Exponential, an Online Ad Network, Cuts Jobs

[qi:011] In what is a sign of the times, online ad network Exponential has cut nearly eight percent of its staff as it prepares for what is shaping up to be a nuclear winter in the advertising business. The Emeryville, Calif.-based company runs and operates many digital advertising and marketing entities, though it is best known for its flagship ad network, TribalFusion.

We were tipped off about last week’s job cuts by one of our sources, and CEO and founder Dilip DaSilva confirmed the cuts this morning. In response to an emailed query, he said: “We decided to be proactive and make adjustments in anticipation of a downturn in the economy and advertising for 2009.” Exponential was launched in 2001 and is still an independent company; it has taken no venture capital backing. And according to DaSilva, it’s been profitable for every quarter for the last seven years.

The company is one of the many online advertising services providers that are preparing for the worst. As we’ve previously reported, publicly traded companies like ValueClick (s VLCK) have been hit hard — even Google (s GOOG), the big kahuna of online advertising, is readying itself for tough economic times.

While most expect traditional media entities such as newspapers, television and radio station operators to be hit hard, online publishers are not  immune to the whiplash-inducing economic forces that are impacting every advertiser — from consumer electronics makers, banks and automobile companies to mom-and-pop local stores. This is eventually going to impact the entire online media ecosystem, including small publishers like us.

This isn’t the only problem — there is also the problem of too much. At the UBS 36th Annual Global Media and Communications Conference, panelists lamented that there were too many networks and too much inventory, which has pushed the price of display advertising down. This is going to lead to a big shakeout amongst the ad networks.

As a result, many VCs are turning their attention away from advertising-dependent startups. “What’s changed more than the ability to make money from ads is the ability to raise money at the same valuation it had six months ago,” David Weiden, partner at Khosla Ventures, told The New York Times. He doesn’t expect ad-related funding to rise for a few years. The pendulum, once again, has swung to the other extreme.