My Take on the Calacanis Email Missive

Mahalo CEO Jason Calacnis has posted an in-depth email to his huge private mailing list this evening to provide more details about the firings and changes at Mahalo today. While I can’t republish the email, I thought I would provide my honest thoughts on his comments.

Jason begins with today’s post from his blog. I’d have thought the post would have been better placed on the Mahalo blog. It’s important to speak to your customers more than anything.

He then explains that he still has 30 FT staff across 6 offices in California and more than 50 freelancers. In his interview last week in London with Intruders Jason stated that they have 100 FT plus 200-300 freelancers. Not sure which number is accurate.

I will agree with Jason that there’s nothing worse than having to look an employee in the face and telling them that they are no longer employed with x firm. It’s not something any manager ever wants to have to do. This part of his email is well worth reading.

Jason notes that most of the Mahalo reorg was handled while he was out traveling the world. He explains that he pushed his executives to come up with a cost-savings plan within two weeks which included five days to analyze and execute the plan. With 4 years of money "even if we never generate a penny" why was there a need to rush to a decision? Why not take the time to accurately look at the situation? I am still confused at how the economy is playing a role in today’s decision. From my perspective and to be completely honest, after reading his email, his blog post and the other reviews today, I get the sense that today’s announcement is a traditional business restructuring rather than directly due to the current economy.

Jason compares firing staff members with a sports team coach letting players go at training camp. This is really an unfair comparison. The people that Jason has fired/restructured are the people who built Mahalo and apparently put in their blood, sweat and tears. A fairer (but not accurate either) comparison would be a coach firing his/her offensive line the day before the superbowl.

He wants the company to have four years of runway with no income coming in — this was his goal with today’s restructuring. He was spending two editorial dollars for every technology dollar — this makes sense considering his vision is for a human network, not a computer network.

He goes on to explain that the people who work at home are significantly cheaper than full-time employees. Isn’t that usually how it works? So what cuts were there?

• Mahalo daily video editors are now contract employees – Jason doesn’t specify if these employees get any benefits at all
• They swapped their phone lines to save $1.5/month – although I thought this was done earlier this year?
• They rent out office space to other companies
• He won’t be traveling the world anymore – even though last week in Asia he said that Americans should travel outside the U.S. – 10-12x a year to be successful
• They have moved "aggressively" to a freelance workforce – this means no benefits, no stock. This is so different than everything I’ve heard from Jason to-date.
• We also learned that Jason likes to blog from his garden near his pool

Jason then shifts to revenues where he explains that they have "aggresively" started running Google AdSense. This is clearly noticeable as the ads mirror the content exactly. My gramma would never be able to tell the difference. Good to see Jason be upfront about the change here. He’s also working on partnership deals around content – if he can close 20% of them, it will help cut their spending by 10%. He ends by explaining that they are focusing on building revenue now – and I completely agree with this.

Jason doesn’t believe an end to the current financial situation is in sight.

He shares some points around executing the workforce reductions:

• do it all at once – I agree, pull the bandaid off at once versus slowly don’t sugarcoat it
• cutting salaries is typically worse than cutting headcount – I generally agree, large companies do this pretty often – fire the expensive workers and replace them with cheaper less experienced talent. Of course in today’s market
• you can grab top quality talent for a much cheaper price.
• give severance – i’d like to see him share what he did for his employees today. when they moved to freelancer status, did he pay out their stock options? this is where i’d like some answers.
• get everyone focused again – frankly my suggestion is to close the office for a day – let people clear the air – especially with today’s internet – all of his staff will be reading posts like crazy – let them clear their heads and take a deep breath.

I leave you with this… I’ve said since day 1 that for Mahalo to survive they have to move away from humans and more to technology. I continue this belief with today’s announcement. And just like I said in my previous post, if there’s anyone affected today by the job cuts at Mahalo (or anywhere else), drop me a line if there’s something I can help with. (don’t ask for money though, I have none to give)