Mobile Q&A answer service ChaCha is shedding one third of its employees. We’ve confirmed with the company that it laid off 25 people, leaving it with 56 employees. ChaCha cited the layoffs as necessary to ensure profitability in the future. The layoffs have been added to the TechCrunch layoff tracker. From one tipster who says she was let go today:
Wanted to drop you a quick line informing you of layoffs at ChaCha today. There were 25 people layed off, leaving the company with 56 employees. Some very high ranking people were let go today, including 2 Directors of Development, the Vice President of Engineering, 2 Product Managers, a Sr. Director of Product Management, Director of Marketing Communications, 2 Linux System admins, and a Senior Program Manager. These were some of the larger layoffs. The rest of the company will also be taking a 10% decrease in pay, along with Upper MGMT taking larger cuts.
The news today about the $12 million is a ruse. Its just confirmation of a round we closed back in October.
These cuts come in the face of a drowning company. The ex VP of Mobile Ad Sales at Yahoo, Rob Wilk, has been in the NYC offices for 8 weeks now, and has not closed one single deal for any advertising on ChaCha’s platform. After I was let go, there was a company meeting in which Scott Jones layed out a pretty bleak estimate for the coming times. If the company can’t get to a crossover point and make money in 2 months, the whole thing is over.
Strangely, ChaCha hid the layoffs in a press release announcing a $12 million equity financing round, which may or may not be an extension of the $30 million round we reported on in January. (We are awaiting more details)
UPDATE: ChaCha informed us that they never officially announced their C funding round, but the amount was approximately $15 million and closed in October 2008. The company closed their $12 million Series D round last week, with funding from Morton Meyerson, Scott Jones and other investors.
We haven’t been big fans of ChaCha in the past and cited many reasons why the startup needs to reevaluate its business model. Still, the company was growing on us and their occasional snafu was always entertaining.
UPDATE: ChaCha issued this response to the tipster’s assertions about Rob Wilk: “Rob Wilk was a top performing advertising sales leader for Yahoo and he is leading an advertising sales effort for ChaCha that is resulting in significant revenue growth each month. Rob started 6 weeks ago and opened our New York office.”
lol?
In an attempt to further trim costs and maximize efficiency ChaCha has launched a pilot program aimed to allow it’s guides to develop and analyze the advertising copy it delivers to it’s customers. Let’s think about this for a minute ChaCha is relying on it’s guides for advertising copy? Sadly many of these guides have no recourse but to work for the sub-minimum wage compensation offered by ChaCha. As an advertising buyer I expect that my advertising dollars would warrant attention form at least a “paid” advertising analyst at the company. To add insult to injury a “source” tells me that many of these analysts were chosen by far less than professional criteria. If your going to choose your “analysts” by their personal appearance maybe you use their photos in your clients advertisements.
Advertising Maven
That email is epic
good
Sunds to me like they should have fired the lady that told you all of thie stuff sooner…LOL They still are better that the other company “KGB” they havent had and original idea in the list 15years. I guess stealing ideas seems to be what is profitable now days.
ChaCha stole the idea from AskMeNow.
ChaCha doesn’t have a business model. With the high cost of SMS fees and the cost of paying ‘guides’ their best case scenario is probably 15 cents per message sent. They are monetizing with crappy little sms ads and there is no way they are getting $150 CPMs on em to break even.
Perhaps they can apply @ 542542.
Am I the only person who get tired of the stories of companies like Cha-Cha who get funded up the wazoo without a hope nor prayer of ever getting profitable?
http://www.funadvice.com thank Jesus is profitable, stealth and growing like crazy. Yeah you’ll never hear us mentioned in these august pages, but we’ll continue earning and growing nontheless.
I don’t get it. You’re stealth but you’re blog-spamming? What’s the catch?
owned
It’s stealthed by his mothers basement.
ChaCha?!? That thing’s still around?
Good luck to ChaCha!
It’s interesting to read about a company from the same town I live in. *hehe*
ChaCha is one of those companies that I keep hearing about.. they seem to be growing like crazy. Seems like a promising service in a growing sector — mobile advertising.
I’d like to see them do well. The product is very cool (I just tried it.. u text 242242). I got an answer back quickly.
astroturfing… LAME
All companies have their ups and downs, many strive and have even more success. In a trying economy, we all *hope* the best decisions are being made. No room for negativity.
