Mark Zuckerberg’s college-spawned startup is supposed to hire its 1,000th employee sometime this year. I don’t think that’s going to happen. If Zuckerberg isn’t talking about layoffs behind closed doors, one of his executives must be brave enough to bring it up. I don’t think the company is going to issue pink slips. But I do think its headlong growth in employees will come crashing to a halt before the end of the year.

Here’s some back of the envelope math on Facebook’s burn rate. Figure the company’s operating expenses are divided roughly half in labor, half in operations like running its servers. Count $100,000 in salary and benefits per employee, and double that in overhead; double that again to account for the company’s non-labor costs. You end up with an annual cost structure of $400 million. Facebook’s revenues for this year are projected to be $300 million to $350 million; if the company isn’t already operating in the red, it’s headed there fast.

Microsoft’s $240 million investment? Most of that is already gone towards buying servers — and it’s not like Facebook can’t stop buying servers as usage of its site continues to boom.

Publicly, Zuckerberg has talked about the company making growth its priority. But a $400 million a year ship can sink fast, especially if the advertising market faces a hard contraction and media buyers cut back on their more experimental ad buys. And none of Facebook’s new ad formats have proven to be a breakout hit, as Google’s AdWords was earlier this decade.

That’s why I think Facebook’s braintrust is talking about whether they can afford to keep hiring — and whether they need to cull their existing ranks.

Here’s where Facebook COO Sheryl Sandberg, the law-and-order type Zuckerberg hired from Google, comes in. She’s already made hiring considerably more bureaucratic, instituting new requirements straight out of the Googleplex, like a 3.5 GPA from a top school.

Getting strict on recruiting is just the start. Facebookers should expect to see more rules, rules, rules. And even the slightest violation will prove cause for firing — especially for employees who are within weeks of vesting their first batch of stock options, which only come after a year on the job.

Sandberg’s very savvy about keeping up appearances. Google thrived in part because, in the darkest days of the dotcom crash, from 2001 through 2003, it was the only company hiring. Until it bought DoubleClick, Google had never done a layoff. That’s part of Google’s image, and I’m sure Sandberg wants it to be part of Facebook’s image, too.

So we won’t hear about a Facebook hiring freeze. We certainly won’t hear about layoffs. Whatever happens will be quiet: Candidates won’t get called back about jobs they applied for. Managers will find their hiring requests tied up in bureaucracy. And employees will quietly box up their things and go.

The sad thing is that those Facebookers will think they screwed up. They won’t even have the saving grace of a layoff — the corporate kiss-off that says, “Hey, kid, chin up — it’s not you, it’s me.” A layoff would be the honest thing. But it’s the one cost-cutting move Facebook can’t afford.

But with the nation’s economic woes deepening, there are signs of a shakeout as growth in online spending starts to slow and venture-capital funding begins to dry up.

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Associated Press

AdBrite CEO Philip Kaplan is photographed on the roof of his office in a San Francisco in March 2005.

JellyCloud, a Redwood City, Calif.-based targeted ad network, closed its doors this month after raising $11.5 million in venture-capital funding earlier this year. Adzilla, a similar network in San Francisco, also ceased operations.

San Francisco-based AdBrite, which was founded in 2002 by Internet entrepreneurs Philip Kaplan and Gidon Wise and has raised a total of $35 million in funding, recently cut 40% of its work force to make itself profitable.

Other ad networks “are in severe trouble and could be closing their doors in the back half of this year or the beginning of ‘09. People are bracing for the worst,” says Ross Sandler, an Internet analyst at RBC Capital Markets.

Online-ad networks, which started to emerge about a decade ago, offer marketers a one-stop shop to buy ads across dozens, or even hundreds, of Web sites. Most networks either pay a Web site upfront for the site’s advertising inventory and keep the revenue on the ads they sell, or split their ad revenues with the site.

Until now, the business has been fueled by low technical barriers to entry and a flurry of investors looking to cash in on the online-ad market’s speedy growth. Venture-capital firms and large media, ad holding and technology companies, meanwhile, have been on an acquisition spree.

