#NewsBytesExplainer: Major tech layoffs in the post-pandemic era
The year 2022 has been a weird one for tech-based companies around the world. Following a decade of riding the stock market bull and a pandemic peak, they are now faced with a glum post-pandemic reality. Hiring freezes and layoffs have become the norm. Here, we take a look at some of the mass layoffs by tech companies in the post-pandemic world.
Tech companies went through outsized growth during the pandemic
During the pandemic, tech-based companies around the world hired and invested aggressively. Austerity was thrown out of the park as these companies were enticed by the online boom. Both companies and analysts predicted the boom to carry on. However, that's not what happened. Inflation, recession worries, and less-than-stellar quarterly results have pushed companies that went through outsized growth to recalibrate.
Meta has axed over 11,000 employees
Let's begin with Meta. The company formerly known as Facebook enjoyed 18 years of uninterrupted growth. Until now. It is now going through the toughest period it had to endure till now. On Wednesday, the company fired over 11,000 employees in the biggest tech layoff of this year. That is 13% of its 87,000-strong workforce. It also has a hiring freeze in place.
The company's headcount doubled since 2020
Meta, like its tech peers, hired aggressively during the pandemic. In early 2020, the company only had around 40,000 employees. By the end of September 2022, the company had 87,314 employees. In 2022 itself, it hired over 15,000 people. These hirings, especially the ones in 2022, were made in the hope that the economy will correct itself. Instead, the economy corrected Meta.
Twitter laid off roughly half of its workforce
A week after Elon Musk acquired Twitter, the microblogging platform joined the list of tech companies that laid off employees. The company axed around half of its 7,500-strong workforce. This includes roughly 90% of its staff in India. Twitter has been struggling financially for a while. According to Musk, the company has been losing $4 million/day. However, Twitter's mass layoff has another financial angle.
Musk financed Twitter takeover through banks and selling Tesla shares
Musk acquired Twitter for $44 billion. This is much higher than the social media platform's current market value. To fund this deal, Musk pledged equity and debt financing worth $46.5 billion to cover the price tag and closing costs. Major banks gave the billionaire $13 billion. Out of the rest, most came from the sale of his Tesla shares.
The billionaire has to generate revenue quickly
The financing of Twitter's acquisition puts Musk in a tough spot. He's under pressure to generate revenue from the platform. This also means cutting costs. Musk is known for being ruthless when it comes to reducing headcount. He did the same at Twitter.
Microsoft has had 3 rounds of layoffs since July
Microsoft is one of the biggest companies in the world. Since July this year, the company has had three rounds of layoffs. In the most recent one, it axed around 1,000 employees. The tech giant described these spates of layoffs as part of a structural adjustment. This points to the company trying to streamline its workforce amid recession fears.
Snap fired over 1,200 employees as part of a restructuring
Snap was one of the first established tech companies to go down the layoff path. The company laid off over 1,200 employees or 20% of its workforce as part of a restructuring process. The company, despite its success, is yet to be profitable since going public. In the last quarter, it reported a net loss of $360 million compared to $72 million year-over-year.
Meta reported decline in ad revenue for the first time
There is a common factor that has affected companies such as Meta, Snap, and Twitter, among others - a decline in digital ad revenue. In 2022, Meta's ad revenue declined for the first time. In Q3, the company posted $27 billion in revenue, most of which comes from ads. This is 4% less than what it reported in the same quarter last year.
Google and Snap are also facing decline in ad revenue
Similar issues are faced by Google, the world's largest digital advertising platform. YouTube, Google's streaming website, reported a year-over-year decline in ad revenue from $7.2 billion to $7.07 billion. Snap's revenue is almost wholly dependent on advertising products such as Snap Ads and AR Ads. The decline in ad revenue has forced Snap to look for new avenues.
What is causing the slump in digital ad revenue?
There are plenty of reasons why digital ad revenue is on a downward trend. The economic downturn along with recession fears and the inflationary pressure on costs has forced businesses to spend less on ads. Sectors like cryptocurrency, banking, and insurance have slashed their ad spending. Then we have Apple's 2021 iOS privacy update with App Tracking Transparency to limit targeted advertising.
BYJU'S plans to fire 2,500 employees
The layoff season has not only affected the big tech companies. BYJU'S, the world's largest edtech firm recently announced plans to lay off 2,500 employees in the next six months. BYJU'S is another prime example of an unsustainable pandemic model affecting the company after the pandemic. The company was very aggressive with its hiring and investments during the pandemic.
The edtech firm cites macroeconomic pressure for axing employees
The post-pandemic reality hit BYJU'S hard. The economic downturn, macroeconomic pressure, and focus on profitability are cited as the chief reasons for the company's decision to lay off employees. In other words, the company is now readjusting to the post-pandemic reality. The outsized growth it underwent during the pandemic has to be recalibrated to suit the current needs.
Tech companies are going through a period of correction
With the looming threat of recession and no signs of a quick recovery on the horizon, we will see many companies trying to trim costs. Tech companies will be at the forefront because of the pandemic growth they experienced. What's happening now is a correction of sorts. The tech world is now finding its feet in a world where people go out.