I am surprised that ANYONE from the ChaCha family would submit this story. ChaCha has always been about A-team members, what was done here did not exemplify that. Unfortunate.
If the allegations about hiding the layoffs in a misleading press release are true… yeah, real “A-Team” management you got there.
To be honest, I’d love to see Cha-Cha succeed. It’s a unique product with a lot of potential.
There was no hiding of layoffs. On the CNBC article written yesterday it was even stated, “The company is reducing headcount, overhead, and expenditures through a series of cost-saving actions to ensure the company is positioned for long-term success.”
ChaCha may have reduced some departments, but they continue to hire in sales and sales support along with having a full-time recruiter. So from the looks of it the are just changing focus to be more sales oriented while having the recruiter be on the look out for the best of the best.
Cha-Cha is hardly a “unique product.” It’s the reinvention of the virtual reference services countless public libraries nationwide already offer its patrons for free.
@Leigh Anne – I agree with you 100%.
I admit the press release really sucks to be sent out at the same time the layoffs happened. For the record, Scott did NOT say we have 2 months and we are done. Nothing was ever said about the company going under. It was simply laid out we need to step up to the plate in order to best utilize our existing funding.
Common sense says any company in today’s economy has to make solid decisions in order to survive. Just because ChaCha cuts staff doesn’t make it a “bad” company, it is like any other company that could make better financial decisions and doing what has been done thus far isn’t going to continue cutting it. hard decisions get made.
too many people getting hired too fast means when the going gets tough…people have to go. Yes it sucks, but its reality.
The sad thing are the human Guides are too brain dead to figure this all out.
They lay off workers, cut the Guide pay, hire some big wig from Yahoo or w/e that probably makes a bundle as it is.
Oh well.
Yes, we all have the intellect of a retarded water buffalo. NOT.
What is your basic malfunction? About 40 percent of the people I know have either experienced a cut in pay or hours or been laid off entirely. These are people with degrees and white collar jobs. I’ve said it before and I’ll say it again:
This economy is a mess. It took a long time getting here and it will take a long time to fix it. No one is immune. ChaCha included.
Will ChaCha survive? I certainly hope so. Will it get worse before it gets better? Probably.
It isn’t rocket science, bucakaroo.
I met one of ChaCha’s board members a few weeks ago at an entrepreneurial event at Purdue University (about an hour from ChaCha HQ); he was a doofus. Also have spoken with three Guides who knocked their entire model pretty badly. I don’t wish ill will upon anybody, but I can’t say I find this surprising. Information retrieval via text? Once smartphones take over, people will just use Google (same as the Guides).
Even if everyone in the world had a smartphone (which numbers probably aren’t even that high) there will be people that rely on others to get answers. Some people can’t find their answer with Google right in their face.
ChaCha wasn’t made to help with the easiest answers, even if it does, it was made to help people who really just can’t find the answer. That is why Guides answer questions based on expertise in certain areas. They have a basis to know where to start a search instead of doing so blindly like the user may.
I too hope ChaCha succeeds.
If you go to their web site and read the release, it doesn’t look like anyone is trying to mislead anyone. It appears that they are raising money in a tough economy, but doing the best possible things they can for the business to succeed.
I hope they do. I don’t see any reason why this community would want to be negative, call people names. It just doesn’t make sense.
Best of luck to ChaCha and tough choices that have to be made.
Correction: Today’s $12 million funding news accounts for ChaCha’s series D round which closed last week. Although it was not announced by press release, ChaCha’s C round totaled approximately $15 million and closed in October 2008. Furthermore, it is expected that ChaCha will reach profitability without requiring any additional funding. ChaCha continues to lead the pack as the fastest growing SMS search service according to Nielsen Mobile – http://www.wire....aspx?id=166416
The great thing about this company is the fund raisers. Somehow these guys wrangled a lot of money away from investors when ther NEVER WAS A BUSINESS IN THE FIRST PLACE.
Damn. Some investors are so stupid. It’s hard enough to make money off of good visions and strategies, but this one was a recipe for failure from the start. What a waste.
