Tough Week for Digital Media Startups

Written by Ryan Lawler

Friday, October 17. 2008 at 03:55 PM EDT 2 comments

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Last week, Sequoia Capital and Silicon Valley investor Ron Conway began advising their portfolio companies that they'd have to start cutting costs and showing a path to profitability if they hope to survive today's uncertain economic times. Well, it appears several startups have begun taking that advice.

In what's been a rough week for startups, as Seesmic, Jive Software, AdBrite, Hi5, Ztivity, Appcelerator, and Pandora have all reportedly reduced headcount in an effort to cut costs.

The bad news started last Friday, when Seesmic CEO Loic Le Meur posted on his blog that the video blogging site would let go seven of its employees -- or about one third of his staff.

That was followed this week with the news that Jive Software, which makes social software for businesses, reportedly laid off one third of its staff. According to a report at TechCrunch, the Sequoia-backed company reduced its headcount by 40 employees during the cuts.

AdBrite, which runs an auction-based ad network, reduced its personnel count by 40 percent, according to CNET. According to AdBrite CEO Iggy Fanlo, those cuts were made in an effort to reach profitability.

While MySpace is preparing to clear $1 billion in revenues, not all social networking sites are faring as well. As a result, Hi5 -- the No. 3 social network behind MySpace and Facebook -- is laying off 10 to 15 percent of its staff, according to TechCrunch.

Apparently, not even adult sites are immune to the current economic climate. Adult photo-sharing and rating site Ztivity cut eight of its employees -- or about one third of its staff, TechCrunch reports. The site, which is in private beta, is still expected to go public next year.

Appcelerator CEO Jeff Haynie announced on his blog that the company, which provides open-source tools for developing rich Internet applications, was shutting down its Atlanta office and laying off the remaining six employees that worked there.

And finally, Pandora founder Tim Westergren wrote that the company was reducing staff from 140 employees to 120 on the company's blog today. Despite increasing its number of listeners and growing its ad sales, Westergren writes that the company "is not immune to the challenges presented by the current economic turmoil," and is "trying to react quickly and responsibly to the new environment"