Using yet another layoff euphemism, Google announced that it is “reducing the number of roles” within it sales and marketing organizations by about 200 across the globe, adding those to the 40 radio ad roles and 100 recruiter roles that disappeared from the search giant earlier this year. Perhaps the poor economy is affecting Google a bit more than it’s letting on.
In a blog post announcing the “role reduction”, Google’s Omid Kordestani, senior VP of global sales and business development, says the latest layoffs are not so much due to poor ad sales in the current economy, but instead are necessary to correct overlapping organizations that were muddying Google’s decision-making process:
When companies grow 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.
Google’s torrid hiring pace was legendary and so it’s not surprising that inadvertent overlap occurred. But the last part is more ominous. Google overinvested in certain ad sales areas it expected to grow–that didn’t. And those non-growth areas are probably multiplying, as current economic indicators are trending toward things getting worse before they get better.
For example, AP reports that consumer spending edged up 0.2% in February, while at the same time consumer income dropped by 0.2% due to job losses (and role reductions). While good news for an ad seller in the short run, it’s probably not sustainable in the long term.
Consumers continue to lose their jobs and eventually, will have to cut back their spending even further. And that means they will have increasingly less interest in viewing and clicking on ads for things they can’t buy–leaving Google with increasingly anemic ad revenue.
Google spokesman Matt Furman today says no further cuts are planned. But that’s what Google CEO Eric Schmidt said two months ago, after Google laid off the 100 recruiters. Google continues to tighten its belt, even putting a halt to its famed acquisition pace. Still, investors continue to reward it for making these cuts and adjustments (it’s stock rose $9.22, or 2.7%, to $353.29 yesterday, even with the layoff news).
But how long can Google realistically continue to put up good numbers while its core business keeps eroding? Guess we’ll know at Google next earnings call, which is scheduled for April 16. Stay tuned.
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