Implications of the Spot Runner Layoffs

Spot Runner announced that it is laying off 115 people, or less than 30 percent of its staff. It confirmed that a big chunk of the layoffs are coming from its local sales division, formerly known as Weblistic.

Company officials say they are getting mean and lean for the recession, but that Spot Runner has significant cash in the bank. They also say they will continue to support local search initiatives, but that the company is going to focus harder on its core video business. The layoffs, which follow earlier layoffs of 50 staffers in August, have been hinted at for several weeks.

Weblistic was purchased in March 2008 for $22 million worth of Spot Runner options. At that time, major synergies were envisioned with Spot Runner’s national advertising franchisee sales (i.e., Coldwell Banker, 24 Hour Fitness), video and display ad production, and media placement. But it isn’t apparent that there turned out to be much synergy between these units.

In some ways, the company seems to have been lurching from one strategy to the next, with local ad sales just the latest of many efforts as the company positioned itself for an ultimate exit. The dominance of Google in a local SMB space that seemed primed to have many other channels (Yahoo, Ask, Superpages, Yellowpages.com, etc.) seems to have hurt the company’s prospects to be profitable as a search reseller. As a reseller, Spot Runner doesn’t receive any discounts on Google purchases.

Spot Runner was rumored to be in talks with Microsoft last year, with a hefty Microsoft offer said to have been rejected. A Spot Runner spokesperson says they are simply “unconfirmed rumors.”

In the meantime, “alternative strategies” are being pursued for Weblistic, which had been scaled for massive sales, with at least 30 engineers. At the very least, the layoffs will enable the division to be “right sized” for profitability.

The Weblistic layoffs may have implications beyond Spot Runner. People will be closely watching the prospects of other companies in the space, including ReachLocal, WebVisible and Marchex.