Mr. Silbert. (Photo: http://www.flickr.com/photos/docsearls)

SecondMarket was having a pretty good week. On Tuesday came a flurry of articles about the startup's crowdfunding-flavored partnership with Angellist, and just yesterday, CEO Barry Silbert announced that Tennessee's First Advantage Bank was using the service to go private while remaining open to investors. He called the move "validation of our model."

Today, according to a post on SecondMarket's blog, several employees got the ax as part of "org changes."

To his credit, Mr. Silbert takes responsibility for the layoffs:

"I admit it, I screwed up. While the transition of SecondMarket from a telephone broker of illiquid assets in 2005 to the technology-driven reinvented stock market that we are today has been quite successful, I have done a poor job managing our cost structure during this transition."

Consequently, he added, "there are a number of high quality, hard-working SecondMarket family members who are now looking for their next challenge." If only there were some way to monetize euphemisms, Silicon Alley would be swimming in cash.

But Mr. Silbert wouldn't want to leave you with the impression that the company is in trouble. "I remain extremely optimistic about SecondMarket’s future and the important role we plan to play in reinventing the stock market and redefining the modern company," he wrote, adding that the company has $25 million in the bank and "an expected break-even bottom line" within sight. Rather, "we have decided to double down on what is working, eliminate any unnecessary costs and get our company back to the lean, mean, high performing organization that we once were before hubris took over."

The company also went through a round of layoffs in March 2012, thanks to the Facebook IPO.

SecondMarket declined to comment further to Betabeat, so we’re not sure how many were let go. (Update: Valleywag says as many as 40.) Let’s hope those “smart, capable people” are at least getting glowing references.

Got any more info? You know what to do: tips@betabeat.com

(Photo: Twitter/successmagazine)

Earlier this week, Tumblr CEO David Karp took the stage at PaidContent Live for a panel called "Tumblr and the Future of Media." It was a poignant title considering that one of the topics discussed was Mr. Karp's recent, rather brusque blog post announcing the end of Storyboard, a high-profile editorial experiment that hired journalists to write features or film documentary video about Tumblr's community of "creators."

For example, this Storyboard piece about a photojournalist documenting a gang truce in El Salvador (on his Tumblr) was published by Mother Jones. One about activists and feminists using nail art (and the growing subculture on Tumblr) was produced in partnership with the Daily Beast.

“We decided it wasn't really the right tool in our tool box," a hoodied Mr. Karp told the conference goers gathered at the Time & Life building. "It was working in some regards. It wasn't working in the ways we intended."

That decision came as a surprise to Storyboard’s editorial staffers. “We were not warned that the department might be shut down,” Chris Mohney, Tumblr’s former editor-in-chief, said by email, in the first interview since he were laid off last week. As was previously reported, former executive editor Jessica Bennett got the bad news just before boarding a plane. Editorial producer Sky Dylan-Robbins declined to comment for this piece.

There was a similar lack of transparency regarding those unrealized intentions Mr. Karp mentioned at PaidContent. “We weren't given any more specifics about what we were doing wrong or right--or not doing at all--than David indicated either in the announcement or in his remarks at the conference,” Mr. Mohney said.

(In our recent report about the growing leadership vaccuum at Tumblr, one source cited Mr. Karp’s “wildly unpredictable and inconsistent” management style as a possible motivation for the executive departures, as well as Mr. Karp's tendency to play favorites.)

When Storyboard launched a year ago, its use of “almost retrograde feature journalism” to promote the Tumblr brand was closely watched by media insiders as a vanguard of a VC-approved way of making original reporting pay, like Facebook Stories, which followed that summer. Storyboard sounded like a more sophisticated version of branded content, which has rushed into the vacuum left by the waning media industry, blurring the line between advertising and editorial.

In Storyboard’s case, the mandate was to cover “Tumblr as if it were a digital city--the ideas, trends and culture coming out of it,” said Ms. Bennett. “I had no problem with that being deemed marketing as long as I was getting to produce the kind of rich, compelling content that I got into this business to do.”

