Digital Media

Amid economic woes, stagnant growth, and a management shakeup, onetime social-networking pioneer MySpace has announced that it has cut its head count by slightly under 30 percent in what the company calls a "return to start-up culture." Well, that's a nice way to put it.

Reports had circulated that MySpace would be laying off nearly half its employees in a move that had delayed its relocation to a bigger office space in the Los Angeles area. With the layoffs, MySpace's full-time U.S. employee roster will be down to 1,000 people--which means somewhere just south of 500 jobs were cut.

MySpace said that the layoffs are evenly distributed across all U.S. divisions of the company. Since MySpace also operates a number of offices overseas, it's not yet clear how they were affected (if at all), and representatives declined comment as to whether international offices would be affected down the road. CNET News has heard rumors that there may be consolidation in some of MySpace's European offices, something that the company did late last year when it merged its Amsterdam and Berlin offices.

"Today the domestic restructure is the only info we can share," a MySpace representative said in a phone call Tuesday.

Owen Van Natta, CEO of the News Corp.-owned social site, said in a release: "Simply put, our staffing levels were bloated and hindered our ability to be an efficient and nimble team-oriented company. I understand that these changes are painful for many. They are also necessary for the long-term health and culture of MySpace. Our intent is to return to an environment of innovation that is centered on our user and our product."

Van Natta, the former chief operating officer at Facebook, was hired as CEO of MySpace late in April after a short stint at the head of start-up Project Playlist. Former CEO Chris DeWolfe had stepped down earlier that month, reportedly at the behest of Jonathan Miller, the new digital czar at News Corp. Executive shakeups at MySpace had been happening sporadically for nearly a year at that point.

MySpace's new executive lineup gives it solid entertainment street cred: Van Natta was joined by former MTV digital exec Jason Hirschhorn and former AOLer Michael Jones. Late last year, another MTV digital-media executive, Courtney Holt, joined MySpace as the head of its new MySpace Music division.

A source with knowledge of the situation said that senior management was spared Tuesday's cuts.

Launching MySpace Music, which focuses on free streaming music supported by advertising, was a return to the company's roots: once a hub for indie band promotion and community, MySpace had grown massive before Facebook began to catch up to it in international and then U.S. traffic. Partnerships with the likes of Google and a prominent endorsement of the OpenSocial developer initiative didn't help it regain traction as a networking destination.

Holt told CNET News in March that MySpace Music's traffic was "huge." But record label executives--who are partners in the MySpace Music joint venture--reported dissatisfaction with the revenue it was generating.

Last update at 11:56 a.m. PT.

Yahoo is closing its GeoCities personal home page service, and with it will go an era of self-expression on the Web that's largely been replaced by social networks and blogs.

GeoCities rose to power during an era when publishing on the Internet meant setting up your own Web site. GeoCities simplified the process by helping people sidestep the complications of registering a domain and learning how to program HTML, the language that describes Web pages.

Yahoo is closing it GeoCities site this year.

(Credit: Screenshot by Stephen Shankland/CNET)

Yahoo bought GeoCities for more than $2.9 billion in dot-com-priced stock in 1999, when GeoCities had more than 1.1 million users. However, while the idea of having a personal presence on the Internet has caught on, GeoCities turned out to be a backwater, not the mainstream.

"We will be closing GeoCities later this year," Yahoo said in a note on the site. "We'll provide more details about closing GeoCities and how to save your site data this summer."

Goodbye Geocities, hello Facebook
Today, the way people choose to express themselves on the Internet is shifting away from isolated Web pages. Instead they use social-networking sites such as Facebook, with built-in features for creating a profile, staying in touch with contacts, and maintaining at least a little privacy; WordPress, where it's easy to post updates to a blog; or Flickr, where the photographically inclined can meet, share, and comment.

What these services and others including Twitter, YouTube, MySpace, and Blogger possess is a mechanism to notify interested parties of new activity, helping to keep social links pulsing with new information in a way that just can't be replicated by depending on a person to swing by a personal Web site.

