One of the trends not necessarily evident from attending Affiliate Summit has already started, and will continue in the days and months ahead. This trend reminds us of something we listened to a little more than a year ago at a very different tradeshow, Real Estate Connect. There, a packed house listened to a figure known only within the financial community but whose predictions on the economy would elevate him from cult status to popular appeal. Economist Nouriel Roubini, known as Doctor Doom for his obviously not optimistic commentary on the economy, told a room full of real estate agents that by this time next year perhaps as many as thirty percent wouldn’t have a job. Luckily for Dr. Roubini, he does not get paid for the audience’s opinion of what he says. A year later and 2.6 million jobs lost in the US, while a full-third from the year prior haven’t found themselves without work, more than enough have and many of those remaining teeter closer than they’d like to joining the list of the departed. Dr. Roubini didn’t make any predictions about our space, but those looking for encouragement need only ask the growing list of folks who find themselves currently out of a job.
When hearing that a company is letting people go, the first thing that tends to come to mind are that these companies must be struggling. If a company about to or having just filed bankruptcy lays off employees, people seem to understand it. Without the cost cutting, the entire organization might not make it. The same hasn’t held true for four companies we know of that laid people off, with two shedding close to 75 employees each. Both of these companies runs profitable businesses and in an industry expected to grow this year. Even more confusing it would seem, these companies are performance-based marketers and not reliant on fickle brand dollars. This contrasts markedly with the resulting from the collapse of the Internet bubble. Then, plenty of tech companies shed massive amounts of jobs, so many and so frequently that it spurned an website tracking the negative growth of company headcounts. Those of us still employed at Internet companies would have it open in the background constantly checking to see if our company or one that a friend worked at was mentioned. On more than one occasion, employees learned about layoffs at their company from the site before hearing of them internally, and more than a few banned access to it. But much more often than not, those shedding massive jobs did so to conserve cash as many of their businesses ran unprofitably.
Circling back to the companies in our space who have already shed between 15% and 30% of their staff, what sticks with me most about the layoffs this time are that these companies could support their current head count going forward if they so chose. In trying to understand why, a good friend reminded me of a presentation given three months ago by the famed Venture Capital firm Sequoia Capital to its portfolio companies. The slides, even without the commentary, show nothing new – a lot of downward trends and dire predictions. The depth of the data aggregation certainly makes it a more than worthwhile presentation, but one slide in particular stands out, number 49, in which it advocates deep cuts early on as opposed to incremental ones over time. Whether truly the best approach, we live in an investor driven economy, and this is an example of how investors think. Part of the investor driven economy also means companies must hit certain numbers in good times and perhaps even more so in bad.
They make these cuts, because outside of the handful of firms making large amounts of money off of unstable sources of revenue, many of the more traditional performance marketing companies have found strong revenue growth elusive, so hitting margin means focusing on what you can control, the costs. It is a difficult cycle to break. Once one stops spending, others feel they must too, and no one wants to be the first to take a risk on people or costs in anticipation that the bottom has been reached. There will be a lot of anger, confusion, and distress. For some, the change will be something that they had on the back of their mind with this spurring them into action. For most though, it will come as unexpected, unwelcome, and not well enough explained. And, no matter what, there is no good explanation, but it doesn’t mean that all is lost.
If one persons junk didn’t make for another’s treasure, sites like eBay wouldn’t have flourished like they did, and so it goes with the online space. That someone gets laid off doesn’t necessarily imply a lack of value to someone else or even a lack of value to the company. Layoffs are an inexact science driven by fear of the future. When you suck at your job you get fired. When a company doesn’t exactly know what to do only that it needs to hit certain targets, it lays people off. None of these will make those recently laid off feel any better, and it doesn’t help either that those getting laid off fall into the category of a company “trimming the fat.” The more appropriate term is “battening down the hatch.” It’s not that time are tough, it’s that no one knows just how tough or for how long. The decisions reflect a minimalistic attitude where they try to run on the bare minimum, like stocking up for a nuclear winter. The bare minimum, though, will always include a few that don’t count as essential, which is why those leaving must simply look forward and not analyze the past. We are entering a time that we haven’t experienced before in the online advertising space, and we wish the best for those whose lives have been and/or will be upended. And, if all else fails, you can always start a fake blog.
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