But reporters considering working for brands or tech companies may want to take note. Tipping more towards journalism rather than branding might have been an issue for Storyboard.

“I sort of wonder whether part of the problem was that the content was actually too good,” Ms. Bennett conjectured. “Like, had we taken the simple ‘rah rah Tumblr’ approach, would we still be around? Who knows. But the reality is that we're journalists, not flaks. That's why Tumblr hired us in the first place!”

At the PaidContent conference, however, Mr. Karp seemed to insinuate a different reason for closing Storyboard: the fact that it picked favorites.

“We want to give you the stuff you’re going to love on Tumblr, but we don’t want to say what great stuff on Tumblr is. We don’t want to say what great content is, or these are our favorite blogs. We don’t wan [sic] to color it too much or scare anybody off.”

In response to those comments Mr. Mohney said, “It's worth noting that far more so than Storyboard, Tumblr's Spotlight and Radar have historically been about doing that exact thing. Of course, both those spaces are for sale, unlike Storyboard.”

Was Tumblr worried that Storyboard was encroaching on potential revenue opportunities? “Hah no. Storyboard was never a revenue thing, and never could have been with our resources,” Mr. Mohney said. “What I'm pointing out is that Tumblr has always promoted good content to users through Radar and the Spotlight, and now those two spaces are the things they are selling to advertisers. Make of that what you will.”

Like Ms. Bennett, Mr. Mohney is clearly proud of what Storyboard was able to accomplish, as well as its insistence "that the marketing mission could not compromise the the quality or tone of the editorial we published."

"If you want an example of how that dynamic can tilt toward PR and lose its ability to compel an audience, look no further than Facebook Stories--beautifully produced features that did just a little too much cheerleading for the patron platform, and so read as commercial," Mr. Mohney added. "The main unfortunate similarity between Facebook Stories and Tumblr Storyboard was that both were held at something of a nervous arms' length by their company, for what I suspect were totally different reasons."

Neither project, he explained, was acknowledged or promoted by the parent company. "I'd imagine the segment of Facebook users who knew about Facebook Stories was even smaller than the percentage of Tumblr users who knew about Storyboard," he said. Why Tumblr opted for that route, "only management knows for sure," he said.

Mr. Mohney also had some advice for anyone considering launching this kind of hybrid endeavor. "Make sure, from the start, that there is a clearly expressed purpose in line with the goals of the organization, and that there is sufficient buy-in from the people in charge to see it through to achieving that purpose. We thought we had done so internally--several times--but obviously not."

As for another remark Mr. Karp made during the PaidContent conference, calling profitability "not a metric that is particularly important to [Tumblr]" both Mr. Mohney and Ms. Bennett declined to comment.

The flash sales wine site has had numerous strategic stumbles under founder Philip James. In December 2011, the site expanded into European markets, but pulled out of the U.K. in July, after just seven months. There was also the acquisition of the French competitor Vinobest and attempts to get into experiences. But last January, 15 percent of employees were handed a pink slip, followed by 11 layoffs in June and six more in July.

A spokesperson for the company confirmed to Betabeat that the layoffs were related to a strategic pivot toward direct response under CEO Jay Sung, who replaced former CEO Kevin Fortuna this past December. The spokesperson said Mr. James is still with Lot18; he will be charge of what a source close to the company called Lot18's "hail mary" pass: selling wines through a subscription model.

Mr. Sung (Photo: LinkedIn)

"The point being from the beginning they were trying to build an interesting high-end brand and now it’s like, 'We just need to get users, we don't care who the fuck they are,'" said the source, who added, "Jay Sung, a direct marketing guy, is now running the company, which tells you exactly what you need to know. Any pretense of higher-end lifestyle stuff is going by the wayside."

The spokesperson also confirmed that the layoffs were related to the existing flash sales business, which will continue on. "Everyone built [flash sales] up to the place where it can run with lower burn," he said, noting that Mr. Sung chose the remaining staffers "because he believes in their ability to fit in with the new subscription model and support flash sales." Mr. Sung also told ATD that Lot18 needs "to resource according to our new business model and operate the existing business more efficiently with considerably less burn."