That's not to say personal home pages are extinct. Google Sites is still around, and Yola, formerly SynthaSite, bought out search ads related to GeoCities searches on Thursday. But for most folks, it's easier to rely on more sophisticated pre-built services than to roll their own sites.

It's no surprise GeoCities is on the chopping block. Yahoo has its hands full trying to integrate its successful properties with the socially active parts of the Internet. The company hardly has resources to spare on last decade's trend.

Part of GeoCities' closure is related to Yahoo's circumstances. The company already was under financial pressure before the recession arrived in full force, but now things are even tighter, and new Chief Executive Carol Bartz is focusing on the company's core, successful properties--laying off about 675 employees in areas that don't pass muster.

GeoCities' vanishing sites?
Still unclear is what exactly will become of GeoCities pages. New sign-ups are already no longer permitted, but what about existing sites?

Here's how Yahoo put it: "You can continue to enjoy your Web site and GeoCities services until later this year. You don't need to change a thing right now--we just wanted you to let you know about the closure as soon as possible. We'll provide more details about closing GeoCities and how to save your site data this summer, and we will update the help center with more details at that time."

That leaves open the possibility that Yahoo will make it possible to move a site to another service, as it did when shutting down Yahoo Photos, but in the current climate, it's probably best not to expect such a graceful transition option. Yahoo wouldn't comment on its plans.

Another option is to upgrade to a separate paid Yahoo service: "You don't need to change your service today, but we encourage anyone interested in a full-featured Web hosting plan to consider upgrading to our award-winning Yahoo Web Hosting service."

But given how many GeoCities users weren't technical experts, it seems likely that a lot of amateur Web sites soon will vanish without a trace, a casualty of business priorities and the Internet's rapid changes.

It took awhile, but the recession has definitely sunk its teeth into Google's financial performance.

"No company is recession-proof. Google is absolutely feeling the impact," Google CEO Eric Schmidt said in a conference call Thursday after reporting first-quarter financial results.

Google's revenue growth rate has been slowing, but for the first time since it went public, the company's quarter-to-quarter revenue declined. (Click to enlarge.)

(Credit: Google)

The company, as is customary, reported results that most business only dream of, recession or not. Its net income grew 8 percent to $1.42 billion and its revenue, excluding commissions paid to advertising partners, grew 10 percent to $4.07 billion. It generated free cash flow of $2 billion for the quarter, the vast majority of it derived from money advertisers pay Google when people click on ads next to search results.

But everything is most definitely not coming up roses. Google's revenue, after ascending steadily quarter after quarter, peaked in the fourth quarter and declined 3 percent in the first quarter. Google's business is still relatively strong, and it's been hit by the recession less than many in the tech world, but it's been hit nonetheless.

Curtailed clicks
Why? In short, because people are buying less and advertisers consequently are advertising less. As an Efficient Frontier study released earlier this week showed, advertisers are getting more conservative by bidding for search terms where there is a proven return on investment (ROI).

Here's Schmidt's explanation, including his assertion that the company's overall business of showing ads next to search results is still intact:

Users are still searching, but buying less. What that means is the ads are converting less. There's more window- and comparison-shopping, purchasing lower-priced goods. In other words, users are doing the right thing. They're doing what you'd expect them to do given the enormous economic changes around us.

Advertisers are still spending, but they're lowing their bids to manage their ROI. They're behaving correctly in our view. One way to say that is our advertising model is working. The user and advertising behavior we're seeing is entirely rational, and the auction model is working for both.

In short, Google Chief Economist Hal Varian's "Wal-Mart effect," in which people under financial pressure would steer more of their purchasing behavior through search engines in an attempt to get the best deals, has its limits.

Creeping pessimism
To put this in context, let's retrace some history over the previous four earnings conference calls. The company's statements have grown gradually more pessimistic:

First quarter 2008: "We've looked at this really carefully, and we do not see an impact as of this time," Schmidt said. "We're well positioned should economics change. We continue to do well because our model is so targeted, and targeted (advertising) does well in most scenarios."