But as the climate has soured, network executives say many ad deals in the pipeline have been reduced or pulled. Tight wallets have forced ad agencies to get tough, even canceling ad deals to get a better rate.

Faced with tighter budgets, media buyers say they probably will place their ad dollars with top networks that offer the most-sophisticated technology and are capable of reaching the largest audiences.

But experts say the fallout isn’t limited to the small players. Time Warner said in September that its AOL unit, which invested more than $1 billion to create the country’s largest online-ad network, was experiencing softening in major ad categories, such as autos, financial, telecommunications and travel — particularly on the ads it sells on third-party sites.

Mr. Sandler at RBC Capital also recently cut his estimates for ValueClick — operator of the country’s fifth-largest ad network, as measured by unique visitors. The analysts warned investors to brace for declines of nearly 2% for the full year 2008 and as much as 7% in 2009 in the company’s ad-network business. ValueClick is expected to report third-quarter results Wednesday.

Advertising cutbacks aren’t the only signs of contraction in the business of ad networks. Industry executives say some networks are putting themselves on the block, in hopes that getting bigger will help them ride out the downturn.

Ad networks like Burst Media, the 17th-largest by unique visitors, and Collective Media, the 16th largest, say they are both seeking buyers.

Even the once-healthy venture-capital pipeline is drying up. “Six months ago, if you came to the venture-capital land and showed wildly viral growth statistics, you could get funding,” says Dennis Miller, general partner at Spark Capital, a Boston-based venture fund. “That’s not so now. There’s a return to ’show me the money.’ ”

Write to Emily Steel at emily.steel@wsj.com

The old way to tell you’re about to be fired: Your boss comes up to you, claps you on the shoulder, and acts all chummy. The new way to tell you’re about to be fired: Your boss leaves a glowing recommendation for you. Revision3’s Damon Berger got one from CEO Jim Louderback five days before he was laid off from the online-video startup. Damon, you should have gotten a clue when Louderback wrote that you could be “a great front-person for any organization.”

San Francisco based PowerReviews, which has raised over $21 million in venture financing, has let 30% of staff go, say multiple sources. Among those that left is VP Marketing Jay Shaffer.

The company let retailers include Amazon-like product review features into their websites, for free. PowerReviews then aggregates reviews from their client retailers on their own customer-facing site called Buzzillions.

The company had at least 42 employees before the layoffs. We’ve contacted them for confirmation and have added them to the Layoff Tracker.

Massachusetts based MatchMine, which raised $10 million a year ago, has shut down operations.

The company created media recommendations that categorizes and analyzes your media likes and dislikes in order to serve you content that is more to your taste.

In a blog post today CEO Michael Troiano talks about the shutdown, and encourages others to hire the team, but he gives few details about the reason for the failure.

He suggests there’s some drama behind the scenes: “I could not have imagined this last Thursday, let alone earlier. It is one thing to be failed, quite another to have been deceived.” My guess (and it’s only a guess) is he’s pointing the finger at his investor, Kraft Group. Either a promised bridge funding fell through, or Kraft pulled what was left of their previous investment out of the company. That’s the only reasonable explanation for how the CEO didn’t know the company was shutting down a day before it happened.

MatchMine joins the DeadPool and have also been added to the Layoff Tracker.

Just got an email from Damon Berger, Sr. Dir. of Creative & BusinessDev @revision3 He has been laid-off w/others due to downturn. So sorry.

about 2 hours ago from web

andrewbaron

Andrew Baron

http://twitter.com/andrewbaron/statuses/977711286

Revision3, the online-video production company started by Digg executives Kevin Rose and Jay Adelson, is the latest company to go through a round of layoffs. We’re not sure how many staffers are affected but are looking into it.

Not surprisingly, news of the layoffs is all over Twitter: the first report of it appears to have come from Rocketboom founder Andrew Baron. He said he had received an e-mail from Damon Berger, senior director of creative and business development at Revision3, who said he was one of those laid off.

Blog guru Leo Laporte twittered about the layoffs several minutes later.