Lot18 is going after the market currently dominated by industry veterans like Global Wine Company and Direct Wines, which run The New York Times Wine Club and a wine club for The Wall Street Journal, respectively. "If you look at the $30 billion to $40 billion wine market, the vast majority are not at that high end," said the Lot18 spokesperson. The company needs to look for customers "who can't afford $50 for a Cabernet, but can afford a $15 Cabernet."

Our source said it wasn't yet "game over," for the startup. "If Lot18 can put better wines in front of people on a club basis, they can justify an exit or acquisition, that would end up making their investors happy." Bottoms up?

Salesforce CEO Marc Benioff. (Photo: Wikipedia)

After rumors began swirling on Twitter about layoffs at Salesforce, the cloud-computing company confirmed to Business Insider that it has laid off a fair chunk of its Radian6 employees. Salesforce says that less than 100 employees were impacted, but considering that Radian6 boasts only 320 employees total (according to Crunchbase), that's still almost a third of the staffers being shown the door.

Radian6, a social media monitoring platform, is an integral part of Salesforce's big play for a piece of the social marketing space. It acquired Radian6 back in March 2011 in order to build out the Salesforce Marketing Cloud.

In June of this year, Salesforce also acquired New York-based social media marketing company Buddy Media for a reported $689 million. We noted then that an acquisition of Buddy Media made sense following Facebook's bungled IPO. By hiring an "IPO-friendly CFO," Buddy had signaled its desire to go public, but after Facebook's shares dove following its own IPO, that left less room for social marketing companies to successfully follow in its footsteps.

Radian6 and Buddy Media offer complementary products within the Salesforce Marketing Cloud. Radian6 provides a way for companies to listen to how people are talking about their brands on social platforms, whereas Buddy Media offers a full-scale social marketing dashboard—including publishing and analytics—for brands.

The layoffs at Radian6 also come on the heels of Salesforce filing documents with the SEC regarding its acquisition of Buddy. Though many noted at the time of the acquisition that the purchase price seemed a little high for the social media marketing company, details revealed in the SEC filing show an even grimmer financial situation.

First, the actual acquisition price was even higher than originally reported, at $745 million. The filings also show that Buddy Media lost $20 million in the first six months of 2012, up from $3.5 million in January to June of 2011.

According to Business Insider:

Buddy Media does not appear to be scaling toward profitability. Rather, it's going backwards — losing more money on its revenues as it grows....

In 2011, its losses were 34% of its revenues. In 2012, they're 114% of revenues.

In 2011, Buddy Media spent $12.8 million to make $10.2 million in revenues; in 2012 it spent $35 million to make $18 million.

Given Buddy Media's financials and the layoffs at Radian6, could Salesforce be looking to shutter--or at least phase out--its fledgling social marketing arm?

Competitors like Adobe Social (where this reporter used to work) are ramping up with massive advertising campaigns in an effort to assert their market dominance. Or perhaps the solutions offered by Radian6 and Buddy Media had too much crossover, and Salesforce is attempting to trim the fat while honing the Marketing Cloud.

For its part, Salesforce argues that it's simply "rebalancing its resources," according to a statement sent to Betabeat:

With the combination of Radian6 and Buddy Media, the Salesforce Marketing Cloud is the undisputed leader in social marketing and the only suite that allows brands to unify social listening, engagement, advertising and measurement. With the integration of Radian6 and Buddy Media, the Salesforce Marketing Cloud is re-balancing its resources to support its growth, including moving from a hub to a distributed model for certain customer-facing roles, consolidating marketing and dramatically increasing investments in R&D. Fewer than 100 people were impacted globally.

Update:

A Salesforce representative has clarified that the layoffs were not concentrated solely on Radian6, but instead spread throughout the Salesforce Marketing Cloud (which could include Buddy Media employees).

