Posted by: Rob Hof on March 26, 2009
In a blog post today, Omid Kordestani, Google’s senior vice president for global sales and business development, said the search giant had simply hired more people than it needed for the current level of business. So 200 jobs in sales and marketing will be cut, though some of the people will be able to apply for jobs that Google is still hiring for.
Clearly, Google has seen its business hurt by the economy more than it expected even in January, when CEO Eric Schmidt said deeper cuts were unlikely. It seems likely that whatever revenue growth Google achieves in its first quarter, which it will report on April 16, it won’t be as much as the company thought a short time ago. According to many advertisers and search experts, January and February saw fewer searches and less search spending, though March may be showing some improvement.
What’s more, the cuts come in a particular challenging area for Google. It has been trying to persuade Madison Avenue ad agencies and big brand advertisers that it can offer them more kinds of ads beyond search, from pictorial display ads to TV ads. Those efforts remain nascent. The layoffs also follow the departure of North American ad sales executive Tim Armstrong, who is leaving to become CEO of Time Warner’s AOL unit.
At the same time, although this is the largest layoff this year, it still strikes me as remarkably small given Google’s 20,000-person staff and the severity of the recession—even with the earlier layoffs of 100 recruiters in January and 40 people after Google closed its radio ads business in February. Although more could come especially if the economy continues to worsen, these appear to be rather selective at a time when nearly every company seems to consider a 10% to 20% layoff mandatory. That indicates that while Google’s business certainly has been hit by the downturn, it’s not doing as badly as most businesses.
At least one search expert thinks Google won’t much miss the lost sales people. “Google’s core product sells itself,” Kevin Lee, CEO of the search marketing firm Didit, emailed me today. “Most savvy marketers would spend the same, with or without a sales rep. Reps are important, but mostly to educate on new products. Some of that is handled better via PR or webinars.”
The layoffs bear the mark of relatively new Chief Financial Officer Patrick Pichette, who was hired last fall. Google people have been telling me Pichette has imposed a new discipline on Google’s spending. “Patrick has helped us uncover opportunities” to cut operations that weren’t performing, such as Google’s Lively virtual world, which was jettisoned recently, Bradley Horowitz, VP of product for Google Apps, told me. Dave Girouard, president of Google’s corporate enterprise efforts, says Pichette “digs very deep” in asking questions about which ads are working for which advertiser.
Here’s full memo from Kordestani, after the jump:
Google has grown very quickly in a very short period of time. When companies grow that quickly it's almost impossible to get everything right—and we certainly didn't. In some areas we've created overlapping organizations which not only duplicate effort but also complicate the decision-making process. That makes our teams less effective and efficient than they should be. In addition, we over-invested in some areas in preparation for the growth trends we were experiencing at the time.
So today we have informed Googlers that we plan to reduce the number of roles within our sales and marketing organizations by just under 200 globally. Making changes of this kind is never easy—and we recognize that the recession makes the timing even more difficult for the Googlers concerned. We did look at a number of different options but ultimately concluded that we had to restructure our organizations in order to improve our effectiveness and efficiency as a business. We will give each person time to try and find another position at Google, as well as outplacement support, and provide severance packages for those who leave the company. Finally, I would like to take this opportunity to thank everyone affected for all they have contributed to Google.