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Layoffs, Attrition Deplete Morrisville, N.C.-Based Search-Engine Marketing Firm

Posted on: Thursday, 23 February 2006, 12:00 CST

By David Ranii, The News & Observer, Raleigh, N.C.

Feb. 23--The work force at struggling MarketSmart Interactive has shrunk by one-third since October because of layoffs and attrition.

Today the search-engine marketing company has 102 employees, down from 160 in October.

The latest reduction came this month, when the company formerly called WebSourced laid off 19 employees at its Morrisville headquarters.

A spokesman said those cutbacks represented "prudent financial management" and that those who lost their jobs received severance packages.

"We came to the realization that there were too many people in areas where [MarketSmart] didn't need them," said Xavier Hermosillo, spokesman for MarketSmart's parent company, Illinois-based Think Partnership.

The company also eliminated nine jobs in January -- seven layoffs and two "for cause" -- and laid off two workers in October, Hermosillo said. The rest of the employees left voluntarily.

The cuts have been spurred by the revamping of the company's operations, he said. That overhaul included providing a more customized approach to each client's needs. Market-Smart helps companies rank higher in Internet searches.

The company's shrinking work force is a stark contrast to years of rapid expansion that saw it grow from 18 employees six years ago to a peak of 176 last year. That growth was fueled by the popularity of search engines such as Google.

But MarketSmart encountered turbulence last summer when the company discovered that some clients who signed 12-month contracts stopped paying their bills after the first few months, triggering a $1.4 million write-off. MarketSmart subsequently changed the way it recognizes revenue and the way it bills customers, restated its earnings and installed a new management team led by George Douaire, chief operating officer of Think Partnership.

MarketSmart's revenue for the third quarter was basically flat at $4.5 million, according to documents Think Partnership filed with the Securities and Exchange Commission. By comparison, revenue for the first half of 2005 rose 48 percent.

MarketSmart's pre-tax profit slumped to $455,311 in the first nine months of 2005, versus $1.85 million a year earlier.

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Source: The News & Observer

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