(Photo: Insider Monkey)

Social gaming company Zynga has endured a rough couple of months. After its acquisition of the NYC-based company OMGPOP--producers of the fad-friendly game Draw Something--Zynga has experienced a downward spiral. Earlier this month, it reported an estimated net loss of $90 million to $105 million for its third quarter, sending its already-low stock price into a tailspin. Now, The Next Web reports that the company has laid off 100 staffers from its Austin headquarters, and may even be shuttering its Boston office altogether.

Writes The Next Web:

We’ve heard from a former employee at Zynga who tells us that the layoffs did happen in the company’s Austin office. Additionally, TheVille will be discontinued. More than 100 employees were let go and ordered to turn in their computers, phones, and badges — many of whom have been working at the company for more than two years.

Employees affected by this change were given two hours to vacate the office. It appears that those affected were from two different game divisions: theville and bingo.

Gamasutra reports that it has received first-hand confirmation that Zynga is shuttering the Austin office altogether. [Update: Gamasutra says they may have incorrectly reported the full closure of the Austin office. "We can confirm that over 100 people are out of work in Austin, but we can not confirm whether the studio is remaining open in some capacity, nor if Zynga's QA office in Austin has been affected."]

Gamasutra also reports it has heard unconfirmed rumors that Zynga also intends to shut down its Boston and Chicago offices. A Twitter user reported to Gamasutra that one of his friends was laid off from the Boston office, and posted the following to his Facebook: "Zynga Boston is no more. Shocking and not awesome."

A source confirmed to The Verge that there have been layoffs in Austin, Boston and Chicago today.

[Update 4:05 PM: Techcrunch reports that it has confirmed Zynga has shuttered its Boston office and laid off 2/3rds of its Austin employees. "One former employee said the Boston office was almost ready to release a product that Zynga management was enthusiastic about. But the need to trim the company through severe layoffs meant that product couldn’t be seen through to launch."]

Zynga also has a New York office and Betabeat is investigating whether or not employees there will also face layoffs. OMGPOP cofounder Dan Porter was announced as the VP and general manager of Zynga New York back in March. ”Maybe we can turn New York City into a hotbed of gaming activity as well,” Mr. Porter told us then.

As TechCrunch points out, TheVille--which is kind of like The Sims but lame?--has been hemorrhaging users, losing 33 percent of them in just one month.  In fact, in its third quarter results, Zynga blamed downgraded revenue forecasts on "reduced expectations" for games like The Ville. The company is also facing a lawsuit from EA games for violating copyright laws.

In keeping with its questionable ethics, employees appeared to have been notified of layoffs during Apple’s keynote event, when most tech outlets would be focused on Apple’s announcements.

UPDATE: As news of the layoffs continues to leak, anticipation for Zynga's third quarter earnings call scheduled for tomorrow afternoon is building. Like, oh, pretty much everyone, Sam Barberie, who has been crunching Zynga's daily active user numbers for Super Data Research, anticipates "bad news, especially with regard to their simulations games." Earlier this month, shortly after Zynga released its downgraded forecasts, Fortune's Dan Primack tweeted:

Zynga needs legalized online poker yesterday.

— danprimack (@danprimack) October 4, 2012

Mr. Barberie, who recently released a report on the company's future concurred, predicting a "definite move into the social casino games."

"Basically, that's sort of where the industry is heading as one of the remaining places to make money," he said. "They got rid of a bunch of people in the sim games and bingo to refocus on the real money games."

Poker games were mentioned during Zynga's last earnings call, with an expected release date next year. "[Zynga is] gaining users, but not maintaining them. If they're not maintaining their users, they're not going to turn those players in payers," via in-app purchases or advertising revenue, he said. "The thing about social casino is that it's gambling, which has a hook regardless of the medium that it's in."

Update 2:

A former Zynga employee told TechCrunch, "[CEO Mark] Pincus wants to be able to say that the company’s profitable but that’s harder as revenue goes down. They’re doing short-term things that don’t make any sense at all if you’re thinking about this being a stable company with $1.6 billion in cash in the bank."

