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Mahalo Fires Staff; Bad Economy or Bad Business Model at Fault?
Just back from a business trip to Europe and Asia, Mahalo CEO Jason Calacanis has decided to make some cuts, firing nearly 10% of the staff and has started to rent out space to other startups. From what we understand, the rentals started earlier as Techcrunch50 finalist CauseCast has been renting space for a while. It’s good to see Jason took my advice from last week.
The staffers who were fired today are absolutely the best of the best. In London at FOWA, Calacanis explained that he only hires the top, best possible talent. This should probably help the fired staffers with future job inquiries. Good luck to all of those who lost their jobs at Mahalo today and if I can be of any help, send me an email.
One of the questions I’ve wondered about and have been asked for my opinion a number of times over the past month is whether the startups that are firing staff are doing it because of the economy or because their business model concepts or actual ideas are the real issue. It’s a very difficult question to answer without getting a look at the information from the inside. I posed the question on Twitter and was pointed to Jonathan Gheller who recently closed his startup Fashmatch. He notes that it wasn’t the economy that pushed them to close.
I certainly can’t say which reason is at fault for Jason’s decision to fire staff today. I can only assume it’s economy related based on the fact that his entire team are the highest delivering employees possible.
My view on Mahalo is the same as it was day 1; to be successful they will need certain pages to drive the large share of revenue. While ads on the site now mirror exactly the other links on the page (this may actually confuse visitors), will that be enough to drive users to click on the ads? And how much does a page require to break-even? I’ve also started to see an overall drop in Mahalo’s standings in Google. What used to be instant page 1 status now has been pushed further back. Mahalo has $20 million in funding so they have some runway to continue to refine their business model as they continue to grow.
Mahalo Daily, the video show, also appears to be declining in viewership even with their SEO titles and excellent thumbnail work.
Ashkan summarizes the Mahalo business model:
Mahalo’s traffic strategy right now is simply to jump on the latest, breaking news, publish a page on it, and hope that Google’s super quick spiders index their page… It’s a gimmick, not a worthless one, but not exactly priceless either.
There’s been chatter about more Mahalo positions moving overseas. Our sources tell us that Jason has opened an office in Manilla. I don’t want to speculate on what positions are located there yet – we are still waiting for some final confirmation. We were provided this photo which was shot by a Mahalo staffer of what appears to be (unconfirmed) the Mahalo team in Manilla. I count 25 people in the photo.
You can find a lot of workers overseas that will do data entry for around $7K/yr (that is full-time).
$175K for 25 full timers sounds like a bargain.
Is the economy to blame? Maybe, but digital ad sales are still increasing last time I checked. And advertisers are never afraid to advertise on quality sites. The only thing these start-ups have to fear is running out of money before they get acquired. And less are likely to acquire with dwindling stock prices.
A real business model allows you to weather the storm, a stellar business model gives you a chance to sit back and watch the dirt and grime get washed away.
I don’t know the exact percentages but I am sure that at least some of the businesses aren’t firing staff for the economy.
Where do you get that startups are supposed to grow at 100% year over year?
Hi Allen!
Startups that fail, as well as many other companies, like to blame the economy. In my opinion, most of the times, the problem is not the economy but a) the business model or b) the management.
Startups are supposed to grow very quickly: 100%+ every year. In contrast, a fast-growing economy grows at 10% (China), while an economy in recession may have a small negative growth (2%?). If a startup is supposed to grow at 80% per year during the first few years, a bad economy, in most cases, will only slow it down to a 70% growth per year.
Companies like LendingClub may blame their failure (if they fail) on the economy. On the other hand, Yahoo! (poor management) and Mahalo (not-so-good business model?) can’t and shouldn’t blame it.
I really respect Calacanis as an entrepreneur and someone who really speaks from experience & knowledge but I have never for a second thought of Mahalo as a good idea/concept. Anything that laborious in my opinion is just not worth doing – good luck to him but frankly I would probably pull the plug earlier rather than later and/or buy out Kosmix.com .
Great business model – $3000 coffee machine..(ahhh… life at Mahalo)
http://calacanis.com/2007/08/16/life-at-mahalo/
Going to have a detailed email of what we did and why later today. You can signup for the email at http://www.tinyurl.com/jasonslist
In terms of Manilia we have a small team there doing data entry and clean up type work, Majority of the work is done by folks working from home for $10-12 an hour. That’s really what we did yesterday: focused on the outsourced editorial model that worked so well at Weblogs, Inc. and grew that business into a powerhouse.
Thanks for the kind words during a very difficult time. Also, I wasn’t endorsing Charles’ calling you fat with my tweet, i was just pointing to the cat-fight. As someone who’s been 20 pounds heavier than I am I have sympathy for your weight issues
all the best,
jason
Jason,
I am a Filipino and i can say, giving those individual (Jobs) a little help for their everyday need to support their family is something mean a lot to them. The $12-$13 dollars is small for us here but over there in the philippines mean a lot. Keep up the goodwork.
Nat