Online Advertising is booming! And… I’m probably boring you already. We’ve all heard the Skype, err hype that online advertising is garnering. One look at Google’s stock price says it all. And the latest sign that the apocalypse is upon us: The biggest Internet companies are all rumored to be circling AOL’s wagon, probably valuing a stake in the company in the billions. Yeee Haw!
But among all this excitement, this growth, this profitability, there comes news that two formerly highflying stars are laying off workers: Adware companies, 180 Solutions and Direct Revenue. 180 recently announced they were laying off 20% of their workforce, or about 50 people, amidst a broad restructuring. Direct Revenue recently let go of 1/3 of their workforce. What could cause this, especially in the most lucrative time of year in one of the hottest growth industries? There are three possibilities:
1) Growing too quickly- after receiving $40 million of funding 180 started hiring at a blistering pace. Perhaps this was done too quickly, without a set plan on how each employee would add value to the company
2) Pressure from their Venture Capitalists- As some of my friends at Investment banks call them, Vulture Capitalists. These guys put $40 million up for 180, with the intent that they would make many times this amount. If growth started slowing, or the VC’s got nervous, they could apply pressure to cut costs.
3) Changing Adware arena- The Adware arena is changing, and changing quickly. Elliot Spitzer, state legislation, proposed federal legislation and regulatory agencies such as the Center for Democracy and Technology led by Ari Schwartz are all applying pressure to Adware companies. A stray software exploit, bundling other applications, and other nefarious practices are no longer tolerated. The challenge of growing their base was confirmed by 180 Solution spokesman Sean Sudwell who says that the number of users remains unchanged at about 20 million.
So what gives? Is Adware dead? A competitor of 180, WhenU, seems to be sticking to their guns- Bill Day, the President, says that advertising is usually strong in the 4th quarter and "There’s nothing in the marketplace broadly that is impacting us…” It will be interesting to see where Adware is in 2 years from now- that’s the question. Any bets?
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