Update 3:

A Zynga representative emailed Betabeat a copy of the internal memo from CEO Marc Pincus:

Team,

Earlier today we initiated a number of changes to streamline our operations, focus our resources on our most strategic opportunities, and invest in our future. We waited to share this news with all of you until we had first spoken with the groups impacted.

As part of these changes, we’ve had to make some tough decisions around products, teams and people.  I want to fill you in on what's happened and address any concerns you may have.

Here are the most important details.

We are sunsetting 13 older games and we’re also significantly reducing our investment in The Ville.

We are closing the Zynga Boston studio and proposing closures of the Zynga Japan and UK studios.  Additionally, we are reducing staffing levels in our Austin studio.  All of these represent terrific entrepreneurial teams, which make this decision so difficult.

In addition to these studios, we are also making a small number of partner team reductions.

In all, we will unfortunately be parting ways with approximately 5% of our full time workforce.  We don’t take these decisions lightly as we recognize the impact to our colleagues and friends who have been on this journey with us.  We appreciate their amazing contributions and will miss them.

This is the most painful part of an overall cost reduction plan that also includes significant cuts in spending on data hosting, advertising and outside services, primarily contractors.

These reductions, along with our ongoing efforts to implement more stringent budget and resource allocation around new games and partner projects, will improve our profitability and allow us to reinvest in great games and our Zynga network on web and mobile.
Zynga made social gaming and play a worldwide phenomenon, and we remain the industry leader.  Our success has come from our dedication to a simple and powerful proposition – that play is not just something people do to pass time, it’s a core need for every person and culture.

We will all be discussing these difficult changes more with our teams and as a company.  Tomorrow, Dave and I will be hosting a post-earnings webcast (details to follow) and next week we will be discussing our broader vision and strategy during our quarterly all-hands meeting.  I’m confident this puts us on the right path to deliver on the promise of social gaming and make Zynga into an internet treasure.

If you have any immediate questions, I hope you will talk directly with your manager, Colleen, or me.

I look forward to talking with you tomorrow.

Mark

If you have any information about the layoffs, please email tips@betabeat.com or drop us an anonymous tip from the top of our homepage.

(Photo: Inner-active.com)

How did big data become a meme? Here's a hint: a catchy, non-technical name helps. [New York Times]

Larry Page's big plan for his "boldest" acquisition involves laying off 20 percent of Motorola's work force--and nearly a third of its 94 offices around the globe--on his way to becoming a hardware manufacturer. Generous severance packages will cost the company $275 million. [The Next Web]

JFK Airport's $100 million security system was no match for tipsy jet skier, who climbed the fence and made his way into Terminal 3. [New York Post]

We'd never thought of publicly tearing Facebook a new one as a fundraising strategy, but it seems to have worked for Dalton Caldwell. App.net just raised $500,050 to build a new kind of social network. [The Verge]

A new accelerator, developed by Venture Catalyst Partners, launched in New York City over the weekend called Tribe of 12. You can read all about how they combine, "high-level collaboration, 'think-tank'-based masterminding and Super-Fueled 'ideation,'" that is if you can get past the scare quotes and jargon in the press release. [Virtual Strategy]

(mediaserver.com)

We heard rumors that a large majority of Meebo's staff was let go immediately prior to announcing its acquisition by Google, so we reached out to a source to confirm.

A source inside the company told us that Google acquired Meebo primarily for the engineering team, and that those engineers would be going to work on Google+. The source also said that there will be interviews tomorrow to determine the fate of the sales and marketing teams, but that it's not looking good and most people are expecting to be laid off.

Techcrunch confirms our source's account, saying "we’ve confirmed that there are layoffs happening within the sales and marketing arms of the company." They also confirm that the rumored price is indeed around $100 million.

We reached out to Meebo but they directed us to Google's press office, which we also contacted. A Google spokesperson told us that they could not comment on personnel issues. We'll update when we know more.

In a statement, the company said, "We don't foresee additional layoffs at this time."