Revision3 posted an explanation to its blog later on Monday morning: the shows Pixel Perfect, Pop Siren, and Internet Superstar have been discontinued. The post did not say anything about how many layoffs there have been, though.

The start-up has also dropped its licensing deal with popular Web shows Epic Fu and Wine Library.

“About a week ago Revision3 let us know that despite a year of record revenue and viewership, they are feeling the effects of the economic crunch and need to make some urgent and tough decisions,” a post on Epic Fu’s production company’s blog read. “As of the end of 2008, Revision3 will no longer be the web licensing partner for Epic Fu, and we’ll be leaving their network of shows. We wish Revision3 luck in the coming months and remain a fan and supporter of their shows.”

In light of the economic downturn and the end of its Revision3 contract, Epic Fu production company Smashface has opted to make some layoffs as well, letting three employees go.

The San Francisco-based Revision3 has enjoyed most of its popularity among the Twitter-friendly geek set, signing deals with blogger personalities like wine critic Gary Vaynerchuk and former CNETer Veronica Belmont.

Confirmed: Helium.com HUGE Layoff (See CEO Comment)

This JUST in!

Helium.com had let go about 1/2 it’s staff. Helium.com is a web 2.0 meets citizen journalism experiment, laid off 30% of their workforce on Friday, including their VP of Development and their Director of Sales for Helium Marketplace.

They has about 110 employees before the layoff.

Here is more info on them.

Helium is simultaneously an online community for writers and a directory for user-generated articles. Writers can submit articles to 24 different channels (business, entertainment, travel, etc.), write for the side of a heated debate, try to capture publisher writing assignments bounties or win user-voted Helium writing contests. Users get to rate submitted articles so the best writing rises to the top.

Community writers can also get paid for their work. Helium shares ad revenues with popular writers and the site has an extensive network of publishers that pay for specific articles that meet their criteria. Payments per article range from $20 to over $100, with 20% transaction fee going to Helium.

Helium also has a partner program where partners can create their own branded Helium page with topics and debates that they choose. Partners are given co-branded advertisements to include on their sites and receive small donations for every visitor they send to the Helium site.

UPDATE:

The CEO gave us an update on this situation. Thank you Mark.

Mark Ranalli
http://www.helium.com

Just a clarification. Helium cut it’s organization by 30%. We are sad that we needed to take this action, but we did so for the ongoing health of our business. Helium remains well financed and is enjoying its best quarter ever. The current financial market conditions are causing us (and most well run start-ups) to revisit our expenses.

Mark Ranalli
CEO, Helium Inc.

Startup guru Paul Graham’s “greatest success” may be floundering

I’ve always thought Scribd, the online document-posting startup, was set up mostly so its investors had an excuse to throw parties. They may not have that excuse much longer, if FuckedStartup’s report that Scribd is running out of money is accurate. At a time when any number of startups are running out of money, why fret about Scribd’s bank-account balance? Because Scribd was manufactured in angel investor Paul Graham’s Y Combinator startup factory.

Graham, who sold a company to Yahoo in the ’90s, had become microfamous for Y Combinator, which provided both a social club and seed-stage funding. The summer (and winter) camp for young entrepeneurs spun off any number of companies, which then got venture-capital financing, and then a quick exit courtesy of Google or Yahoo’s shareholders.

In the bubbly years when Yahoo and Google were snapping up startups freely, Y Combinator’s offspring thrived, or appeared to thrive. Got an online PowerPoint clone? Google will buy it! Graham still seems to be living in his someone-will-buy-it dreamland; he recently proposed that companies hire “chief acquisition officers,” to specialize in consuming the fare he dishes out. But the giants of the Web have put acquisitions on hold, and few others are stepping up to the plate.

Is Scribd, once described as Graham’s “greatest success,” in trouble? We don’t know that for sure. We do know that hiring 20 people to create software that lets people post PDF documents to the Web always seemed silly. Having a cocky 20something Harvard grad as CEO may work for Facebook, but we don’t think Trip Adler is the next Mark Zuckerberg. But Scribd itself isn’t the real story. It’s whether Paul Graham’s magical startup machine is grinding to a halt.