Gaia Online Cuts 13% Of Staff Despite Claims Of Record Earnings

Gaia Online, a social network/virtual world hybrid that includes one of the web’s most popular forums, has laid off 36 employees, or around 20% 13% of its staff. Of those laid off, 16 were full time and 20 were contractors. From what we’ve heard the layoffs were unexpected by most affected employees – the site raised $11 million in July, and has been hiring employees as recently as a month ago.
Update: Gaia has written a blog post on the layoffs stating that the headcount represents 13%, not 20%, though this may discount contracted workers.

Even more odd: an article printed today in the San Jose Mercury News quotes Gaia CEO Craig Sherman stating that the company is looking forward to a record month.

“So far, the deepening recession has not slowed sales of virtual goods, which executives attribute to people spending more time at home. Gaia Online, a youth world with 7 million monthly visitors, sells more than $1 million a month of virtual goods and expects a record month in December, said its chief executive, Craig Sherman”

Sherman’s statement seems to be misleading – we’ve heard that revenues last month were lower than expected after a product launch didn’t go as well as hoped, and today’s layoffs seem to contradict the idea that sales of virtual goods have not been affected by the recession.

That said, it is possible that virtual goods sales have held steady as other streams of revenue like advertising have fallen off, or the cuts were made to preempt a forecasted (but as of yet unseen) slowdown. In any case, the article couldn’t have come at a worse time for those laid off.