Betabeat heard word Friday that part of the restructuring would involved shutting down certain markets for Gilt City, the company's location-based deals service that offers discounts on luxury events and experiences. In the statement, Gilt Groupe confirmed that it will be closing its offices in six secondary cities "effective immediately," namely San Diego, Houston, Philadelphia, Seattle, Dallas, and Atlanta. "We have not been as successful in smaller markets and the resources they require take away from growing our core business," the company said.

Prior to this move, Gilt City operated in thirteen markets, so this represents a significant reduction. Going forward, Gilt Groupe said it will be "servicing those smaller markets through a centralized sales force."

The company maintains, however, that in larger cities, Gilt City, which competes with other deals sites from Groupon to LivingSocial to Jetsetter (another Gilt property) has a market edge. "Regarding Gilt City, that business has developed a clear market position and terrific offerings in our core cities, with NY, LA, SF, Chicago, Boston, DC and Miami all showing growth over the last year. "

On Friday, sources also told Betabeat that several high-level staff members from Gilt City were let go, including the division's president, chief revenue officer, and senior director of sales. In the statement, Gilt Groupe confirmed that Nate Richardson, Gilt City's president, will soon be leaving be the company, although the company says it was of his own accord:

"This restructuring has accelerated some changes that were percolating on the management level. Nate Richardson has expressed his desire to return to the start up world, a place where he thrives.  He'll continue to stay on through a transition phase before moving on.  Nate was initially brought to Gilt to build and launch Gilt Man which has gone on to become one of Gilt's marquis businesses.  He then launched and expanded Gilt City which has grown significantly under his entrepreneurial direction."

Betabeat was the first to report impending layoffs at Gilt Groupe. At the time, sources said John Auerbach, head of the mens site Park & Bond, had been let go. Mr. Ryan responded via AllThingsD that Mr. Auerbach was "still working there as of now." However, today, he tells the site that Mr. Auerbach is indeed also leaving because he is, "better suited for running start-ups."

The past few months have been a period of reckoning for flash sales sector. After laying off nearly half its staff, BuyWithMe, another daily deals site, was acquired by Gilt City along with 20 to 25 of its 190 employees. Earlier this month, Mr. Ryan told AllThingsD that after Gilt City was fully integrated with BuyWithMe, they probably wouldn't need as many employees.  Like both BuyWithMe and Lot18, Gilt Groupe, which expects an IPO as soon as Q4 2012, raised significant venture capital before laying off employees. In May, Gilt Groupe raised a $138 million series E from Goldman Sachs, Draper Fisher Jurvetson, and others, at a rumored $1 billion valuation.

We will be updating this story as we learn more. Please email tips@betabeat.com.

Tipsters have written into Betabeat that some of those layoffs are currently underway. "People leaving. Sadness. Super uncomfortable work environment," said one source who wanted to remain anonymous, adding, "General atmosphere is terrifying."

Gilt Groupe raised a $138 million series E round just last May and, in addition to launching new verticals, acquired BuyWithMe last October. Prior to the acquisition, BuyWithMe made its own layoffs, letting go of nearly half the staff in order to make the company more attractive to buyers. As Mr. Ryan indicated, some of the 20 to 25 BuyWithMe staffers that came over to Gilt as part of the deal may be among those let go as "they probably don’t need that many going forward now that the integration has been completed," paraphrased AllThingsD.

Another vertical that Mr. Ryan indicated might experience cuts is Gilt Taste. Since reporting the layoffs at Gilt Groupe, a number of other players in the luxury good and daily deals space have let go of staffers, including RueLaLa, which cut 60 staffers, and Lot18, a Gilt Taste competitor.

Betabeat will updating the story as we learn more. If you have any information about the layoffs or restructuring, please email: tips@betabeat.com.

One kind of pink slip can lead to another

Betabeat has been covering the layoffs at BuyWithMe since Wednesday, when more than half the staff, at least 100 people,  were laid off without warning or severance. There has been almost no word from the company or its management. As a result, we've had to rely mostly on anonymous sources who know bits and pieces. But over the last 24 hours, we've been able to put together some big pieces of the puzzle.

