The strategic shift comes just after landing a $15 million debt financing deal late last year when Spruce Media trumpeted strong momentum with clients. From the November press release:
- "Between 2010 and 2012, Spruce grew annual ad spend on Facebook by more than 10x; and the company has a $150M+ run rate for Facebook ad spend for 2012 based on current Q3 ad spend data."
The company added in the same announcement that its headcount had increased 140% to 60 U.S. employees, with new hires in sales, engineering, operations and account management.
Given the "30+" number from Jacobs and "more than 60" in the release, layoffs have been at least 20 since November.
The move could represent several macro trends:
- First, ad tech startups moving away from services as clients get more adept at running their software.
- Ad tech startups naturally want to be positioned as "tech" startups. Valuations on tech businesses are a lot higher than services businesses. "Service" is a dirty word in tech at times. The big "exits" happen in tech.
- Facebook Exchange has changed the game for social ad companies like Spruce Media and others who had made their living off of the Facebook Ad API. The arbitrage of cheap inventory is no longer available as bidders through Facebook Exchange have run up prices led by ecommerce retargeting spend.
- The changes around Facebook ad creative could be making it more expensive to arbitrage as the old, tried-and-true way of using "Like Us" as a call-to action gets squeezed. Spruce Media itself published data about this tightening of the creative "screws" by Facebook.
- "This morning I was informed that our design department was cut. I am disappointed that we won't be able to see our hard work through to completion and continue to work on the product. It truly was a great experience and I have no hard feelings, it's business."
Spruce Media COO Lucy Jacobs confirmed the news to AdExchanger today and offered the following:
- "Spruce Media has always been focused as a best in class social media technology, our core investment has always been as a social media technology stack
- 2 years ago when Spruce Media started the self service market was early in adoption and we needed to launch a managed services business to correctly service clients
- As the Social Media space is maturing and more clients are adopting self service, the Spruce Media organization had to be re-aligned to meet the market changes
- The core value proposition remains in our technology and strategic social consultation, we continue to service both managed services (larger FB spenders / agencies) and self service (trading desks and large self service clients)
- We are NOT exiting the Managed Services business, we continue to focus on managed services but larger strategic Facebook spenders through agencies & direct with brands
- Yes — we still have 30+ people across the US."
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