The blogosphere is buzzing about Dave Sifry's announcement that Technorati is laying off employees and he is stepping down. First off, I must say that I'm so impressed with what Dave and his team have created. I think David is a wonderful guy and I hope he won't take me off his friends list on Facebook for saying so, but I think it's only appropriate that he step down given his track record of late. Layoffs? Are you kidding me?
I was skyping about this with technical guru Russ Nelson, who commented offhand that Technorati "has everything needed to be successful." Here's a quote from David's blog post from last month: "Today, we are about 45 people, have a presence in Japan, serve about 12 million unique visitors each month, are watching our page views grow by double-digits each quarter". No mention of revenue or even revenue growth in the list of stats he trots out to impress us, however. How hard was he focusing on it?
You can find a hint in his final post at the Technorati blog: he prefers the heady innovation days of a start-up, views becoming a revenue-stage company with "a bit of sadness", and seems to resent the "customer-driven needs" that take him away from "fundamental blue-sky innovation". Well, to me this means he probably should have stepped down from his CEO role about two years ago. It's precisely your customer's need and their ability to pay you to solve it that are "fundamental" to business -- not innovation for innovation's sake.
Different people are good at different things, and David did an amazing job of starting and growing this company. But Technorati should be financially successful by now. There's really no excuse for its inability to create a decent ad revenue stream. They practically cornered the market on blog tags, they have huge traffic, they have a great reputation for credibility and they have the goodwill of the entire blogosphere. Among those assets you'd think they could drum up a decent lead-gen, keyword ad or tag cloud sponsorship strategy to keep them laughing all the way to the bank. Instead they're laying people off and scaling back?
Sadly, we can't really blame Dave for this - once again, I turn to the VC (Draper, in this case) and wonder why they weren't more responsible about demanding a stronger revenue strategy before upping their funding levels. Sometimes I swear those VC folk are asleep at the switch. Don't they know better by now? It's precisely this kind of foolish funding behavior that causes bubbles, crashes, and jaded commentary from people like Jason Calacanis (currently helping Sequoia stay awake and alert).
Like me, Jason lived through the first boom and bust, so he has a right to be little jumpy and predict market corrections when they're not really there. His reaction to the Technorati announcement -- "Did I Just Hear a Pop?" is the scariest of all:
"Technorati *laid off* eight people today.
I have not seen a LAYOFF situation since 2002 I think. This is
significant because Technorati didn't say restructuring. They said we
don't need these positions and we can't afford them. Dave says in his
post, in fact, that they are scaling the business in line with their
revenue. Why would you scale a growing business to revenue!?!? Why not
keep scaling it up!??! Oh, right... the market is changing..."
Yeah, well, nobody can deny that the mortgage crash is going to impact the Internet world. But, tempting as it may be, please let's not infer from the Technorati situation that we've just begun another downward spiral. The user-participation Internet boom has barely gotten started, and it deserves to be huge. Sometimes a cigar is just a cigar. Sometimes one company's poor performance is just one company's poor performance, and not a harbinger of a widespread across-the-board trend.
instead of this 