ChaCha rec’d a $2 million grant from Indiana’s 21st Century Technology Fund. It’s not that funny to taxpayers here in the region, some wonder why a company with no revenue model was provided funding in the first place.
They do have a revenue model, but they can’t make it happen overnight. It takes time to build up and ChaCha is doing just that. They continue to grab market share from Google and are doing the right things to make it a very profitable business.
And personally living in Indiana/Indianapolis I find nothing wrong with the 21st Century Fund backing a company started by a man who clearly has what it takes to lead a company to success. Not only that, but to show his trust and put his own money in the company.
Keep in mind that Scott was a founding board member of this fund.
Sure, ChaCha has a typical Scott A. Jones business model, pump up a non-existent product with over marketing, sell it, and screw everyone else in the end. Yea! He also has the classic, swoop in and snactch up a company in their time of need and bend them over. How did things end for the stockholders of his failed attempt at the DARPA Grand Challenge? (indy robot racing, LLC)
The whole guide thing was a scam anyway. They would promise money and then say that the answers given were no good. Mahalo Answers seems to be catching on.
I’ve been a guide since last September, and I get paid every month. Whoever told you that they weren’t getting paid probably didn’t know HOW to get paid.
Do they still do invites on Cha Cha…I was testing and got a message halfway thru that I failed. I had not been testing for more than 4 minutes and was shocked!
Hey Folks, the service is actually very useful. I was in a cab from JFK to Manhattan recently. It was raining and I forgot a coat. I knew there was a Filene’s basement by my hotel, and I texted to ChaCha asking what time the Union Sq Filene’s basement closed. Got an answer back in about 2 mins. I’ve since used the service a handful of times for similar queries—basically when I’m too lazy to find the answers myself.
Now I wouldn’t pay for the service like the clowns at KGB are hoping I will (SMS to 542542), but if they find a way to make ad-support work, the service will find an audience.
Problem is I don’t see how the economics will work.
Call me a ChaCha cheerleader if you want. I think they rock! I follow TechCrunch on twitter but I come to find out not everything you announce is true. Very disheartening. Here is a link with more accurate information: http://www.cnbc...com/id/29742394 I am done with your tweets! They are far from Twitterific!
You can call me a ChaCha cheerleader too as I’m a current Guide. ChaCha has won many awards so far and haven’t been around that long. I know many have posted there opinions so here is mine. It’s been said that the Guides are too stupid to know what is going on. Well that is not the case. Why would Palm, H&R Block, Coca-Cola, McDonald’s and the Obama Campaign run ads with ChaCha if they were going under. Why would ChaCha partner with AT&T if ChaCha was not a good invested. That says it all right there!
You clearly don’t understand…
Those companies run the ads because they reach an audience at a desirable rate–your company, Cha-Cha, is unable to profit at that rate and as such continues to lose money.
If the NY Times offered McDonalds a full page ad for, say, $100 that doesn’t mean the NY Times is successful, does it?…Understand now?
BTW, I have used Cha-Cha in the past with success but recent uses were a disaster.
Well I am a ChaCha cheerleader as well. I have been with the Company for almost a year as a Guide.
With the economy the way it is every Company is struggling. ChaCha is not exempt from that.
I do want to say for those of you who posted that the money give for this Company was a waste because you don’t think the Company’s Vision, Well keep those words right there.
I think you are going to find out that ChaCha not only is a great vision, this vision will grow as it is already and will be widely used.
I challenge each and everyone one you to use ChaCha try there service out, if you own a business try contracting with them and get your businesses name out there through ChaCha.
ChaCha does 100’s of thousands calls a day, if you go by that alone then ChaCha can’t be wrong. That many people using the system and loving it can’t all be wrong.
By the way have you read the newspaper lately, do you know how many Companies are laying people off right now?
The economy is bad, Companies have to do what is in their best interest to stay alive until we as a Country can get on our feet.
Why do you even have this article? It is not like the truth is being told in it. If you want the truth you can get it from ChaCha.
The only good thing I see coming from your article here is that you give us more publicity, and ruin your reputation as a reporter for publishing untrue comments and out right lies.
Happy ChaCha Guide & Cheerleader
Ouch, well … the only thing I can say is congrats to those let go! Life’s too short to be stuck in the IT rat race. I know it hurts right now but give it time and getting tossed will actually be a great thing.
