Anonymous app Whisper lays off 20% of staff to survive

Startups are dying all over the place as last year’s investment cool-off leads many to run out of cash. But Whisper refuses to race into the graveyard like fellow anonymous social apps Secret and Yik Yak. A source told TechCrunch that Whisper experienced layoffs this week, and after requesting comment, the startup now confirms to us it’s let go of 20 percent of staff so it can become sustainable for the long run.

“We have been very focused on getting the company cash-flow positive,” Whisper CEO Michael Hayward tells TechCrunch. To that end, 14 of Whisper’s 71 employees are being laid off, with a concentration in its editorial team that needs less staff now that machine learning can help repackage Whisper’s user content for distribution by other media outlets.

Whisper’s COO Jaime Mendez is also leaving the company in a mutual decision after he was promoted from head of product to the arduous operating officer role last year. He was formerly the GM of Zynga’s popular FarmVille 2 game.

Hayward tells me Whisper now has 20 million monthly active users across its app and site, giving it a modest base to monetize through a larger focus on programmatic ads, which earn much more than its sponsored content deals with big brands. Including its embeddable widgets, Whisper sees 30 million viewers a month, and 250 million if you count those it reaches via Facebook and other social networks. The emphasis on externally sourced programmatic ads also led to layoffs in the ad sales team.

Thanks to the cost cuts from the layoffs, a source familiar with Whisper’s finances says it expects to have $100,000 in free cash flow in August, and it pulled in $1.3 million in gross revenue last month. That’s after the company was burning $2 million a month for years, the source says. It’s an impressive ramp up of its business, as Whisper is said to have had no revenue a year ago. The revenue is expected to reach $12.5 million in 2017 and grow 2.5X in 2018.

Whisper lets anyone post anonymous snippets of text that other users can like or comment on. The idea is that you’d share more personal or controversial ideas than what you’d post to Facebook or Twitter with your name attached. The anonymity can help people speak out and receive support. Anonymity can also facilitate harassment, though, which Whisper combats with artificial intelligence and human moderators.

Founded in 2012, Venice, LA-based Whisper has raised $61 million from prestigious investors, including Sequoia, Lightspeed and, most recently, Shasta Ventures, which led a  $36 million Series C in 2014. The startup monetizes with traditional ads in its app, and special sponsored content from name brands like Coca-Cola. It also packages its crowdsourced content for distribution by media partners like Conde Nast and BuzzFeed, which drives more downloads and leads to more ad impressions.

But the anonymous social app space has dried up in recent years. Fast-rising upstart Secret was destroyed by unchecked harassment and a shabby redesign, leading it to shut down and give its remaining funding back to investors in 2015. College gossip app Yik Yak saw its popularity wane, and pivots to chat, status updates and meeting up with friends offline failed to reinvigorate the startup. Yik Yak shut down in April 2017 after selling its engineering team to Square for around $1 million.

The core product problem with anonymous apps is they aren’t social in a way that creates true network effect. You don’t build a group of friends or collection of content, so each day you essentially start from scratch. Gossip, one-liner jokes and bullying get boring after a while, and with no strong social ties pulling you back, it’s easy to drift away.

Anonymous apps are also based around text, rather than the eye-catching photos and videos dominating modern social networks. Whisper has adopted video sharing, but there’s not much to put on camera if you don’t want your identity revealed. And with little data for ad targeting, anonymous apps earn less per impression than those who know who you are.

Layoffs might be the best path forward for Whisper. If it can strip down to just the most efficient business model and essential content moderation staff, it might be able to become a sustainable long-term business rather than relying on skittish venture funding.

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