Glam Slashes Exec Compensation By Up To 60%, Everyone Else by 3%-15%

Advertising/blog network Glam Media held a company wide meeting today where employees were told about the company’s 2009 operating plan. Q4 was surprisingly strong, the company told employees, with only the auto and finance advertising sectors down significantly.

But the company is making changes anyway, they say, mostly to control expenses. The executive team will take a “25-60% reduction in pay” with an offsetting bonus based on performance should the economy not go as far south as people expect. CEO Samir Arora will be on the high end of the cut percentage. For staff salaries are being cut 3% – 15%, with the same offsetting commission plan.

I have a couple of observations. First, companies are beginning to realize that emails to staff are the best way to spread news. They tend to leak (as this one did), so there is rarely meaty stuff there. But it’s also rare for a company to slash salaries because employees are so adverse to it. It’ll be interesting to see if Glam can keep its top people. In this economy, though, I doubt many will be leaving their jobs.

The full email is below:

Dear Employees,

Despite the very turbulent environment we are fortunate that 2008 has been a good year for Glam Media and our publisher network. This was the year of forging ahead by focusing on our core business while still being conservative and cautious. It was a time for leadership and resolve, and Glam has emerged as a much stronger company because of it.

Market Update

1. The founding vision of Glam Media was to help brand advertisers embrace the Web. As time spent on TV and print significantly declined in 2008, the Internet and Glam benefited.

2. Glam helped build the premium display ad market for women’s ad categories—most of the brands in our categories had very low spending on Internet, unlike now-hard hit categories in categories like Auto and Finance, where the Internet spend was already high and cutbacks are high.

3. Pioneering the Vertical Content Network with a dedicated and strong Publisher Network is built on the way the Web works—distributed media and fragmentation with users increasingly going to individual sites. De-portalization and the internal challenges Yahoo and iVillage continue to face are creating growth opportunities for Glam to provide a better solution to their brand advertisers.

4. Of the three types of advertisers—High Brand with Low Direct; Brand and Direct; and Direct—Glam focuses on Premium and Luxury brands that typically spend over 70% on brand ads in traditional media and much lower on direct response. In a down turn, these advertisers don’t go to direct or “cheaper” media, they just spent carefully (Vogue’s advertisers don’t go to US Weekly or Direct Mail—and they are coming online to Glam)

5. Glam chose to have very limited Ad Networks fill in its inventory using GlamX Exchange, a sector hit very hard in the downturn. This conservative strategy has helped build a stronger direct sales business—we could have had more revenue, but then we would have been looking at lower or even negative growth.

Business Update

1. While the reports of downturn/recession for the last 3 quarters feel right to us, the reports of widespread panic and meltdown online seem thus far fear-driven or isolated to specific ad categories like Auto and Finance. We were expecting very bad news in Q4 and were ready to take decisive action, but have been positively surprised at the strength of the web, women and men’s lifestyle ad categories and the continued shift of spending to the web. We expect the business to be overall much tighter, with advertisers more careful and seeking in the short term more return/data-driven, but the fundamentals of the web, online advertising, and display ads are all strong.

Despite the slower economy, Q4 was the strongest quarter we have had—we will end the year in a triple digit ad revenue growth rate year over year, and also very strong sequentially. We believe Glam is one of the few digital companies with this level of growth in revenue today. The reason is the focus on making our customers-—the agencies and brands successful online, being the number one for women, the scale of reach, premium inventory, targeting technology, custom solutions and our strong publisher network.

2. Glam’s strategy of staying focused in the first three years on Women & Style was essential to get to scale and our tipping point, but our strategy in diversification in 2008 was essential driver of our growth. Glam expanded by creating New Vertical Networks for Women in Style, Living, Health & Wellness, Entertainment, Luxury and Family, and also launched Men’s network in Lifestyle, Entertainment, Tech & Auto. Glam’s ad sales team has brought in business from over 500 new advertisers and additional business from 300 existing clients in 2008.

