The move is the Web search leader’s latest effort to cut costs amid a tough economy and a broad slowdown in advertising spending. In January, Google laid off about 100 recruiters and it said up to 40 people would be laid off in February, when Google pulled the plug on its radio advertising effort.
“When companies grow that quickly it’s almost impossible to get everything right and we certainly didn’t,” Google Senior Vice President of Global Sales and Business Development Omid Kordestani said in an announcement posted on Google’s blog on Thursday.
“In addition, we over-invested in some areas in preparation for the growth trends we were experiencing at the time,” he added.
Google has nearly 21,000 employees. The Mountain View, California-based company does not disclose how many staff work in sales and marketing.
Sameet Sinha, an analyst with JMP Securities, said the cuts were in keeping with the agenda of Chief Financial Officer Patrick Pichette, who took the job last year and has made cost-cutting a priority.
“His first line of attack was going after non-core expenses. Now he’s looking at some of the major organizations there where you can cut costs,” said Sinha, who rate Google’s stock “market outperform.” His company makes a market in the stock.
In the wake of US sales head Tim Armstrong’s recent departure from Google to take the top job at Time Warner Inc’s, AOL, Sinha said the sales team was more vulnerable to cuts.
Google is the No. 1 search engine in the United States, with a roughly 63 per cent market share, according to comScore. In 2008, 97 per cent of Google’s $21.8 billion in revenue came from advertising.
Google’s strength in text-based search advertising has shielded it from the difficult conditions plaguing the online display ads that companies like Yahoo Inc (YHOO.O) and AOL depend on.
Even so, Google’s business has not been completely immune. Total sales grew 18 per cent in the fourth quarter of 2008 versus 51 per cent in the fourth quarter of 2007.
A Google spokesperson said the company will seek new positions for some of the affected employees, but it will not be able to do so for all of them.
Shares of Google finished regular trade up 2.68 per cent, or $9.22, at $353.29 on Nasdaq on Thursday.