ExpressVPN has been telling users that recent layoffs are all about removing redundant roles to position the company for future growth. But insiders tell PCMag the job cuts could hurt the popular VPN service, including its ability to bypass government blocking attempts.
"The culture of the company was to deliver value to the customer, and then the money follows. Now they're cutting all the operating costs. It’s become 100% focused on profit,” according to a former ExpressVPN employee.
Going the Elon Musk Route
ExpressVPN's Singapore office (Credit: ExpressVPN)The job cuts come several months after ExpressVPN’s parent company, Kape Technologies, delisted itself from the London Stock Exchange and took itself private. Some top executives, including an ExpressVPN co-founder and Kape’s own CEO, have since left. Meanwhile, an executive from the company’s notorious past, former Crossrider CEO Koby Menachemi, has returned in a management role.
Sources familiar with the layoffs—which involved around 200 people—say much of the staff at ExpressVPN’s main Singapore office is now gone, including talented software engineers, quality assurance specialists, and executives. Which is why those sources believe the job cuts will take a toll on VPN’s quality in the coming months and years.
For example, ExpressVPN was in the midst of addressing all the technical debt it had accumulated over the years in an effort to streamline IT operations. But the job cuts have dissolved the entire undertaking, meaning it’ll be harder and more time-consuming for ExpressVPN to roll out changes and enhancements in the future.
Other sources say Kape “basically massacred” ExpressVPN’s whole quality assurance team and gutted the operations department. As a result, ExpressVPN could struggle to circumvent internet-blocking attempts from both government and providers such as Netflix.
"The lead times on responding to outages will blow out," one source says.
Users probably won’t encounter any noticeable changes, not at first anyways. A former ExpressVPN employee equated the job cuts to how Elon Musk laid off most of the staff at Twitter. Although the site now known as X remains functional, bugs, outages, and content-moderation problems are now more frequent.
“I would imagine in the short-term there will be no noticeable impact, but in the longer-term issues will occur,” the former employee says.
In addition, ExpressVPN has halted server renewals to save on costs. “It’s either they won’t renew it, we’ll just see what the impact is, or we’ll renew it, but on a much massive reduced number of users. Or they just don’t go with it at all,” the employee says.
End of a Premium Brand?
(Credit: ExpressVPN)The layoffs are puzzling since ExpressVPN appeared to be quite profitable. According to sources, it currently has over 4 million subscribers —which is up from 3 million back in Dec. 2021— all of whom pay around $10 per month.
Kape, which also owns CyberGhost VPN and Private Internet Access, has gone private, meaning its financial situation and governance is no longer public. Still, in Kape’s last 2022 fiscal earnings report, which was published in March before the privatization, the company said it made $623.5 million in revenue, a 170% percent increase from the year before.
Although absorbing ExpressVPN would have bolstered those financials, Kape still notes the company's teams delivered "strong organic growth across all our segments" to reach the high-end or beat its projections on earnings. Meanwhile, user retention was at 83%, up two points from the year before.
'Just a power play. Nothing more. But the end of a premium brand.'But despite the positive earnings, Kape initiated layoffs. Teddy Sagi, the Israeli billionaire who owns Kape, moved to delist the company starting in February after its stock fell by around 200 points from December 2021. That’s a steep decline after Kape paid over $900 million to buy ExpressVPN in September 2021.
What Sagi intends to do with Kape remains unclear. But the layoffs signal he’s trying to cut costs while maximizing profits. One source mentioned the laid-off workers in Singapore and London can be more expensive to employ due to their locations. ExpressVPN's team and infrastructure was also known to be more advanced than its counterparts at CyberGhost VPN and PIA.
After the privatization, Kape named Koby Menachemi as chief operating officer, despite his infamous reputation running Crossrider, according to sources. Back in 2012, Sagi acquired Crossrider, which Menachemi ran as CEO until 2016. During that time, Crossrider was accused of helping clients spread adware. The company then renamed itself Kape to pivot away from its adware reputation and focus on cybersecurity, which eventually led to the acquisition of ExpressVPN.
“We had to get out from under that history when we were acquired and then they brought him back,” a source tells PCMag, who described the management shake up as a “coup” that seemed to focus on laying off staff at ExpressVPN but not CyberGhost or PIA.
“Just a power play. Nothing more. But the end of a premium brand,” the source adds.
Another source says it has always been a “dictatorship” at Kape, citing Sagi’s majority control. “We lost a heap of good people, most of the top notch people from the looks of it, and it feels essentially like an end of an era,” the source adds. “The family is broken up.”
Inside the Layoffs
(PCMag/ExpressVPN)For some, the layoffs at ExpressVPN were shocking since they involved top staff. One source also notes: "The week before, [COO] Koby told a town hall there weren’t going to be layoffs."
When the layoffs occurred, "HR were visibily shaken," a source says. "Some in tears. Clearly a rushed process as the normally efficient systems were not present. IT was not clear about who or how to offboard employee hardware, for same-day gardening leave."
Sources also say ExpressVPN has given laid-off workers in Singapore the bare minimum in terms of severance, or what can amount to a month’s worth of pay. That’s a contrast from the generous severance packages Silicon Valley employees can receive—up to 14 weeks or longer. Some laid-off workers in Singapore will also have to leave the country if they fail to secure a new job once their employment passes expire.
“The general sentiment was that this was a greed-driven move. That it was for short-term profitability to focus on listing the company later,” a former employee adds.
Another source says: “Perhaps in a few months or a year down the line, [Sagi will] sell it to a private entity and he will probably pocket the profit.”
A 'Transitional Stage'
Kape confirms to PCMag that Menachemi has returned to the company, but only as "co-manager" for the "Kape Technologies group level." This is now public in a ExpressVPN blog post, which has a meta robots tag instructing search engines not to index the page.
"During this transitional stage, a long-term CEO is yet to be appointed," a Kape spokesperson tells PCMag. "Newly appointed Chief Technology Officer Chris Econn and long-standing technical lead and Chief Engineering Officer Peter Membrey are leading the product and technology."
'It's not possible to cut 20 to 30% of the workforce and not compromise quality.'The company also rejects accusations that ExpressVPN's quality will suffer. "These claims are untrue; we’ve retained a talented team across all functions," the spokesperson says, later adding: "The organizational restructure was focused on ensuring we are set up in the long term to continue providing our customers with the best protection in the industry."
Kape also says it only laid off 12% of its workforce, or about 180 employees. But sources say the job cuts covered over 20% of the workforce. Once you subtract Kape’s 500-employee customer support team, the company’s headcount was under 1,000 before the layoffs.
Another source adds: “I do expect quality to drop. It's not possible to cut 20 to 30% of the workforce and not compromise quality. The focus now is clearly acquiring more users at lower cost.”
Kape declined to detail the severance packages it offered to laid-off employees. "Severance packages were determined based on local market standards and length of service. Unfortunately, we can’t comment on the specifics of any particular case," the spokesperson says.