Are you there Cha-Cha? It’s me Margaret.
Nice post! Check out my site too at http://macmaniapodcast.com.
Thanks for this insight!
How and why has this company raised so much money? If I understand what they do, they do more or less the same thing as UK-based Any Question Answered (http://cli.gs/00ssHt), and I believe they managed to turn profitable without raising even a tenth of the capital ChaCha has raised. What gives?
It’s not that this model cannot be profitable. But this company has been overspending in every categories. I don’t know the details, but for one, their whole company works out of a luxury outdoor shopping mall, one of the most expensive ones in Indiana. The rent is not cheap!
@ChaChaster – You hit that one right on the nail. For those wondering, here is the link to what the place looks like on the outside
http://maps.goo...476923076923073
inside however, everything looks and IS high-tech. They have multiple 27″-32″ HDTV’s in the receptionist area alone with top of the line workstations. They spared no expense making the place the best it can be.
Not only they enjoy top of the line equipment at a high-rent district, but I heard that employees also had many benefits such as free massages (I think that link can be found on Wikipedia I’m not sure) so for a while there they were enjoying the high life and now that high life is over.
The sad thing is that while they enjoyed this high life, guides never saw an increase in pay, only a decrease, and hit after hit to the customers questions limits which also affected guides.
It sucks that it took an economic downturn for ChaCha to finally crack down and cut costs but in my opinion, the cost cutting measures should have been there from the beginning. Maybe a lot of that money could have been better allocated to the businesses survival and possibly a pay increase for guides that are literally working for 3 bucks an hour.
Actually, that’s not quite true. Many expenses were spared. This was not your typical office. When I left ChaCha we didn’t even have a real phone system in place. The massages were a small fringe benefit to help compensate for lower salaries for much of the administration at the time.
Hmmm, well here’s a headscratcher, that space is owned by Simon Property Group (NYSE:SPG) and the Simon family are investors in Chacha. I don’t know if Chacha pays market rent… But hey before the SPG shareholders get upset, lets give a shout-out to the Tax payers in Indiana who wisely allocated nearly $34 million to support their much hoped for tech industry through the 2007-09 Biennium Awards!! Shockingly, shortly after Scott Jones hosted a fundraiser at his home for the (then) governor elect, ChaCha received $2mm of that money! But HANG ON, out of the hundreds of grant applications – Scott Jones’ other venture ( a robot that mows golf course greens) also received nearly $2mm! Thats right – Jones received nearly 12% of the total taxpayer monies allocated in Indiana to support all tech and biotech and keep them in state. Don’t bother complaining to the media – Jones owns the local Inside Indiana Business media company. Oh, he also is the Chairman of the biggest VC in the state for tech. But hang on – they haven’t funded anything in years. Thats to say nothing of the fact that Indiana.gov uses Chacha as its search engine – selected without a competitive bid. And lets not forget the SEC issue and the great “deal” Indiana Univeristy got by using Chacha. Chacha will exit shortly (I suspect) and Jones will be fine. I suspect no one else will be (given Jones history), but then maybe the guides and everyone else can go work for the robots…. And the taxpayers of Indiana – well – Jones never stops coming to Indiana for money and someone with the purse strings in Indiana keeps paying him! Its sad really….
Scott A. Jones is as shady of a businessman as they come, everybody but him gets screwed in the end. His “robotics” company is going under as well. I was recently fired from Precise Path along with 1/3 of my coworkers. We spent all of our money on web sites, trade shows and free lunches. The company clearly had no plans in creating a working product, only hyping it up and selling their “customer list” as they could. The lawn mower has never even driven!
In an attempt to further trim costs and maximize efficiency ChaCha has launched a pilot program aimed to allow it’s guides to develop and analyze the advertising copy it delivers to it’s customers. Let’s think about this for a minute ChaCha is relying on it’s guides for advertising copy? Sadly many of these guides have no recourse but to work for the sub-minimum wage compensation offered by ChaCha. As an advertising buyer I expect that my advertising dollars would warrant attention form at least a “paid” advertising analyst at the company. To add insult to injury a “source” tells me that many of these analysts were chosen by far less than professional criteria. If your going to choose your “analysts” by their personal appearance maybe you use their photos in your clients advertisements.
Advertising Maven