Gaia Online, a social network/virtual world hybrid that includes one of the web’s most popular forums, has laid off 36 employees, or around 20% 13% of its staff. Of those laid off, 16 were full time and 20 were contractors. From what we’ve heard the layoffs were unexpected by most affected employees – the site raised $11 million in July, and has been hiring employees as recently as a month ago.
Update: Gaia has written a blog post on the layoffs stating that the headcount represents 13%, not 20%, though this may discount contracted workers.
Even more odd: an article printed today in the San Jose Mercury News quotes Gaia CEO Craig Sherman stating that the company is looking forward to a record month.
“So far, the deepening recession has not slowed sales of virtual goods, which executives attribute to people spending more time at home. Gaia Online, a youth world with 7 million monthly visitors, sells more than $1 million a month of virtual goods and expects a record month in December, said its chief executive, Craig Sherman”
Sherman’s statement seems to be misleading – we’ve heard that revenues last month were lower than expected after a product launch didn’t go as well as hoped, and today’s layoffs seem to contradict the idea that sales of virtual goods have not been affected by the recession.
That said, it is possible that virtual goods sales have held steady as other streams of revenue like advertising have fallen off, or the cuts were made to preempt a forecasted (but as of yet unseen) slowdown. In any case, the article couldn’t have come at a worse time for those laid off.
Where are their tacos????
It’s very possible that the CEO is using the current economic situation to streamline the company and get rid of some ‘dead weight’ by removing some executives that were probably on their way out sooner or later anyway.
Very likely – I bet it’s happening a lot at the moment and not just in the tech sector.
McAfee just did the same thing: they cut jobs despite record revenues. What gives?
Wow, the Sherminator wielding the axe a week before Christmas. Hasta la vista, baby!
You’re looking for logic? Everyone’s doing it nowadays. LinkedIn, citing the economy, laid off more than 10% of the staff just a week after announcing that they’d received over $20 million that they “didn’t need” and just days after an article quoted the founder as saying the company was “recessionproof”. It’s not always the economy, stupid. Sometimes, it’s just … stupid.
It’s not so unexpected to have record sales in December. Christmas time is coming, people will be shopping presents. I don’t see their record sales having anything to do with the layoff.
I agree, last quarter should typically be the strongest for sales so no surprises there but whether the company’s really doing as well as the CEO claims is anyone’s guess..laying off 13% of employees doesn’t exactly inspire a lot of confidence.
Does anybody know which divisions on Gaia are being cut?
http://www.thewebwar.com
It’s really hard to say why people get laid off when you look at it from the outside. My speculation (having worked there in the past) is that it was a long term decision, and a chance to get better talent given the recently unemployed talent pool out there.
These folks have a great business model, and I am pretty sure the sale of virtual items are unaffected by the recession for the same reason that Budweiser (NYSE:BUD) doubled it’s stock since March.
Disclaimer: I’m presently employed by Gaia
1) The “20 contractors” number is entirely incorrect.
2) The Sherman quote is a paraphrase from something said a while ago. When Sherman made the statement he was optimistic that the economy would not hurt virtual goods sales. It turns out that Gaia was hit much harder than expected. Regardless, Sherman’s statement was as accurate as he could predict at the time and is being taken out of context in the above quote.
3) The fact that Gaia raised as much money as it has does not mean layoffs are inappropriate or unnecessary. The money raised is essential for surviving an income downturn and riding out a period of heavy losses, even with reduced staffing costs.
It’s tragic that this happened at all, especially in the middle of the holiday season. But that’s no excuse for a dishonest article about the company.