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SEEK reports artificial intelligence can power profit growth

SEEK Limited (ASX: SEK) is one of Australia’s most entrepreneurial digital businesses and also one of the heaviest investors in new tech, product development, and start up or early stage ventures (ESVs) for long-term growth.

In fact it’s ready to wear $25 million to $30 million in ESV losses over FY 2020 such is it’s commitment to sacrificing the short term for long term success.

It now has an aspirational revenue of $5 billion by FY 2025 versus the $1.54 billion delivered in FY 2019, which would be an impressive result if achieved. 

It recently reported how it’s an Australian market leader in artificial intelligence (AI) investment with a team of more than 100 specialist data scientists and software engineers building AI that learns from how candidates search job ads to better target ads for advertisers.

According to SEEK the new AI has resulted in an 11% increase in job ad click through rate, a 10% uplift in candidate applications per session and 600,000 more applications per month across its platforms. This reportedly leads to a reduction in time to hire for employers which of course translates into a better return on investment for their adverts. 

SEEK has also followed property classifieds business REA Group Limited (ASX: REA) recently in launching “depth” or “promoted” job adverts that are given a greater prominence on its website to attract more candidates.

It reports this helped lift ANZ revenue growth over FY 2019, with the opportunity to role out the “depth” product across its vast global network. 

Both SEEK and REA Group also have commercial partnerships with the News Corp Media (ASX: NWS) to cross sell products and deepen their digital footprints. 

Employment social network LinkedIn has also launched “promoted” job ads and its competitive threat probably explains a lot of SEEK’s thinking in reinvesting so heavily into its existing and new businesses. 

For now the reinvestment is flattening reinvestment profit growth, but investors appear willing to shrug this off thanks to SEEK’s global promise including at its Zhaopin business. 

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Tom Richardson owns shares of REA Group Limited and SEEK Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has the following options: long January 2021 $85 calls on Microsoft. The Motley Fool Australia has recommended REA Group Limited and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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