Tough times, hard decisions.
Given the challenging economic environment, we’ve decided to cut costs at Mahalo.
Although we’ve got a significant amount of cash on hand, and the business is ahead of schedule in terms of traffic (4m uniques a month, double where we thought we would be at this point), we’re fairly certain that the advertising climate for the next two years will be severely depressed. To ignore this obvious fact would be irresponsible.
We’ve laid off a just under 10% of our full-time staff, cut our overhead by doing smart things like renting desks (we have six offices in Santa Monica fyi), and reorganized our editorial department to focus on freelance positions over in-house editors. The net result of the effort is we are giving Mahalo another year of “dry power” (or runway) to complete our mission.
We can now operate past 2012 even if we never make any advertising revenue, and truth be told building advertising-based companies is my specialty (the last two, Silicon Alley Reporter and Weblogs, Inc. each broke 10m a year revenue between their third and forth years). Perhaps we’re being too conservative, but I’ve rarely heard of companies that went out of business because they made cuts too early, and I’ve heard of many who have reported the opposite.
As the CEO of the company, the responsibility for these cuts are mine and mine alone. Obviously, I did anticipate that the market would correct and that is why we raised $20 million over two rounds of funding before we launched. That move ensures that Mahalo will be able to get to profitability and ride through what is sure to be a very deep and painful recession.
While I anticipated and prepared for the ‘internet winter’ we’re now facing (you’ve read my posts and e-mails about the startup depression I’m sure), I failed to realize how bad the situation would get. It’s much worse than I thought it would be, and ignoring market conditions today would only mean deeper cuts down the road.
It’s my responsibility to make this hard decision and I don’t take it lightly. To the people impacted I’m very sorry that I wasn’t able to anticipate this better. It’s my fault and I’m sorry that you’ve got to bear the burden of my inability to better prepare.
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Wow, I wish the MD at my last place when he made half of our
dev and support departments redundant (including me) was that
honest and sincere when he told us of the cuts.
Comment by Whitespider1066 — October 22, 2008 @ 7:25 pm
sorry to hear about this. 10% of a co is a decent sized layoff.
Comment by david amodt — October 22, 2008 @ 7:26 pm
I should add a week after telling us they were advertising for
staff in the BK office, which apparently was totally inconnected.
Lose 100 staff in UK, employ 100 in BK to do job cheaper.
Comment by Whitespider1066 — October 22, 2008 @ 7:26 pm
Very well put Jason - it’s a smart move.
But OMG!! Does this mean you won’t be buying the 2nd Tesla.
Comment by Jerry Moore — October 22, 2008 @ 7:34 pm
My thoughts are with your staff today. You have attracted an
amazing group of talent at Mahalo. Doing the tough things in
a tight economy is never easy.
Comment by Michael Sean Wright — October 22, 2008 @ 7:36 pm
[...] a post on his blog, Mahalo CEO Jason Calacanis has announced that his human powered search engine has laid [...]
Pingback by Internet Winter Hits Mahalo; Cuts 10% Of Staff — October 22, 2008 @ 7:38 pm
Cutting people is never fun, but this is a great example of being proactive instead of reactive
Comment by Cody — October 22, 2008 @ 7:41 pm
Don’t cut This Week in YouTube please
Comment by Andrew Mager — October 22, 2008 @ 7:48 pm
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Pingback by HipMojo.com » Mahalo in English: Suddenly, it’s 2001 — October 22, 2008 @ 8:01 pm
This post must have been very tough to write. I admire your
transparency and honesty. My thoughts are with the talented people
you are laying off, opportunities tend to pop in the middle of
the storms, let us hope their talent lead them to a safe harbor.
Comment by masan — October 22, 2008 @ 8:11 pm
As always - a class act. I think it will be much worse, though simultaneously I think there is nothing but opportunity now… I’m hearing a lot of things about wind, shelter and windmills these days.
Comment by Richard Titus — October 22, 2008 @ 8:14 pm
I’m sorry to hear that. You have good people in your company. Couldn’t have been easy to let any of them go.
Comment by Andrew Warner — October 22, 2008 @ 8:21 pm
Nice to see you take personal responsibility. Unfortunate that it has to happen, but well done.
Comment by Dan — October 22, 2008 @ 8:25 pm
hey Jason,
can you elaborate on how you made over $10 M in revenue based on advertising alone?
Comment by Charles Ju — October 22, 2008 @ 9:28 pm
[...] Wrote Calacanis, in part: Although we’ve got a significant amount of cash on hand, and the business is ahead of schedule in terms of traffic (4m uniques a month, double where we thought we would be at this point), we’re fairly certain that the advertising climate for the next two years will be severely depressed. To ignore this obvious fact would be irresponsible…While I anticipated and prepared for the ‘internet winter’ we’re now facing (you’ve read my posts and e-mails about the startup depression I’m sure), I failed to realize how bad the situation would get. It’s much worse than I thought it would be, and ignoring market conditions today would only mean deeper cuts down the road.” [...]
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