Are Google's 200 Layoffs a Sign of Something Else?

 
 
By Nicholas Kolakowski  |  Posted 2009-03-27
 
 
 

Google laid off 200 employees from its sales and marketing teams on March 27, raising questions about its strength in the face of the current recessionary environment. 

The company claims that those jobs were slashed in order to eliminate overlapping positions, a side effect of years of explosive growth. However, coupled with the February 2009 shutdown of its Google Audio Ads and AdSense for Audio projects, and the January 2009 layoffs of 100 recruiters, the newest round of layoffs could suggest that the company is preparing for the same sort of rough economic ride as IBM and Microsoft.   

Although its quarter-over-quarter revenues remain robust, Google has seen its profitability dip thanks to growing softness in the online advertising industry.

Google employs some 20,200 workers, according to the Associated Press, meaning that the current layoffs represent less than 1 percent of the total. Thus, in absolute numbers, and when compared to the current round of massive layoffs at IBM, which according to Alliance@IBM could total 4,000 to 5,000, the Google layoff numbers are miniscule.

"It seems like a judicious cut," Roger Kay, an analyst with Endpoint Technologies Associates, said in an interview, "and one that's more tactical than strategy-oriented. If Google had laid off large numbers of engineers, that would be an entirely different story."

However, according to John Byrne, an analyst at TBRI, the layoffs are potentially "concerning" in light of Google's rapid hiring pace over the previous few years. "I attribute part of this to the company taking the 'opportunity' of the recession to address the kinds of inefficiencies that are likely to occur when you grow that quickly."

In his view, the layoffs hint at a broader revenue crunch for online.

"Clearly it indicates that Google does not like what it has seen from its advertisers thus far in 2009, which does not bode well for other companies in online advertising, including Yahoo, AOL and Microsoft," Byrne added in an e-mail. "It is clear from more recent comments from Schmidt as well as the layoff decision that Google is certainly feeling the pain as well, though not as much as its peers."

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