Google's Layoffs, Explained

Last week, Google (GOOG) went through its second layoff this year, firing 200 fulltime employees and under 100 contractors to boot.

Here’s the scuttlebutt on the news:

  • Q1 revenues are a little soft. The layoffs were a conservative measure to manage costs.
  • This means Google is now a company that is prepared to manage costs in relation to revenues. Previously, this was an open question.
  • If Google ever operates like a normal, cost-managing company in this way, it is thanks to new-ish CFO Patrick Pichette, who is able to be pragmatic and communicate to Google’s internal idealists.
  • Firing 200 sales people, Google reasserted itself as an engineering-driven company.
  • It’s not a coincidence the layoffs came as outside sales* boss Tim Armstrong leaves the company. Tim believed Google needed a (relatively, for the company) high touch sales force, pushing Google into new ad markets like print, radio and TV. This strategy required a larger sales force.
  • That era is over. It ended with Tim’s group missing its numbers in Q1.
  • Tim wrote the layoff memo to give new US outside sales boss Dennis Woodside a fresh start.
  • The layoffs and Dennis’s arrival reflects a change in Google’s sales philosophy. Dennis is the anti-Tim Armstrong: an ex-McKinsey quant you won’t catch giving a keynote to the IAB. He’ll focus the sales team on selling what Google sells well: search ads.
  • He learned this lesson watching Google’s Europe outside sales business, which is larger and growing faster than its US counterpart.

*Most of Google’s sales come from self-served buys online. The outside sales force handles the rest.

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.