Google CEO Eric Schmidt

(Credit: Stephen Shankland/CNET)

Second quarter 2008: "Despite the weakness in the economy, advertising revenue seems to be holding up remarkably well in most sectors. I think this illustrates the point that we have made several times: during periods of slow economic growth, the last thing an advertiser wants to cut is its spending on search-based advertising," said Google chief economist Hal Varian.

Third quarter 2008: "It's clear the economic situation is so fluid that we're all in uncharted territory...It's clear the global economic situation is worse than predictions just a month ago," Schmidt said, and Varian added, "When there is a recessionary event, and people are counting pennies and researching purchases, this potentially has an upside for Google...We think this kind of effect could work to Google's benefit potentially."

Fourth quarter 2008: "In some ways, the fourth quarter was the easy part," Schmidt said, when the economy was in "uncharted territory. Now it's clear we're in recession. We don't know how long this period will last. We're certainly prepared to get through this (with) no problem."

So yes, Google has been getting more cautious about the economy and its effects, but Thursday's assessment was the most sober by far. In contrast, other companies including Yahoo saw these effects sooner and issued cautionary statements earlier.

Through a Google lens darkly
One curiosity about the timing disparity is that Google, through analysis of search activity through what the company calls the "Google lens," has a view on the economy most other companies lack. Where a business such as Proctor & Gamble has to look at sales data and surveys to project consumer sentiment, Google can look directly at what people are searching for.

Searches on "bankruptcy" increased 53 percent in the last year, and those for "unemployment" more than doubled, said Jonathan Rosenberg, senior vice president of product management.

So what comes next? Google clearly isn't done with search advertising, and there are plenty of opportunities for more money: Google can improve search results overall, drawing ever more search traffic. It can show ads more often, as long as it maintains the quality standards to avoid showing irrelevant or inappropriate ads. It can draw more advertisers to search advertising, increasing the bidding for search terms.

And of course, the company is working on any number of other projects, from closely aligned ones such as ads on image search results, to more distant ones such as graphical "display" ads on YouTube that are targeted at users based on their Web-surfing behavior, to remote ones such as charging subscriptions for online office productivity tools. Such areas are subsidized by search results today, but there could come a day when they stand on their own.

Even though the recession's teeth took a bite out of Google's results, even though Google has trimmed a number of projects that didn't pass muster, and even though the company's employee count actually dropped for the first time, the company still has plenty of money to invest in its other areas.

"We think Google is now well placed for the recovery as it occurs It appears (advertisers') shift to online ROI...is outpacing, on a relative basis, any on loss of economic activity. We benefit from that," Schmidt said. "Our priorities remain unchanged. Basically, long-term growth."

Google is eliminating about 200 sales and marketing jobs, the company said in a blog post Thursday, blaming the move on overlapping areas and overhiring during a more optimistic time.

"Today we have informed Googlers that we plan to reduce the number of roles within our sales and marketing organizations by just under 200 globally," said Omid Kordestani, senior vice president of global sales and business development, in the blog post. "We did look at a number of different options but ultimately concluded that we had to restructure our organizations in order to improve our effectiveness and efficiency as a business."

Those losing their jobs will get severance and a crack at other openings at the Mountain View, Calif.-based company, which had 20,222 employees at the end of December.

"Google has grown very quickly in a very short period of time. When companies grow that quickly it's almost impossible to get everything right--and we certainly didn't. In some areas we've created overlapping organizations which not only duplicate effort but also complicate the decision-making process. That makes our teams less effective and efficient than they should be. In addition, we over-invested in some areas in preparation for the growth trends we were experiencing at the time," Kordestani said.

Google has shaken up even Silicon Valley with its fast growth in revenue, size, and ambition, but it's not immune to the global economic woes, and it's been trying to improve its profitability by cutting underperforming projects such as a print advertising initiative. Last year, Google started paring back its contractor workforce, and this year, Google cut 100 recruiters and 40 in a canceled radio ad effort.

