Google Cuts Its Contractor Workforce

Google spokesperson acknowledged that the company is widely reducing its contractor positions, but it has no official plan for layoffs. In an interview with Bloomberg, Eric Schmidt, the CEO of Google said that while facing the current economic downturn, the company has not stopped its plan of recruiting new employees but the extent is rather reduced.

Google was unwilling to explain in details the capacity and process of reducing its contractor workforce. The spokesperson claimed that the company had planned to systematically cut its contract employees long before the worsening of the economic crisis. As of this September, Google has about 20,000 full-time employees and 10,000 temporary staffers.

Google’s contractual workforce not only includes programmers, cafeteria personnel and shuttle bus drivers. Google’s co-founder Sergey Brin earlier said that the expense for temporary positions is “pretty high.”

Google’s expense is incredibly high with its cost- basis at $39 billion dollars in the end of the third quarter. Google has been growing over the past 12 years since it was founded. Because the company made $210 billion dollars in revenue last year, it has a surplus to conduct some less lucrative investments, including Google Earth. The company even made a 1 billion dollar profit from its $16.5 billion acquisition of YouTube.

However, the business of digital advertising is also affected by the global economic agony. Comparing with 14% of growth in Q3 of last year, Google has only 3% of growth in the same quarter of this year.

The reduction of contractor workforce suggests Google is controlling its operational costs. It is slashing some lavishing bonuses and closing unprofitable products. These efforts of cost reduction draw investors’ attention. Google’s stock price fell from $700 in last December to the current price at $250, its first time below $300. Since Google has tightened its expenses, the stock price immediately rose by 8%.

Besides the gloomy economic outlook, Google has to deal with competition from Yahoo and Microsoft. Schmidt claimed that the overall environment of the advertising market is not rosy, but Google can gain its edge from the targeted advertising that is the company’s strength. Schmidt said, “Google is still hiring new employees, but the extent is becoming smaller. Google continues to do some exciting and even crazy things.” In Q3 of 2008, Google increased its staff by 519 people, lower than 2130 people from Q3 of last year.

Because of the financial crisis, many Internet enterprises have announced plans for layoffs. Yahoo announced to lay off 10% of its workforce in October, approximately 1500 people, to trim cost by $5 billion dollars per year. This is the second layoff for Yahoo in nine months. In addition, Ebay also announced to lay off 10% of its workforce. Of the 1500 staff about to be let go, 1100 workers are from the auction department.