Amazon and others have joined Meta in announcing thousands of job cuts as they shrink to fit a new set of economic norms.
State-by-state:
- Google settles for $392 million
- Apple retail staff unions grow
- Amazon’s founder is planning a big giveaway
- Microsoft faced more antitrust complaints
- Meta provided “bogus support” to former employees
- Tencent is also cutting jobs
Amazon and others have joined Meta in announcing thousands of job cuts as they shrink to fit a new set of economic norms. Companies that enjoyed a boom driven by the pandemic now face a reckoning with reality, and recession.
- Meta announced it would sack 11,000 people (13 per cent of its workforce);
- Amazon is planning roughly 10,000 job cuts in retail, devices and human resources (about 3 per cent of its corporate employees but a tiny fraction of its 1.6 million total workforce);
- Twitter has fired about 4,000 people including content moderators and engineers, with more cuts planned;
- The whole technology industry has already shed over 9,500 jobs last month, the highest figure since November 2020.
The firings are a response to dampening demand and swooning advertising revenues. After a decade of seemingly endless growth which promised to deliver more and more value through increasingly intrusive ads, the boom seems to have bust.
Meta’s advertising revenue shrunk by 4 per cent last earnings call, and the cost per ad was down 18 per cent. Amazon’s ads business actually grew by 18 per cent (more below). Google’s YouTube ad revenue fell by 1.9 per cent. Executives at all the tech states had to tell investors last month advertisers were cutting back.
In this millennium, the world has seen only one major recession, in 2009, when Instagram was still in development under the name Burbn and the internet giants of today had yet to scale up. This is the first time the big tech model will be tested by a truly global economic downturn. There’s no guarantee it’ll survive.
- Covid can’t help them any more. Amazon in particular overreached. During the pandemic its online sales jumped 57 per cent, Amazon Prime Video became the second fastest-growing streaming service in the US and Amazon Web Services (AWS) saw sales rise more than 50 per cent. To match the enormous demand, Amazon hired 476,000 employees between the end of 2020 and the start of 2022.
- Ad sales are slumping. Underlying demand is down; data shows overall ad spend was down 5 per cent this September compared with a year earlier, continuing a four-month downward trend. In 2021 Apple’s iOS privacy changes made it harder for ad-supported applications such as Facebook and Snapchat to track users. Amazon, by contrast, is in its own silo, where advertisers go to target users directly.
- Dreams haven’t come true. Research and development divisions that had been over-resourced and under performing are on the chopping block. Meta’s track record of failure, Wired reports, is long and colourful. It also makes Meta’s outlook particularly bleak. From the ditched cryptocurrency Libra, to Facebook Portal and its short-form video flop Lasso (no one else has heard of it either) Meta’s 11,000 job cuts are not just a way of coping with the current downturn, but a move to shed its expensive legacy of aborted projects.
“Sectors often undergo initial growth, become complex and problematic, and then need to consolidate,” says Dr Sally Wright at the Institute for Employment Research. “Now there’s a market correction underway.”
This correction could be a sign of things to come in the wider economy. Many of the moves we’re seeing in big tech are preemptive of an early recessionary climate: profits slump, advertisers cut down, consumer spending drops and companies themselves spend less because sales are falling.
The big tech companies “could be the canaries in the coal mine,” says Tony Wilson, director of the Institute for Employment Studies, for trends that will soon set in elsewhere.
But it may not be that simple. The tech sector, Wilson adds, is a relatively small part of the economy in volume terms, and it’s subject to specific conditions. We’re unlikely to see similar levels of job cuts, in percentage terms (3, 13, even 50 per cent), in other sectors.
