The Electric Sheep Company, one of Web 2.0’s real superstar design shops, is firing one-third of its
employees in light of declining business.

Considered white hot just a year or so ago, Electric Sheep made its mark by designing ‘builds’ for brands on Second Life. Now, though, with many companies re-thinking the viability of a Second Life presence, Electric Sheep has had the plug pulled (or its billings sheared, depending upon one’s metaphor of choice).

Electric Sheep’s management made the same mistake many of us made during those lazy, hazy, crazy days of dotcom mania. Peppercom did it. And when the dotcom express derailed, we had to manage our way through two separate messy and depressing downsizings. I’ll never forget one bleak February day when, in the midst of the downsizings, our phone system shut down. Rumors began circulating in the industry that we’d closed. Ouch.

But, that was then and this is now. We’ve not only diversified our client portfolio, we’ve also become much more disciplined in hiring. We’ll never again hire willy-nilly in expectations of a continued boom. Instead, we analyze, as best we can, what the coming 90 days look like and make ‘go/no go’ staffing decisions accordingly.

Hopefully, Electric Sheep’s painful market prod will
serve as a wake-up call to the remaining flock. Let’s hope they
diversify the brand beyond being just a ‘Second Life’ developer and
become more of a full-service shop. Second, let’s hope they don’t
overreact to any unexpected upturns with another hiring frenzy.

Downturns are a downer and layoffs are lousy. So, in the best spirit of
the holidays, here’s hoping 2008 doesn’t see Electric Sheep become the
Web 2.0’s black sheep.