AUSTIN, Texas--With panels and discussions every year about social engineering, hacking, remixing, and culture jamming, South by Southwest Interactive is the must-attend conference for geeks who want to shake things up.

Maybe that's why the many panels at the conference about the future of media--from print to broadcast to music to film--were tinged with the message that fast, often radical change is necessary. With panel topics like "How Copyright Law Failed The Digital Age," "New Think for Old Publishers," and "Old Media Finds New Voice Through Twitter," this year's SXSWi promised to offer a blunt take on some longstanding stalwarts of the media industry that now lie in states ranging from evolutionary flux to full-out crisis mode. The Austin Convention Center was buzzing with talk of the future, but there was no denying the upheaval going on outside.

The short version of the long version we all know: Traditional moneymaking strategies across the media landscape are losing steam. While solutions from interactive ads to subscriptions to micropayments to social-network "app-vertising" to all sorts of digital sales models have been pitched and put into effect in this new world of iPods and Kindles and YouTube and a dozen different streaming media services, the digital revenues aren't keeping pace with what's being lost. A nasty recession just throws a big, costly fork into the equation.

"I should set up, like, a little picture of me (on my Web site) with a picture of a pirate eye patch on, saying 'Arrrr, give me five dollars!'" said documentarian Morgan Spurlock in a panel called "The Future of the DVD and Digital Distribution," when the topic shifted to the long-shot possibility of asking for donations to combat piracy.

He was joking, obviously. But SXSWi panelists as a whole seemed to indicate that struggling media companies shouldn't just embrace the cutting edge, they should more or less dive off it headlong.

"There is no low-risk solution to innovation. When times are tough, brands and agencies and everyone has a tendency to say, 'Well I don't want to experiment,'" said Patrick Moorhead, director of emerging media at the Microsoft-owned ad firm Razorfish, in a panel discussion on Saturday morning about innovation during a recession. "Our belief is that if you stick with what you've got, that's a bigger risk than taking a risk on emerging media and testing something new that could potentially teach you something."

Moorhead showed off "NewsBreaker Live," an ad campaign created for MSNBC in which motion sensors in participating movie theaters let the audience play a full-body version of a "Pong"-like game to capture real news headlines. It certainly livened up the panel, even though no one could really see closely enough to read the actual headlines.

"South by Southwest, from what I can tell, it's very much end-filtered," said Eric Feng, chief technology officer at Hulu, the joint video venture between News Corp. and NBC Universal. "I think it really prides itself on a free spirit, and you're going to get honest feedback from real people, real users, real companies, a lot more so than some of the other conferences you might go to."

So you'd think that this is the sort of place where the old media's struggling elite might show up in search of a few answers, however out of left field they might be.

But they're hard to find. Wander the halls of the Austin Convention Center during SXSWi, and you'll run into loads of start-up entrepreneurs, digital marketers, and representatives from both traditional and outside-the-box advertising agencies. Traditional media companies on both the print and broadcast fronts, however, are tougher to track down. It's unclear as to just how much of a presence the likes of a major broadcast player or a national newspaper has at SXSWi--it's easy to get lost in the hordes of developers and designers.

"I assume they're here," said Avner Ronen, CEO of the video software start-up Boxee, which has made waves recently for offering a well-received product and getting into a sort of content feud with Hulu and its video partners. "I haven't run into them."

Kevin Marks, a Google product manager who has been working on its Friend Connect product and marketing it to some traditional media properties, thought differently. He pointed to panels like "Designing the Future of the New York Times," in which designers from the struggling newspaper talked about their attempts to propel it into the digital world. "I was very impressed with the (traditional) news people here who say, 'We have this problem and we're finding ways to work through it. We're going to work with the Web,'" Marks said in an interview.

