Advertising/blog network Glam Media held a company wide meeting today where employees were told about the company’s 2009 operating plan. Q4 was surprisingly strong, the company told employees, with only the auto and finance advertising sectors down significantly.
But the company is making changes anyway, they say, mostly to control expenses. The executive team will take a “25-60% reduction in pay” with an offsetting bonus based on performance should the economy not go as far south as people expect. CEO Samir Arora will be on the high end of the cut percentage. For staff salaries are being cut 3% - 15%, with the same offsetting commission plan.
I have a couple of observations. First, companies are beginning to realize that emails to staff are the best way to spread news. They tend to leak (as this one did), so there is rarely meaty stuff there. But it’s also rare for a company to slash salaries because employees are so adverse to it. It’ll be interesting to see if Glam can keep its top people. In this economy, though, I doubt many will be leaving their jobs.
The full email is below:
Dear Employees,
Despite the very turbulent environment we are fortunate that 2008 has been a good year for Glam Media and our publisher network. This was the year of forging ahead by focusing on our core business while still being conservative and cautious. It was a time for leadership and resolve, and Glam has emerged as a much stronger company because of it.
Market Update
1. The founding vision of Glam Media was to help brand advertisers embrace the Web. As time spent on TV and print significantly declined in 2008, the Internet and Glam benefited.
2. Glam helped build the premium display ad market for women’s ad categories—most of the brands in our categories had very low spending on Internet, unlike now-hard hit categories in categories like Auto and Finance, where the Internet spend was already high and cutbacks are high.
3. Pioneering the Vertical Content Network with a dedicated and strong Publisher Network is built on the way the Web works—distributed media and fragmentation with users increasingly going to individual sites. De-portalization and the internal challenges Yahoo and iVillage continue to face are creating growth opportunities for Glam to provide a better solution to their brand advertisers.
4. Of the three types of advertisers—High Brand with Low Direct; Brand and Direct; and Direct—Glam focuses on Premium and Luxury brands that typically spend over 70% on brand ads in traditional media and much lower on direct response. In a down turn, these advertisers don’t go to direct or “cheaper” media, they just spent carefully (Vogue’s advertisers don’t go to US Weekly or Direct Mail—and they are coming online to Glam)
5. Glam chose to have very limited Ad Networks fill in its inventory using GlamX Exchange, a sector hit very hard in the downturn. This conservative strategy has helped build a stronger direct sales business—we could have had more revenue, but then we would have been looking at lower or even negative growth.
Business Update
1. While the reports of downturn/recession for the last 3 quarters feel right to us, the reports of widespread panic and meltdown online seem thus far fear-driven or isolated to specific ad categories like Auto and Finance. We were expecting very bad news in Q4 and were ready to take decisive action, but have been positively surprised at the strength of the web, women and men’s lifestyle ad categories and the continued shift of spending to the web. We expect the business to be overall much tighter, with advertisers more careful and seeking in the short term more return/data-driven, but the fundamentals of the web, online advertising, and display ads are all strong.
Despite the slower economy, Q4 was the strongest quarter we have had—we will end the year in a triple digit ad revenue growth rate year over year, and also very strong sequentially. We believe Glam is one of the few digital companies with this level of growth in revenue today. The reason is the focus on making our customers-—the agencies and brands successful online, being the number one for women, the scale of reach, premium inventory, targeting technology, custom solutions and our strong publisher network.
2. Glam’s strategy of staying focused in the first three years on Women & Style was essential to get to scale and our tipping point, but our strategy in diversification in 2008 was essential driver of our growth. Glam expanded by creating New Vertical Networks for Women in Style, Living, Health & Wellness, Entertainment, Luxury and Family, and also launched Brash.com Men’s network in Lifestyle, Entertainment, Tech & Auto. Glam’s ad sales team has brought in business from over 500 new advertisers and additional business from 300 existing clients in 2008.
3. Glam expanded internationally, acquiring Monetize to launch Glam UK, Codex Media and a JV with Burda in Glam Germany, and launched Glam Japan.
