Net ad server reduces staff by 25 percent

Advertising.com seeks faster route to profits through 72 layoffs

January 05, 2001|By June Arney | June Arney,SUN STAFF

Baltimore-based Advertising.com Inc. laid off 72 of its 287 employees yesterday, about 25 percent of its work force, most of whom worked at its Tide Point headquarters.

"Our decision was based on achieving profitability sooner," said Scott Ferber, co-founder and chief executive officer of Advertising.com. "The industry is changing rapidly. We needed a skill set slightly changed from what we needed before."

The staff reduction, coupled with a second year of consistent revenue growth and more than $50 million in funding secured in 2000 from strategic partners, will strengthen the company's business position for this year and beyond, company officials said.

Company executives predict that they will reach profitability as soon as this year.

The job cuts came across the company, in positions with salaries ranging from $20,000 to six figures, Ferber said. More than 60 of the laid-off employees worked at the Tide Point headquarters in Locust Point, he said.

Advertising.com has provided severance and termination benefits, including outplacement assistance services and health and life benefits, to the laid-off workers.

"It is critical to always focus on sound financial management and to be sensitive at the same time to individual needs," he said. "It's been a challenging, difficult event, but it is the right long-term move for the company."

Advertising.com achieved revenue growth of more than 400 percent during the past two years, Ferber said. Revenue was $11 million in 1999 and more than $45 million last year, Ferber said.

Layoffs such as those at Advertising.com are endemic to the industry, said Marissa Gluck, a senior analyst at Jupiter Research in New York. She noted layoffs also yesterday at competitor Engage Inc. of Andover, Mass., which plans to cut its staff by half in the coming months, eliminating about 550 positions.

"It's ugly out there," Gluck said. "All these Internet companies, everyone from e-commerce to vendors to advertisers, are under increased pressure to achieve profitability sooner."

Given the difficulty that the first-tier players are having, Gluck said, she can envision more layoffs by companies such as Advertising.com, which she characterized as a second-tier ad network.

"If it helps them streamline their business and achieve profitability sooner, it's a good move," she said. "But it may not be enough. They're still dependent on getting ad dollars in the door."

Last year, Advertising.com took several significant steps, such as earning a rating as the fastest-growing Internet advertising services company in the United States by Dun and Bradstreet, and raising a total of more than $50 million in financing. Also, the company launched its European operations with the opening of a London office and became one of the first to serve advertisements to wireless devices.

Advertising.com was founded in a townhouse in Towson in 1998 as TeknoSurf.com. Officials say the company delivers more than 1 billion ads each month to more than 5,000 Web sites. Among its services is one that gives marketers the ability to target audiences across all online channels, including wireless devices.

Advertising.com has offices in New York, London, San Francisco and Silicon Valley.

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