On the other hand, there are dangers in listening too closely to the digerati. SXSWi attracts a self-selecting crowd of well-educated futurists who live primarily in major cities or academic hubs, a good number of whom are probably quite confident that the digital revolution is in full force just about everywhere. It's a truism best personified by the fact that the concentration of Apple's iPhone, the quintessential gadget of the tech-savvy and hyperconnected, was so high in Austin during SXSWi that carrier AT&T had to boost its infrastructure for the week. Attendees are invariably in the company of very bright people on the bleeding edge of digital media. But this can be a myopic bunch.

Ricky Van Veen, co-founder of entertainment brand CollegeHumor, pointed out in a Saturday panel called "Comedy on Television and the Web" that even though canceling cable subscriptions and even ditching TVs altogether is trendy among young people in cities like New York and San Francisco, a recent study showed that the trend nationwide is very different. A start-up like Boxee or even Hulu doesn't have the "wow" factor in a suburban household that watches "Dancing With The Stars" on TV in the evenings as it does in a city apartment where the broadcast airing of "The Office" conflicts with happy hour. "The average American watches 151 hours of television per month," Van Veen said, citing Nielsen statistics from last month. "That's an all-time high."

In an interview with CNET News on Monday, Hulu's Eric Feng concurred. "For the Super Bowl you had a hundred million people tune into one event. You still can't amass that type of audience in an online environment."

But however edgy some of the thinking may be at SXSWi, and however much its demographic may deviate from the U.S. population as a whole, the revenue crisis is real, and this is one of the places where it takes center stage. According to Avner Ronen, the sense of uncertainty over profits is what's holding back some of the innovation that SXSWi's masses are so eager to set in motion.

"That's what's scary for the media companies dealing with Boxee," he said. "They saw what happened with newspapers. It's unlike the record industry, it's not like they fought it. They endorsed it, they executed very well against it, it's just...the analog dollars to digital pennies thing."

Right now, many of them are at the point where they could use some insight--even the wacky kind with eye patches.

So either Jon Stewart is really on to something with his mad-as-hell crusade against financial hypocrisy and stupidity, or there are a lot of unemployed people watching Comedy Central clips to pass the time.

Either way, an on-air freakout by CNBC reporter Rick Santelli may have been one of the best things to happen to Comedy Central in months: Fake-news pundits Stewart (of "The Daily Show with Jon Stewart") and Stephen Colbert (of "The Colbert Report") have seen traffic to their Web sites and online video clips soar after the two went on mocking vendettas against Santelli, fellow CNBC personality Jim Cramer, and the NBC Universal-owned business network in general.

Traffic to the shows' Web sites has been at its highest of the year so far in the past week, at over 60 percent their weekly average for 2009. ComedyCentral.com, which hosts video clips of both programs, also had its best traffic of the year, and the digital version of a viciously funny clip called "CNBC Gives Financial Advice" logged over 1.3 million views in a week, the sort of numbers usually reserved for grainy videos of cats behaving unnaturally.

Here's the back story: Santelli was supposed to appear on "The Daily Show" after his tirade about the federal government's economic bailout, but backed out abruptly. That's when Stewart and Colbert--but especially Stewart--turned up the heat. Stewart went on the aforementioned anti-CNBC rant on March 5, putting "Mad Money" host Jim Cramer squarely in his crosshairs. Cramer appeared on "The Colbert Report" the following night.

Now, Cramer is scheduled to make a "Daily Show" appearance on Thursday night.

Stewart and Colbert have been two of the most visible figures in cable television's slow crawl onto the Web. Not only are they wildly popular with young and tech-savvy audiences, but the segmented format of their talk shows lends itself well to being split into short clips and swapped via video-sharing sites, which meant that unauthorized clips of the two were some of YouTube's earliest hits. That's what indirectly led to Comedy Central parent company Viacom's massive copyright lawsuit against YouTube owner Google.

Later on, the full archives of both shows were made available on Comedy Central's Web site, and recent episodes are available in full on Hulu (as well as iTunes and Xbox Live).