4. Glam continued to focus on making our clients-Brand Advertisers succeed online through the data-driven Glam Evolution Ad Targeting and deep custom advertorials which helped increase the number of advertisers from to over 900 top brands in 2008. Glam and Brash now have one of the largest lists of Premium brands on the web.
5. Glam raised a Series D in early 2008, and did not go out and spend it on large acquisitions or operating overhead. We’ve tried to run a very lean company prior to the downturn, and we continue to believe that being frugal in spending is the best way to run a business we all own.
6. With 54 Million unique visitors to Glam and our network, Glam will end the year as Number 10 on the MediaMetrix Top 100 web properties, on the AdWeek Top 10 Digital Hot List and Number 7 in Online Media after Google, Yahoo, MSN, AOL, Fox/MySpace and Ask.com. Glam is Number 1 in reach in the women category, with over two times the reach of iVillage in the US, and just became number 1 in UK, Australia, and Germany. Globally, Glam now has a reach of 98 Million uniques per month and Brash.com Vertical is already over 15 Million uniques in 2 months of launch. In a downturn, advertisers reduce experimental budgets to smaller sites, and favor fewer, larger companies with proven history in providing reach and value.
7. The focus has been to create New Ad Products and Solutions that provide better returns to advertisers in a down economy. In display ads, Glam is providing contextual, audience, above-the-fold placement, primetime, and now full behavioral targeting with detailed reports. Glam now has full suite of ad solutions that can be built using the Glam Apps Platform—custom advertorials, full page takeovers, influential outreach, video, and applications and widgets for brand engagement.
2009 Plan
With the core fundamentals of the business in place, we are now in the process of finalizing our operating plan for 2009. The lack of visibility is making planning very challenging this year. Given the uncertainties we are taking a different strategy for managing through the downturn and to avoid broad-based layoffs that we think would undermine our potential for success.
With this in mind, we are proposing the following changes:
1. Starting at the Top: The executive team will take a effective 25-60% reduction in pay and an increased commission based on performance. Our CEO and the top sales execs will take a 40-50% reduction. The team will have accelerators to significantly beat the plan—helping instill similar incentives, spirit and dedication in early stage startup founders. We recognize this will be very hard for some, but is consistent with Glam’s core values, and creates a strong incentive for the leaders to deliver results.
2. US Employee Incentive Plan: a small part of the compensation will be converted to a variable commission based model—starting at 3% for employees, to 10% for the more senior staff and up to 15% for the functional management team.
This variable compensation model allows us to reduce operating expenses in the case of a worse than anticipated downturn, saving critical jobs and at the same time if the results better than expected, rewards the current employees more.
3. Functional Plan and Changes: The Glam functional team will continue to build the final business plan, and there may be operating changes in functions, roles and employment—but only as a part of our annual planning process. We will continue to do performance and growth level changes every six months to ensure we have the right people in the right job at the right time.
4. Hiring: Glam is carefully adding some strategic resources—we are looking for several top level product managers in Silicon Valley, international team members in our new subsidiaries, and will continue to conservatively hire in ad sales in line with our growth.
5. Tight expense management, using technology innovation and leadership: Glam will focus on managing our growth rate in a slow economy with very tight controls in expenses, building more technology, thinking outside the box, showing care, and leading in the market.
We trust you will all appreciate this innovative approach to protecting the company and our valuable team in these challenging times. We will continue to monitor the business closely on a month-by-month basis and make further changes as required. We believe we have the very best team at Glam, and these changes will help us bring the Glam Family closer together and will make us stronger. Our values make our destiny. We care. We take our responsibility to our shareholders, investors, employees, publishers, developers, media partners, agencies and brands very seriously, yet recognize the social and local responsibility to manage and lead effectively.
Thank for all for your hard work in 2008- and here’s to a cautious, yet strong 2009!
Glam Executive Team and Founders
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glam investors should be glum!
Pirating and pillaging on your own people. take the knife or walk the plank.
