[Infowarrior] - Livejournal Fires 40% of staff

[Richard Forno]

http://valleywag.gawker.com/5124184/the-russian-bear-slashes-a-social-network

The Russian Bear Slashes a Social Network
By Owen Thomas, 2:24 AM on Tue Jan 6 2009, 28,824 views

The bubble in social networking has burst, decisively. LiveJournal,  
the San Francisco-based arm of Sup, a Russian Internet startup, has  
cut 12 of 28 U.S. employees — and offered them no severance, we're told.

The quirky site, part blog and part social network, is best known for  
its users' weird obsessions — like the troublesome clique of Harry  
Potter erotica writers, whose outré tastes ran afoul of LiveJournal's  
efforts to comply with U.S. child-pornography laws. (Oddly, the site  
also gained a following in Russia, which led to its acquisition by  
Sup.) All that adds up to an environment even more distasteful to  
advertisers than the typical social site.

The company's product managers and engineers were laid off, leaving  
only a handful of finance and operations workers — which speaks to a  
website to be left on life support. Matt Berardo, a Yahoo executive  
hired on last summer, has also left.

The company's Moscow-based management has told employees it blames the  
"global economic downturn" — the kind of pat excuse every boss is  
giving for layoffs, even when mismanagement or a bad business plan is  
really to blame. The brutal, abrupt cuts suggest something different:  
That Sup founder Andrew Paulson (above), who paid an estimated $30  
million for LiveJournal a little over a year ago, has realized his  
expensive mistake in buying at the top of the bubble. Someone familiar  
with the company tells us Paulson lost the CEO job last summer to  
Annelies van den Belt, a former News Corp. executive, and was given  
the meaningless title of chairman; he's essentially out of the company  
now.

Executives at Six Apart, the blog-software company which sold  
LiveJournal to Sup, are happily counting the money in its bank. And  
they should consider themselves lucky that Vox, the LiveJournal  
knockoff it started, hasn't been more popular. At this point, having a  
larger social network in the portfolio would be a drag on the  
company's value.

LiveJournal, founded by engineer Brad Fitzpatrick in 1999, predated  
most blogging services and social networks, and anticipated many of  
their features. (Some of Fitzpatrick's software is vital to the  
operation of Facebook and other large sites today.) But Fitzpatrick  
never figured out how to turn it into a business. Instead, he sold it  
to Six Apart, which didn't have much more luck.

The weakest in the herd are always the first to fall. Facebook and  
MySpace, so far, have resisted layoffs. A host of also-ran social  
networks — Hi5, MyYearbook, and other obscurities — could be next.  
It's only a matter of time before investors reach the same apparent  
conclusion as Paulson: that there's a lot of fuss in running a social  
network, but not that much money.