AnchorFree Shakes up Sales Team

AnchorFree, which provides ad-supported software that secures Wi-Fi and other online connections, has had a shakeup in its sales team in recent weeks.

According to two people familiar the company, as many as six people involved in sales are no longer associated with AnchorFree. Those sources, who asked not to be identified, also said AnchorFree employees were asked to take pay cuts in exchange for stock options.

AnchorFree CEO David Gorodyansky said three people on the sales team — one each in U.K., Los Angeles, and New York — were laid off or quit; two others remain. He said the departures came after the company required employees to work in the San Francisco area rather than work from remote locations.

“It’s very hard to manage a remote sales team. We’ve changed our strategy and we decided to build an in-house [team],” he told ClickZ News last week, adding that AnchorFree is looking to add sales staff. The company employs a total of 20 people.

An AnchorFree spokeswoman declined to identify the laid-off employees by name, citing confidentiality agreements with employees and contractors.

When asked about the pay cut, Gorodyansky said some — but not all — employees were offered stock options in trade for a pay cut. He noted that the economy has had a negative impact on some of the firm’s clients, but emphasized that the move was not a result of the economic downturn. pointing out that company has received a total of $11 million in two rounds of venture funding, as well as seeing ad revenue climb. Gorodyansky would not disclose AnchorFree’s financials.

Over the past year, AnchorFree has also changed its business model. When it launched in 2007, AnchorFree offered ad-supported Wi-Fi service in hotels, coffee shops, and other locations. Under that approach, AnchorFree split ad revenue with businesses and hotspot operators that provided free Wi-Fi service to customers.

In April 2008, AnchorFree began offering a free software download called Hotspot Shield, which encrypts information on a virtual private network sent from laptop or desktop computers connected to a Wi-Fi hotspot.

One version of the software, which currently does not run ads, was developed for the Apple iPhone.

Gorodyansky explained the Hotspot Shield application works this way: An Internet user who downloads and activates the application is served a 30-second video ad. After that, content in the Web browser is pushed down by about 90 pixels, and a new banner advertisement — which appears at the top of a Web page — is displayed every time the page is refreshed.

Explaining the company’s evolving business model, Gorodyansky said AnchorFree still has arrangements with hotspot providers to serve ads and share revenue. He didn’t disclose how many hotspots are in the AnchorFree network today.

With the Hotspot Shield, AnchorFree’s team does not negotiate contracts with small businesses that provide Wi-Fi service. Instead, consumers come to AnchorFree for the free download.

“Our usage is so much bigger with the Hotspot Shield. We don’t have to share revenue with hotspot [providers] and we have aggregated millions of hotspot users,” he said, explaining why the company has switched its focus.

AnchorFree recently encountered one hiccup with the HotSpot Shield’s distribution. The company discovered that a rogue Web site collected $50 from an unknown number of people, and then directed them to the otherwise-free AnchorFree download. A message on that site, VPN4Life, now reads, “This account is currently unavailable due to technical/billing issues. Please contact the billing/support department.”

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