Colbert, who started out as a commentator on "The Daily Show" before spinning off his blowhard persona into his own talk show, also owes a big chunk of his notoriety to the Web. Video of C-SPAN's coverage of the White House Press Correspondents' dinner three years ago, in which Colbert performed a shockingly blunt comedy routine that skewered then-President George W. Bush, was a huge hit on the Web among those who wouldn't have considered actually watching C-SPAN in the first place.

Last year, Colbert was honored by the annual Webby Awards as "Person of the Year." Take that, nonbelievers!

LaidOffCamp, held during daylight hours this week at the Temple night club in downtown San Francisco, brought together more than 600 unemployed and self-employed people seeking to share ideas about finding work amid the recession.

Volunteers, speakers, and sponsors came together to plug networking, information exchange, social media, and interconnected community as ways to find support and, hopefully, an income. Among the crowd, there were also entrepreneurs, venture capitalists, and recruiters.

Another 16 such events are preliminarily scheduled across the nation, with the next one set for Friday in Dallas. But, not surprisingly, San Francisco was the first to play host to this unemployment un-conference.

More casualties of Google's belt-tightening are surfacing as the search and ad giant pares away projects that don't pass muster: Shared Stuff and AdWords business pages for mobile ads.

"This service will no longer be available after 3/30/2009," said a note on Shared Stuff, which let people publish Web links, videos, and Knol articles, then share them with contacts. "If you want another way to share videos, you can use the 'Share' link below each YouTube video. You can also create a public Google Site if you want to share Web sites and links with friends."

In a statement, Google said it decided to remove Shared Stuff "because few people are using this service. Instead, we find people are much more familiar with sharing through e-mail or through other shared services, like the sharing links on YouTube and other sites on the Web."

Google Operating System, which spotted the change, offers some more useful suggestions for alternative services.

Also apparently on the block is the mobile business pages service, a Google-hosted system that let people create ads geared for mobile devices and then hosted those ads for free. Google announced AdWords business pages for mobile ads in 2007.

Tim Cohn spotted a cancellation notice in his AdWords account: "AdWords Business Pages for mobile ads are being retired. As the first stage, you will no longer be able to edit your mobile Business Page after March 23. Please make any necessary changes before that time."

The service was only for ads using the lower-end WAP mobile technology. "We are no longer supporting mobile WAP business pages, but we will to continue focusing on new marketing opportunities on the mobile platform," Google said in a statement.

Faced with economic pressures from the recession, Google is curtailing many smaller projects such as Dodgeball and a few higher-profile ones such as ads for radio and print publications. Google also has slowed hiring dramatically, cut contractor jobs, and implemented more rigorous reviews of new projects.

(Via Search Engine Land.)

Troubled Sirius XM Radio announced Tuesday, following reports, that it will accept an investment from cable giant Liberty Media.

The investment, which will save the satellite radio company from bankruptcy or a hostile takeover, will take the form of $530 million in loans in exchange for an equity stake.

The first phase of the investment will consist of a $280 million loan, $250 million of which will be funded immediately on Tuesday, a statement from Sirius XM noted. The second phase, a $150 million loan, will be aimed specifically at the company's XM Satellite Radio subsidiary. Liberty, which owns a big stake in satellite television provider DirecTV, will also offer to purchase up to $100 million worth of XM's outstanding loans.

"We are pleased to have come to this agreement with Liberty Media, particularly in light of today's challenging credit markets," said Sirius XM CEO Mel Karmazin, whom creditors had been threatening to oust if the company chose bankruptcy over an investment deal. "Liberty's investment is an important validation of what Sirius XM has already achieved and a vote of confidence in what we will achieve. This agreement enables Sirius XM to continue to develop the opportunities first outlined in the merger of Sirius and XM."

Sirius XM was formed in July when longstanding merger agreements between two rival satellite radio companies, Sirius Satellite Radio and XM Satellite Radio, closed following FCC approval.

In October, Karmazin took the stage at a New York business-media conference and insisted that the company was on a firm path to profitability despite the fact that the credit crunch--then in its first throes--had hit Sirius XM particularly hard.

This post was expanded at 6:20 a.m. PST.