments with LinkedIn if certain sales levels are
achieved, and (ii) we may earn revenue by selling our services directly, as
described above. Under our agreement with LinkedIn, we will receive (i) no
commissions on the first $10 million of LinkedIn’s revenue from the sale of our
services during each calendar year, (ii) 20% commission on LinkedIn’s revenue
from the sale of our services during each calendar year that is in excess of
$10 million and less than $50 million, and (iii) 15% commission on LinkedIn’s
revenue from the sale of our services during each calendar year that is in
excess of $50 million. As an example solely to illustrate the stair-step
structure of our commission schedule with LinkedIn, if LinkedIn sells $60
million of our services during any calendar year, we would receive $9.5 million
in commission revenue for such year, in addition to our fixed payments, because
we would earn no commission revenue for the first $10 million of LinkedIn sales
of our services, $8 million in commission revenue for the next $40 million of
LinkedIn sales of our services and $1.5 million in commission revenue for the
remaining $10 million of LinkedIn sales of our services. However, there can be
no assurance that we will meet or exceed revenues earned through Monster
Worldwide in prior periods.
During the term of our agreement with LinkedIn, we may not permit any competitor
of LinkedIn to resell our diversity-based recruitment services. Our agreement
does not prohibit LinkedIn from selling its own or any third party’s diversity
recruitment services, however, during the term of our agreement with LinkedIn
and for a period of one year thereafter, we may not sell our diversity-based
recruitment services, directly or indirectly, to any of the 1,000 companies on
LinkedIn’s restricted account list. The companies in such restricted accounts
list are of varying sizes, operate in diverse geographical locations and conduct
business in different sectors. We believe LinkedIn designated these particular
companies in its restricted account list because LinkedIn has established
business relationships with these companies and feels that these companies are
potential purchasers of diversity recruitment services. We are permitted,
however, to market and sell our products to any company that is not on such
restricted account list after our exclusive agreement with Monster Worldwide
expired on December 31, 2012.
The term of our agreement with LinkedIn is three years, subject to LinkedIn’s
right, in its sole and absolute discretion, to terminate our agreement on the
six-month anniversary of the effective date upon not less than 30 days’ prior
notice and during the fourth calendar quarter of the first and second years of
the term of our agreement upon not less than 90 days’ prior notice. If not
terminated sooner, the term of our agreement with LinkedIn will automatically
renew for successive one-year terms unless either party delivers a notice of
non-renewal with 90 days’ prior notice.
Advertising
University of Phoenix
On January 11, 2011, we entered into a marketing media services agreement with
Apollo Group, Inc. The agreement provides the framework for our relationship
with Apollo Group. It has no expiration date but could be terminated by either
party upon thirty days prior written notice. During the term of the agreement,
we could not perform advertising services for any other institution of higher
education, whether for-profit or non-profit, other than Apollo Group. The
agreement required us to enter into separate purchase orders or statements of
work, referred to as “media schedules,” which describe the services we provided
to Apollo Group on a project basis and the compensation we were paid. We entered
into two media schedules with Apollo Group. The first media schedule was a trial
run that by its terms covered a period of six months ending June 30, 2011, but
which Apollo Group and we agreed to extend until August 31, 2011, and provided
for fees to us in the amount of $664,000. Thereafter, based on Apollo Group’s
satisfaction with our performance, we entered into a media schedule which
expanded the scope of our services and covered a longer period than the term of
the first media schedule, ending September 11, 2012, and provided for fees to us
in the amount of $1,550,000. Pursuant to the agreement and related media
schedules, we received fees for placing advertising media on our websites to
promote Apollo Group’s University of Phoenix and for creating, maintaining and
operating the “Education to Career” and “Education to Education” networking
portal websites. Most of our advertising revenue is derived from our agreement
with Apollo Group. For the nine months ended September 30, 2012, we recognized
$1.5 million in respect of fees from Apollo Group for our services. This
constituted 32% of our total revenue and 87% of our revenue from consumer media
advertising and marketing solutions. In 2011, we recognized revenue of $1.1
million in respect of fees from Apollo Group for our services. This constituted
20% of our total revenue and 72% of our revenue from consumer media advertising
and marketing solutions. On June 11, 2012, we agreed to an insertion order with
Apollo Group. The insertion order now governs our agreement with Apollo Group
with respect to the “Education to Education” networking portal websites, and it
provides for payment to us of up to $150,000 per month during a twelve-month
term commencing July 1, 2012 and ending July 1, 2013, based upon the number of
persons we refer to the University of Phoenix who express an interest in
obtaining information about attending the University of Phoenix. There is no
guaranteed payment associated with this insertion order and for the nine months
ended September 30, 2012, PDN generated $313,000 of revenue pursuant to the
insertion order. On October 1, 2012, we entered into a revised and restated
master services agreement with Apollo Group to replace our original marketing
media services agreement. Our new agreement now governs our agreement with
Apollo Group with respect to “Education to Careers” networking portal website,
and it provides for monthly payments of $116,667 during a one year term ending
March 31, 2014.
We generate a small percentage of our advertising revenue from advertisers that
promote their brands and advertise their products and services to our members.
One of our key goals is to grow the consumer media advertising portion of our
business. We believe that advertisers are attracted to our network of members as
an effective means to reach a diverse professional market.
------
Substantially simultaneously with the effectiveness of the registration
statement of which this prospectus is a part, we will restructure by
reorganizing into a Delaware corporation. Our principal executive offices are
located at 801 W. Adams Street, Chicago, Illinois 60607. Our telephone number
is (312) 614-0950, and our corporate website is www.prodivnet.com.