Thanks you Glam
http://tinyurl.com/4rdhmc
welcome to the world of deflation. FedEx also announced pay cuts, as others companies around the world (UK, for example).
pay cuts might make sense from an individual company perspective, but are a sign of (more) troubled times ahead. This is a *BIG* deflation deal. Economists fear wage cuts more than layoffs, because wage cuts can lead to deflation, which can be disastrous and hard to stop.
an interesting article at the UK Times:
http://business.timesonline.co.....327360.ece
also, the (awesome) NPR planet-money podcast dedicated today’s (great timing, Glam) program to pay cuts:
http://www.npr.org/blogs/money.....y_cut.html
finally, the UK Telegraph says, in an article of Dec/11, that “Widespread wage cuts would condemn the economy to more misery” (http://www.telegraph.co.uk/finance/financetopics/recession/3709279/Widespread-wage-cuts-would-condemn-the-economy-to-more-misery.html)
again, I understand Glam’s decision (one that was only taken because they know that the market is so bad that their best employees would have a hard time finding a new job if they don’t accept/like the pay cut), and that it’s a good one for Glam’s employees as far as it allows them to avoid layoffs. But it’s bad, really bad, that we reached such a situation, and if this spreads throughout the economy it will be even worst.
either way, we’re fucked…
@valleymonger - i think you miss read michael’s article. looks like glam is moving part of the compensation to a mbo bonus based on total revenue generated. this is not a salary cut that the wise economists in uk are talking about. deflation is like in Japan, when prices are falling and it is cheaper to live. on salary cuts for steel or car workers, again you are off. if you read the analysis and why even bush wants the car companies to go into chapter 11 is that the wages due to unions cost us car companies $72 per hour, while toyota pays $38 per hour to happier workers in the us. needs to be fixed.
glam appears to be doing something different. they are surprised by the growth they are seeing, but want to run a tight ship. move to commissions is brilliant as it gets employees to all focus on sales which is good short term yet allows the company not to do layoffs. good for them.
Bill - take your conservative misinformation campaign somewhere else. That $72 number has been discredited for weeks. It includes the cost of healthcare and pensions for retirees, among other things. It is not the wage for autoworkers in the US - it is the overall compensation and benefits expense for all current and former employees. It is not apples to apples compared to Toyota, who has relatively fewer legacy retirees etc. in the US owing to the fact that they only recently had any staff/etc. here.
MBOs and performance comp is a good idea, not just for Glam. As long as companies actually define the scorecards to measure them correctly and the things that they are incentivizing are good for the company. Even better is if they actually pay them when they are met.
Good for them. I love that they’re taking this approach instead of laying off workers. Why couldn’t Citi do this?!?!
Citi’s management was too busy working on their bailout payout packages and executive compensation, instead of thinking differently and saving employee jobs.
Frankly, I am surprised other silicon valley startups have not done this, they are supposed to be creative? Good for them I agree.
With all the bad news about the economy and layoffs, it is good hear some positive things. Sounds like a few companies like Google, Glam, MySpace, eBay and Amazon are doing ok, even in a downturn. Good news for their VC’s and investors, a company that is doing well in the downturn and taking steps to reduce expenses “just in case”
Stepping up to avoid layoffs is a very humane thing for Glam to do, and putting all employees on revenue is very clever in a down economy. With all the bailouts and CEO payouts that makes us all sick, their management is doing the right thing. Hope Obama will bring changes like this for all of us. More companies should step up and do actions like these.
the talent exodus has been going on for a while there… how much of that “triple digit” growth came through the acquisitions?
60% of gazillion dollars is still gazillion dollars.
When is someone going to leak salaries.
I have heard that they pay startup salaries and stock, so most of the execs take big cut to join startups - typically half of their big company salaries.
Also along with these changes, top employees could make as much/more $$ than some members of management.
What a good message to send to say how valued rank and file employees are.
This is the kind of thinking that builds strong and lasting companies -
actually, i think most employees are fine with taking pay cuts as long as it means execs will take a pay cut, too. and if it helps people keep their jobs, even better - even more employees would support it.
