Big tech really went from “always hiring” to “always firing”. The opening act of 2024 is driving that point home, with each day seemingly delivering a fresh batch of pink slips. And, as per usual, there’s been a mix of scorching hot takes and finger-pointing galore, as industry observers try to decipher this chaotic spectacle.
Before we start the platform blame game, let’s take a moment to contextualize just how far-reaching these layoffs have become.
Google already cut jobs across the business last month impacting over 1,000 roles, while hundreds more were impacted in its advertising division, and around 100 more across YouTube’s business. TikTok also laid off around 60 staff from the app’s sales and ads team, while Meta’s latest restructure requires staff to reapply for their roles (though there are significantly fewer vacancies), Twitch has reduced its headcount by 35%, and Discord reduced its workforce by 17%.
And this is just the tip of the iceberg. As bad as these layoffs are for all those people involved, the truth is that doesn’t extend to their employers. In fact, all these layoffs do is reinforce the idea that these are some of the most profitable companies in the world.
Remember that as the industry tries to spin these moves in the weeks to come.
Here’s a rundown of what that list of excuses is likely to be.
Continuation of the ‘year of efficiencies’ (aka cost cutting)
Let’s start with the most important. A lot of the tech companies took on Meta’s CEO Mark Zuckerberg’s approach of the “year of efficiency” in 2023. That’s tech bro speak for cost cutting measures to ensure a company’s revenue stays in the black. And 2024 will likely be no different.
Love him or loathe him, billionaire Elon Musk was the front runner at reducing X’s, formerly Twitter headcount by about 80% — beginning shortly after he bought the platform back in October 2022. His logic: Tesla worked well with a streamlined workforce, so he wanted to apply the same principle to the social networking company, given it was nowhere near profitable. His answer: cutting headcount equals cutting costs. And in some respects, he wasn’t wrong; it was common knowledge in Silicon Valley that the text-based app was incredibly bloated.
Zuckerberg followed suit with swift rounds of brutal, but scheduled layoffs at Meta throughout 2023, determined to “make our organization flatter by removing multiple layers of management.” And this has carried through to January 2024, with some departments even having to re-interview for their current roles.
“Some companies were dependent in some way on costs of capital near zero: some who have made cuts were not cash flow positive and others depended on customers who were themselves dependent on a cost of capital near zero,” said Brian Wieser.
The idea that these layoffs are primarily driven by a corporate compulsion to manage ratio of costs to profits to keep the stock price high and subsequent appease investors really hit home during the latest earnings report.
Alphabet announced $86 billion in revenue for its full year 2023 earnings, up 13% year over year. Yet the company still reduced its headcount by 7,732 (4%) in 2023. For a company earning such big bucks, the only logical reason would be to keep their margins in check.
Speaking or profits… there’s zero interest rate policy (ZIRP)
For the past decade or so, the tech giants lucked out and were able to benefit from the zero rate interest policy, otherwise known as ZIRP, by central banks, which followed the Great Financial Crisis. But now, that period is coming to an end.
Inevitably, with higher interest rates comes more pressure for tech businesses to achieve profitability for their shareholders. And the tech giants (think Apple, Google, Meta) will likely only continue to get bigger, as other startups no longer have access to as much venture capital funding as they once did.
Take the pandemic, for example. Tech giants could literally throw cash at the problem because the world practically became digital-first overnight. They over-hired the top talent in their sector in a bid to keep them one step ahead of the competition.
But as the world is shifting back to a new-normal, post-pandemic way of living, tech is only part of the equation. With companies having to do more to keep afloat, headcounts are considered the first commodity to go — hence the latest wave of layoffs.
According to data from Layoffs.fyi, 1,189 tech companies recorded 262,595 layoffs in 2023 alone. And this year has already witnessed 107 tech firms cutting 29,475 jobs in just the last month.
The problem now is, with more supply than there is demand, there’s a wealth of talent, but no roles for them to slot into. TikTok took advantage of last year’s Meta layoffs and went on a hiring spree, but this year the landscape seems a lot more conservative — that’s despite these tech giants still turning a profit in their latest earnings reports (put another way, they could probably still afford more staff than they have).
AI / transformation
While everyone generally applauds new technologies, the main purpose for its existence is to streamline (and effectively remove) especially mundane or repetitive tasks.
So it comes as no surprise that AI is already replacing staff in some departments at these massive tech companies, and they’re not shy about saying it. Why? Because if a company can get AI to do the same tasks, possibly quicker and definitely for cheaper, they’re always going to prioritize their bottom line.
Alphabet’s chief financial officer, Ruth Porat noted on its recent full year 2023 earnings call this week, “As you can see with our headcount down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring, she said. “We continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI.”
And there’s already been rumblings about Meta reducing human teams and replacing them with AI in some instances for advertisers who aren’t deemed to be spending enough to make it worthwhile for Meta to put in the extra touchpoint.
“These companies are still investing large amounts but capital deployed is going into technology like AI that is designed to reduce headcount intensity in the long run,” said Jamie MacEwan, Enders. “The next big bet is that they can do more with less.”
Forcing employees back to the office… or to quit
To consumers, the platforms have always prided themselves on creating technology which builds connection, and used the pandemic as evidence of it enabling people to feel closer despite the distance lockdowns created.
Sure, it could be argued that some face-to-face interactions are certainly beneficial to team performance, but if the pandemic did one thing, it proved that none of these businesses came to a halt when people worked remotely. In fact for that period, they thrived.
The problem is, as the industry undergoes a post-Covid course correction, these tech giants can no longer justify the cost of their fancy offices if they’re just going to remain empty.
Cue the return to office mandate. Again, Musk led the way by stipulating that anyone who didn’t show up could consider themselves no longer employed by the company.
Apple’s Tim Cook started tracking employees via their badge records last year, and escalated discipline that could ultimately lead to termination to those who didn’t turn up. Google took a similar approach to tracking staff last year, and office attendance became part of employee reviews. Even TikTok introduced the MyRTO app to track employee attendance, with different teams expected to be in the office between three to five days per week, and a reportedly clear warning that “any deliberate and consistent disregard may result in disciplinary action” and could “impact on performance reviews.”
Zuckerberg expected Meta staff to return to the office at least three days per week and encouraging them to “find more opportunities to work with your colleagues in person,” while Snap’s CEO Evan Spiegel announced an 80/20 approach for employees — in other words, they’re expected to spend 80% of their work week (or four days) in the office, to “help us achieve our full potential.”
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