Reports are that Vostu has laid off around 100 workers, putting its headcount around 50 to 70 employees. This is a significant decline from 2011, when the company had around 580 employees spread across Sao Paulo, Buenos Aires and New York and said that 25 percent of Internet users in Brazil played Vostu games.
One major reason for the drop is the decline of social network Orkut in Brazil in favor of Facebook, matching them up against fierce competition from social gaming companies from the U.S. and Europe. Reports are that Vostu started spending in an ROI-negative way on marketing and user acquisition on the Facebook platform.
Additionally, Facebook itself as a game platform has diminished over the past couple of years. Zynga’s weak post-IPO performance damaging valuations and large-scale acquisitions for the gaming industry was also a bad sign.
Multiplying the problems were reported internal management issues with the engineering and product teams who were unable to come to agree on specs that would work for various games. Because of that, Vostu was unable to add features or services that would help keep players engaged.
“Essentially, Vostu was unable to take risks and that brought the company down,” says one source.
Vostu is another example of a company whose fortunes were hinged on the popularity of a social network it doesn’t control. Recently, US-based video app maker Viddy has blamed Facebook on a user exodus that prompted the company to show its chief executive the door and cut half of its workforce.
Source: TechCrunch.com
