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I feel for Mahalo founder and CEO Jason Calacanis this past week. He finishes his Launch conference (my recap), heads to the afterparty and probably gets 10,000 text messages because that was just about the time that Google announced their algorithm change. Assuming Jason wasn’t briefed by Google about the change, that really is pretty horrible timing and I wouldn’t wish that on anyone, even a guy from the B-line (I am D-line).
This afternoon Jason and Mahalo president Jason Rapp sent out a mass email noting that, based on the Google changes, they will be reducing Mahalo staff headcount immediately by 10%. Here are a few key points directly from Jason and Jason:
- (re: the google change) Despite those efforts, unfortunately, the Google changes have led to a
significant dip in our traffic and revenue. It’s hard not to be disappointed since we’ve been spending millions of
dollars on producing highly professional content.
- Today we have eliminated a handful of positions in the company (about 10%), and we’ve cut a number of non-essential services we provide internally. In addition, we are re-evaluating our freelance content
production, pausing it in the near term and determining how to best produce the high-quality educational material we aspire to in the long run. We are not, however, diminishing our video production efforts.
- Interestingly, while the search side of Google has impacted us negatively, Google’s video unit (YouTube) continues to be our strong partner, encouraging us to ramp up our video production and publish even more of our expert video lessons with them.
What’s really interesting to me is that I remember when Mahalo first launched, Jason told me numerous times he didn’t care about Google because he was going to build loyal users who would just come directly to Mahalo (e.g. similar to how we just go to TripAdvisor to look up a hotel).
Mahalo CEO Jason Calacanis announced earlier this week that they are now renting space at their HQ in Santa Monica, California. Apparently the Mahalo office is about 10,000 square feet and they are renting out at least 4,000 square feet. Makes sense with all of the staff they have let go over the past months. Pricing was not disclosed. Check out the photos – pretty nice looking space.
From the announcement, “All with morning oatmeal, desks, Aeron chairs, Polycom SoundPoint IP 550 VOIP phones, printers, facsimile, redundant internet, WiFi, coffee, tea, cleaning, all utilities, shared kitchen, conference, green screen/podcasting facilities, in 10,000 ft space.”
It looks like Causecast is also sharing the space – they were a Techcrunch50 finalist – just saying. (Update: Jason says CauseCast has moved out and that’s some of the open space) From what we understand they have changed their hiring policies so no more worries about putting your startup next to criminals. Annual renewals will receive one ride in the Tesla. The very fancy coffee and tea pot is available for $2.50 a cup – Google AdSense ain’t paying what it used to yo.
All jokes aside, this concept of renting out space seems to be pretty popular these days as startups shrink their size. I know many companies doing it here in NYC as well.
There’s been a lot of talk the past couple of weeks about URL shorteners and the new DiggBar. Even Leah Culver, former partner to Kevin Rose on Pownce, has come out against the methods of the DiggBar. One of the issues with the DiggBar is that it "frames" the content of the site which can lead to a variety of issues. Daring Fireball has laid out his concerns with the DiggBar yesterday.
So what does Jason Calacanis, founder of Q&A service Mahalo, think about the concept of framing? Appears he hates it when Facebook does it but loves it when Digg does it.
In case you are seeking employment in the product management field, q&a service Mahalo is hiring. Check out the full job description on Craigslist. It’s important to know that you must be "THE BEST" to apply for this position. Some other important notes from the posting:
- you will work hard
- it’s "life-changing"
- it’s an "incredible" opportunity
- you must be ready everyday to "kill it" – yes, based on twitter messages, it does mean everyday
- you will work hard
It’s got to be tough around Mahalo these days… what’s happened lately you ask?
- they shut down their greenhouse
- in the new upcoming greenhouse, many of the tasks will be moved to Manila or to the buck-a-post answers system
- Andy Beal claimed that Mahalo is involved in a "pagerank funneling link scheme"
- Leah D’Emilio – host of the very popular Mahalo Daily video show quit this week – the show will move to a weekly format to become profitable
- Apparently while they only want "the best" – they did hire a felon. Apparently Jason’s HR department forgot to do a quick Google check on their employee.
My questions about the felonious hire are…
- Once the Mahalo executives found out about this situation, did they share the news with the rest of the employees?
- What about the Mahalo team in Manila – have they been checked?
- I think there’s a difference between giving a person a second chance after they have served their time and keeping a person who has yet to be sentenced on the payroll
- While Jason plays down the security fears some of Mahalo’s users might have, they are now accepting money from users on Answers. While I am guessing the number of people who have deposited their own money is less than 10, I think those people are due some answers.
- Rafe at CNET asks similar questions about trust with regards to Mahalo going forward and Rafe also wonders if we should trust any Web service that has a convicted hacker on the payroll
Let’s hope next week is a better one for Mahalo!
Last night, Sara from q&a site Mahalo sent out the following email to all Greenhouse workers letting them know their services won’t be needed for the next 60 days. In case you aren’t familiar with Greenhouse, it was setup about a year ago to be the main place for Mahalo’s temporary workers to "pick up" pages that Mahalo wanted created.
For example, they might have pages listed for "How to get a good credit score" or "How to learn French". Typically the pages paid about $10, some of the pages that would take potentially days to write (e.g. a game walkthrough) could go up to $150.
We are going to pause Greenhouse SeRP submissions for the next 60 days. If you have an in-progress page, please submit it as soon as possible, no later than the end of day, Monday, March 2, 2009. Please do not claim any new terms–pages claimed today or later will not be reviewed.
We are revamping the system and will have a new opportunity for contributors in April 2009–please stay tuned for more details!
It looks like the game walkthroughs will continue - my guess is that these pages drive more revenue and make sense to consider.
Are they planning to shift the workers from $10/page on Greenhouse to ~$1/page on their Answers product? Might make sense considering their SEO and crowdsourced-content strategies.
I guess we will need to wait until April!
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)
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.