The 16-month-old start-up, which pays members to surf the Web and view advertisements, cut its work force by 60 people Friday. The company will now employ 600 internationally. The layoffs came within all divisions of the company and focused on U.S.-based employees, the company said.
Hayward, Calif.-based AllAdvantage has become a victim of its own costly success. It draws new members by promising them cash for time spent online. Companies then pay AllAdvantage to run targeted ads based on member profiles.
But the weight of paying its members has ended up crushing AllAdvantage's revenues. The company paid $32.7 million to members from December to March but made only $9.1 million in the same period.
Along with skyrocketing member costs, the size of the company has mushroomed since March 1999.
"That kind of growth is too fast now that market conditions have changed," Jim Jorgensen, AllAdvantage's chief executive, said in a statement. "We have taken stock of the large number of assets we have created, and our plan going forward is to leverage all of these assets more efficiently."
Earlier this month, AllAdvantage halted plans to go public. The company cited adverse market conditions, according to a filing with the Securities and Exchange Commission. In February, it filed to sell 15 million shares to the public for $8 to $10.
The company now must cut costs to survive. In June, it reduced the number of hours it will pay members to surf and lengthened its pay schedule.
Months after the company launched, nearly 7 million people had signed up. Nearly 2 million now actively participate. The company said the layoffs are also part of an effort to consolidate departments.