Jason Calacanis, CEO of Mahalo, a human-powered search engine, announced today that he was forced to layoff 10 percent of his staff (about five or six people) amid a "challenging economic environment" that will require the company to cut costs.
"Although we've got a significant amount of cash on hand, and the business is ahead of schedule in terms of traffic, we're fairly certain that the advertising climate for the next two years will be severely depressed," Calacanis wrote in a blog post. "To ignore this obvious fact would be irresponsible.
"We've laid off just under 10 percent of our full-time staff, cut our overhead by doing smart things like renting desks, and reorganized our editorial department to focus on freelance positions over in-house editors. The net result of the effort is we are giving Mahalo another year of "dry power" (or runway) to complete our mission," he added.
Calacanis told CNET in an e-mail that the layoffs are "precautionary" and his decision to rearrange the editorial department by relying more on freelancers was inspired by his decision to follow "the Weblogs, Inc. model" of paying freelancers based on output while he was the CEO of that company.
"[The layoffs] give us four years of runway (which might be way too conservative), but I'd rather be a little conservative now and expand later when [the] ad market comes back," he said in an e-mail.
Mahalo, which tries to provide better search results on major topics thanks to editorial input, relies heavily on advertising as a source of revenue. But as Calacanis pointed out, the layoffs allow Mahalo to operate through 2012 even if the company couldn't incur any advertising revenue during that time period.