3. Glam expanded internationally, acquiring Monetize to launch Glam UK, Codex Media and a JV with Burda in Glam Germany, and launched Glam Japan.

4. Glam continued to focus on making our clients-Brand Advertisers succeed online through the data-driven Glam Evolution Ad Targeting and deep custom advertorials which helped increase the number of advertisers from to over 900 top brands in 2008. Glam and Brash now have one of the largest lists of Premium brands on the web.

5. Glam raised a Series D in early 2008, and did not go out and spend it on large acquisitions or operating overhead. We’ve tried to run a very lean company prior to the downturn, and we continue to believe that being frugal in spending is the best way to run a business we all own.

6. With 54 Million unique visitors to Glam and our network, Glam will end the year as Number 10 on the MediaMetrix Top 100 web properties, on the AdWeek Top 10 Digital Hot List and Number 7 in Online Media after Google, Yahoo, MSN, AOL, Fox/MySpace and Glam is Number 1 in reach in the women category, with over two times the reach of iVillage in the US, and just became number 1 in UK, Australia, and Germany. Globally, Glam now has a reach of 98 Million uniques per month and Vertical is already over 15 Million uniques in 2 months of launch. In a downturn, advertisers reduce experimental budgets to smaller sites, and favor fewer, larger companies with proven history in providing reach and value.

7. The focus has been to create New Ad Products and Solutions that provide better returns to advertisers in a down economy. In display ads, Glam is providing contextual, audience, above-the-fold placement, primetime, and now full behavioral targeting with detailed reports. Glam now has full suite of ad solutions that can be built using the Glam Apps Platform—custom advertorials, full page takeovers, influential outreach, video, and applications and widgets for brand engagement.

2009 Plan

With the core fundamentals of the business in place, we are now in the process of finalizing our operating plan for 2009. The lack of visibility is making planning very challenging this year. Given the uncertainties we are taking a different strategy for managing through the downturn and to avoid broad-based layoffs that we think would undermine our potential for success.

With this in mind, we are proposing the following changes:

1. Starting at the Top: The executive team will take a effective 25-60% reduction in pay and an increased commission based on performance. Our CEO and the top sales execs will take a 40-50% reduction. The team will have accelerators to significantly beat the plan—helping instill similar incentives, spirit and dedication in early stage startup founders. We recognize this will be very hard for some, but is consistent with Glam’s core values, and creates a strong incentive for the leaders to deliver results.

2. US Employee Incentive Plan: a small part of the compensation will be converted to a variable commission based model—starting at 3% for employees, to 10% for the more senior staff and up to 15% for the functional management team.

This variable compensation model allows us to reduce operating expenses in the case of a worse than anticipated downturn, saving critical jobs and at the same time if the results better than expected, rewards the current employees more.

3. Functional Plan and Changes: The Glam functional team will continue to build the final business plan, and there may be operating changes in functions, roles and employment—but only as a part of our annual planning process. We will continue to do performance and growth level changes every six months to ensure we have the right people in the right job at the right time.

4. Hiring: Glam is carefully adding some strategic resources—we are looking for several top level product managers in Silicon Valley, international team members in our new subsidiaries, and will continue to conservatively hire in ad sales in line with our growth.

5. Tight expense management, using technology innovation and leadership: Glam will focus on managing our growth rate in a slow economy with very tight controls in expenses, building more technology, thinking outside the box, showing care, and leading in the market.

We trust you will all appreciate this innovative approach to protecting the company and our valuable team in these challenging times. We will continue to monitor the business closely on a month-by-month basis and make further changes as required. We believe we have the very best team at Glam, and these changes will help us bring the Glam Family closer together and will make us stronger. Our values make our destiny. We care. We take our responsibility to our shareholders, investors, employees, publishers, developers, media partners, agencies and brands very seriously, yet recognize the social and local responsibility to manage and lead effectively.

Thank for all for your hard work in 2008- and here’s to a cautious, yet strong 2009!

Glam Executive Team and Founders