It will be interesting to see if other companies will be compelled to follow suit. News spreads so fast these days that it will be hard for a brand not to take a real PR hit if it looks like they’ve got greedy execs who are still enjoying top pay and benefits while laying off hard-working employees who have families to support.
@JillK, anita and the others saying that this is “good news”:
please, read a bit, talk to a friend that has studied some economics (not an MBA, please!), and think twice before saying, ever again, that pay cuts are good for the economy/country.
Yes, I get it when you say that they are good for the employees, since at least they keep their jobs –**for now**–, but there is a reason why I posted (above) a few links to a few different articles: so you could learn why pay cuts are bad, really really bad for the economy and, in the short term, even for those whom are having their salaries cut.
As predicted earlier this year, glam is going down and fast, the right thing to do now is to send way 30% of the too many, do nothing executives and cut 15% of the employees. Seem to me that many of the execs are just a friends of the CEO and have no fit.
man,
It is clear that you no nothing about Glam, their team or management. As a publisher in their network, I can assure you that your prediction is completely wrong. Why? Because they are honest about things with us and their employees.
All employees and management seem to be working their butts off. I heard a new employee or exec lasts 3-6 months maximum before they are a serious contributor, or they are simply asked to leave. We are treated well because people don’t think it is just a job. I wish Yahoo and Google would learn from this, where you can’t even get a call or email back.
I called today when I heard about their employee meeting wondering how the people I know were feeling. Was shocked to hear that they were emotional, full of gratitude and yet charged to help. This company has more ads than myspace or facebook and more revenue from brands and happy advertisers and publishers, yet they have less than a quarter of facebook employees- not much fat or friends or ceo or management.
@Peter, I agree. Employees know if they are being treated well. If they can keep their jobs and are treated with fairness. As a publisher, this all means more business for me in a downturn.
I know more than you think, I’m glad you are supportive, and that people are working hard, but it wouldn’t change the reality. Its time to cut deep. The company is not cash flow positive and in this market will never be unless BIG changes are made.
a
Cutting salaries is generally a weak way out. Your best people leave because even in a weak economy, they still have options.
Sometimes you need to swallow the bitter pill and lay people off. Playing on some egalatarian notion might buy good will for a month, but that probably isn’t enough runway.
I do realize they announced a range and the all-stars are probably getting 3% haircuts. My comment is specific to the concept, not this particular instance.
Dan,
It may be a male vs female or strong vs weak principle. Cutting salaries is not the masculine thing to do — but lets not confuse it with strong or weak.
Laying off people is the weakest thing to do. It means passing responsibility that you made a mistake and it is now someone Else’s problem to solve. Look at Yahoo — do you think that ALL the 1,500 people they laid off are not “best” “useful” or “strong”. What a naive view of life! Ask or read any of the comments of the laid off Yahoo people. If you do not do priorities or performance based reviews and fire people when you have to, you loose great people along with any others when you don not want to.
“Swallow the bitter pill” is not done through a layoff, is done through continuous feedback and corrections and holistic support and corrections. The concept they used will make their employees work a lot harder. May be a feminine concept, but being nurturing yet being strong can powerful concept too.
Smart move for any market- and sales-driven business. alas, portends that when they, say, acquire us (answerjam.com) or anyone else it’ll be stock, earn-outs and nothing hard. Bet they use the downtrend to start acquiring a bigger footprint.
Kudos to management for taking the bigger hit. I predict the writers will recognize this is a smart move and will be OK because they are not bearing the bigger burden here. Risk and reward seem to be matched here, which is good stewardship.
Are we talking 3-15% cuts for the staff from ‘market’ rates, or 3-15% cuts from already reduced start-up-type rates?
Already reduced start up rates.
Except for some execs making almost $500K/year not counting bonuses and commissions.
From the finance department: the highest salary is $199,000 today.
@valleymonger: Let me just clarify that I never said pay cuts were “good” or “bad”. I was merely observing that it might be the beginning of a trend, fueled by the “perception” of what seems “right” and “wrong” these days regarding executive compensation.
Very interesting post and comments.
Are salary cuts better than layoffs?