Only two years ago, big tech and Silicon Valley were on what felt like an infinite hiring spree. Take Amazon, who announced in September 2021 that they were planning to hire over 125,000 new hires in the United States alone. Or, Google disclosed they had hired over 20,000 new hires in the second quarter of 2022 alone. Meta (formerly Facebook) currently has over 87,000 employees, an almost 30% increase from just a year ago.
Now it’s all crashing down, and reality is sinking in.
Meta is expected to announce “significant layoffs” this week after disclosing a 50% decline in quarterly revenue. Infamously, CEO Mark Zuckerberg said at a companywide meeting at the end of June 2022 that “realistically, there are probably a bunch of people at the company who shouldn’t be here.”
Google previously announced in July 2022 that they intend to “slow hiring through 2023.”
Amazon has announced that it will “pause” new corporate hiring—this announcement only a month after stating that it would also freeze hiring at its retail operations.
Apple has “paused all hiring” and declared that the hiring freeze may even remain through the end of 2023.
And we’d be remiss to leave out Twitter, which has been in chaos since the $44 billion takeover by Elon Musk. Twitter notified about half of its workforce on Friday, November 4 that they were being fired. But the company is now reaching out to dozens of employees asking them to return, realizing their role and experience were critical.
The recession is scaring investors…and Big Tech
So why is big tech—companies with tens of billions on their balance sheet, and who ballooned in size throughout the pandemic suddenly sounding the alarm?
Listen to any corporate announcement and news commentary and the same excuses are thrown out:
- “Probable recession”
- “Operating costs”
- “Worsening economic outlook”
- “Inflation”
- “Soaring interest rates”
- “Soaring energy crisis in Europe” (yes really)
The list of reasons goes on, but many of the reasons stated are legitimate. Indeed, the economic outlook has continued to decline as consumer spending is down, advertising revenue across platforms like Google Ads, YouTube, Meta, and Apple are down; and Meta’s big gamble on the metaverse is going dramatically worse than expected.
Significant investments in hiring tens of thousands of new employees across big tech companies throughout the pandemic were also miscalculated. Each CEO mentioned repeatedly throughout quarterly earnings reports that there is increased attention to “focus”, “efficiencies”, and (the dreaded word) “productivity.”
That’s all code for we grew too fast, hired more people than we should have, and need to do more with less. Now it’s your problem.
Each company has its own unique culture and methods for handling economic uncertainty. But, hiring freezes are hiring freezes… and layoffs are layoffs.
Companies such as Google and Meta thrive and prosper on ad revenue. As the interest rates soar—which makes borrowing money increasingly more costly—and inflation rises, affecting the bottom line on every balance sheet—companies begin to make cuts.
Even Apple, who was one of the few bright stars of the recent quarterly earnings reports said “all budgets are under review.”
An over-reliance on China for Apple product manufacturing and assembly has also plagued the company as Shenzen, China continues to struggle with COVID-19. China has a zero-tolerance policy for COVID-19 infections, which restricts citizens to draconian isolation measures to reduce spread.
Wall Street dislikes this
All of this has ripple effects on the industry, and big tech suddenly has to make cuts.
Wall Street has not been kind to big tech stocks this year, either. While every stock is down—Google more than 20% in just a matter of weeks—nobody has lost as much Meta, down a staggering 70% within a year.
That equates to over $85 billion in market value erased, and stock levels not seen since 2016.
Meta has suffered from ballooning expenses, so much so that analysts see Meta’s expenses and hiring as “almost a total disregard for investor expectations.” Meta has spent a mind-blowing $36 billion so far to build its Metaverse, with (pun intended) virtually nothing to show for it.
A change to ad-tracking technology and privacy implemented by Apple across its iOS devices has a material impact on Meta’s revenue, too. Any time an iOS user taps “Ask app not to track”, the app (and in turn, the company) loses significant metadata that are used to show targeted ads to the user. Estimates are as high as 80% of iOS users are declining app tracking.
That equals a significant loss in relevant ads to users, and we all know we don’t click on ads that hold no relevance to us.
Still, Meta is earning approximately $1.5 billion in annualized ad revenue.
But the privacy measures implemented by Apple aren’t as friendly to companies like Snap, which missed third-quarter earnings, and announced it would cut 20% of its staff.
Now what? Time for startups to scoop up the layoffs
Big tech—companies like Amazon, Apple, Google, and Meta—have the billions necessary to weather the storm of economic uncertainty, inflation, and a recession. Other companies, like Snap or streaming companies forced to consolidate (such as Warner Brothers’ HBO Max and Discovery+), are more exposed.
But the cuts in big tech are making entrepreneurial startups able to recruit employees they normally wouldn’t have been able to previously. Across LinkedIn and hiring sites, countless people are announcing that they’re looking for work as a recently laid off FAANG employee.
Seed companies and early-stage tech startups are still thriving as they have been spared from inflation, supply chain issues, and high interest rates plaguing big tech.
Despite all the bad news, US employers posted nearly 317,000 tech job openings in October, up more than 10,000 from September, according to CompTIA.
Disclaimer: The author of this article is a current employee of Google. This article does not represent the views or opinions of his employer and is not meant to be an official statement for Google, or Google Cloud.
