The workforce reduction, which insiders say slashes Digital Railroad staff in half, comes as a surprise to most observers. Less than a year ago, the company secured $10 million in second-round financing and launched two new services. Marketplace inventory has been growing, quadrupling to 2 million images in under eight months. The Research Network, launched in September, sports a wealth of image requests and has already had some successes in pairing clients with photographers. Digital Railroad's archiving services, for which it charges monthly fees, continue to attract high-profile agencies, which most recently included British stock house moodboard and photojournalism collective Noor.

Now, the company says it is re-structuring to focus on its 2008 goal: "to drive significantly greater revenue to our members through image licensing in Marketplace." Previously, Digital Railroad employed some 50 people, recently adding staff in the United Kingdom and Los Angeles. Sources say those who lost their jobs this week were mostly support staff, who were let go on Wednesday.

After a turbulent year that saw several agency closings and massive layoffs at Corbis and Getty Images, speculation as to what happened at the seemingly successful Digital Railroad is rampant.

Many say that this is the typical response of a business pressured by its investors for near-immediate returns. Though the company says the Marketplace is doing well, it offers no substantiating information. Several sources, including photographers who use the service, have speculated that the Marketplace has not done as well as expected. Sales profiled by Digital Railroad's blog, as well as overall Marketplace inventory, are heavily skewed toward editorial imagery, suggesting that the sales platform has little penetration into the creative commercial segment. If the Marketplace failed to meet short-term projections, investors may see the entire business plan as unsound and demand drastic measures, such as layoffs.

Given the loss of support staff and a total focus on sales, those affected also question what will happen to the quality of Digital Railroad's paid archiving services. Some of the company's clients, including VII, Redux and Grazia Neri, use these without contributing to the Marketplace.

Insiders worry that the layoffs signal the beginning of the end for the company established as an alternative to the traditional agency. Though Digital Railroad says it is focused on sales, the company does not explain how it plans to achieve them. Unlike similar competitive services, such as Alamy and PhotoShelter, Digital Railroad does not disclose its revenues or marketing budget.

It is particularly notable that founder Evan Nisselson's name is not mentioned in the  released statement addressing this week's layoffs. The newly appointed CEO Charles Mauzy is doing all the heavy lifting, despite Nisselson's stated intent to remain Digital Railroad's public face. This may prove a PR faux pas, particularly with photographers who bought into the Digital Railroad's philosophy because they trusted the man behind it.

Still, Digital Railroad has supporters. John Harrington, a photographer who uses Digital Railroad to host and serve his clients assignment images, offers his perspective on the Photo Business News and Forum. Harrington says, "I believe (with a degree of hope) that this will make Digital Railroad leaner and meaner."

Digital Railroad did not respond to questions at press time.