The statement released yesterday by CEO James Crowley, that the company was reorganizing to best serve its clients and customers, was disingenuous at best.  Numerous sources Betabeat spoke with confirmed that BuyWithMe is looking to be acquired by a larger player in the daily deal space, and has been for some time now. The layoffs were intended to make it a more attractive purchase.

How did BuyWithMe end up in such dire straights? Betabeat has heard from a source that not only did the company purchase six smaller startups in the last six months, burning through some of its capital, but it also took out a $10 million debt round from its backers that was never disclosed to the press. That goes a long way towards explaining how the company got to where it is today.

BuyWithMe was at one point regarded as the number three player in the daily deal space, talked about in the same breath as giants like Groupon and Living Social. But as thousands of clones started popping up in the industry, margins shrank and customer acquisition costs went through the roof. Consolidation and rapid growth became the name of the game.

In December of 2010 CEO Cheryl Rosner stepped down. Many hoped Chief Product Officer David Wolfe, former CTO of Napster, would get the nod, but instead an outsider, James J. Crowley, was brought in. Mr. Crowley had experience with big exits, having taken a company public in the dot-com days and overseen two big acquisitions over the last decade.

Mr. Crowley's first job was a roadshow, pitching investors on a Series C round of venture capital that would raise around $100 million dollars and value BuyWithMe at around $500 million. But while Mr. Crowley's track record looked good on paper, sources say he was a poor public speaker, and failed to convince any big funds to invest at that price.

Insiders say there was interest in partnerships from big firms like Amazon and Google, who were trying to get into the daily deal game themselves, and looking for companies with boots on the ground to source offers. But BuyWithMe declined those partnerships, despite the fact they would have generated substantial revenue, hoping to keep its brand autonomous and aiming for that big exit.

Everything changed June, 2, 2011, when Groupon filed for its IPO, and its financials became public for the first time. The biggest player in the space had long claimed to be profitable, but turned out to be losing hundreds of millions of dollars each year. Suddenly the emperor had no clothes, and all the companies who had been positioning themselves as players in the same space had a much harder case to make when it came to their value.

In the meantime, BuyWithMe had been losing steam. Industry insiders say that by the beginning of this summer, while it was still being talked about as a top player, it had in reality fallen to around the seventh biggest player in the nation. Copycats were everywhere. BuyWithMe tried to ramp up, buying six companies in six months to juice their growth. But sources inside the company said it wasn't working.

At the same time, the macro picture was getting dark. The IPO window that seemed to be opening for tech companies with the debut of Pandora and LinkedIn had snapped firmly shut again. In July, BuyWithMe purchased Edhance, a discount site aimed at college students. Insider say this was the most costly of BuyWithMe's acquisitions, but came with great technology that Edhance has developed. To help fund the purchase, BuyWithMe took out a $10 million debt round, which was never disclosed to the public.

BuyWithMe continued to purchase companies, acquiring Scoop St. the next month and TownHog in September. These were cheap deals, made possible by the fact that many daily deal clones were struggling themselves. But it was quickly becoming apparent that BuyWithMe was not going to be able to raise a new round of venture, and that an IPO was impossible. With about six months left before they burned through their cash, a sale became the only option.

To sell the company at a premium, BuyWithMe decided to lay off everyone who was non-"performing". Essentially this meant stripping the company down to its sales force, who generated revenue, and the executive team, who of course got a free pass. Founder Andrew Moss reportedly wanted to move most employees from full time to contract, saying a mass firing was like cutting off the legs to save the body. But source say he was overruled by the rest of the board, which includes CEO James Crowley and partners from BuyWithMe's backers, Bain Capital and Matrix Partners.

And so it was on Wednesday that 100 employees were laid off with no warning and no severance. Several large firms are still in talk to acquire BuyWithMe, and the company is now a lean property, consisting largely of a sales force, the technology from Edhance, and $30 million in venture backing which needs to be repaid. From a business perspective, it was probably the wisest course of action. But the human toll, and the way in which it was executed, are a grim reminder of what happens when the bubble bursts on an over-hyped industry.