META’S, AMAZON’S AND TWITTER’S LAYOFF - THE REALITY OF TECHNOLOGY INDUSTRY

November 16, 2022

Linh Tu Truong

NEWS

Source: CNBC, The Washington Post

META

Mark Zuckerberg announced that Meta laid off 13% of its staff on November 9th at around 1 p.m. ET. Zuckerberg said that all organizations in Meta are being reduced in size and the company’s recruitment will be lower in 2023. Employees who are affected by the layoff will receive 16 weeks of pay, two additional weeks for every year of service, and will be covered by six-month health insurance.

AMAZON

Amazon is planning to lay off around 10,000 employees in corporate and technology roles this week.

This reduction will be the largest in the company’s history and Amazon will be impacted in a great range from devices organization, retail division, and human resources. The layoffs represent less than 1% of Amazon’s global workforce and 3% of its corporate employees.

Amazon is facing slow sales as an impact of the gloomy global economy. Shares of Amazon were reported to decrease by 2% on Monday.

Amazon has announced lately about the hiring freeze in corporate roles among its retail businesses. In the last few months, Amazon shut down its telehealth service, closed all of its U.S. call centers, shuttered underperforming brick-and-mortar chains, and closed, canceled, or delayed some new warehouse locations.

TWITTER

On November 13, about 4,400 (unconfirmed) of 5,500 Twitter’s contract workers were unexpectedly terminated. They found themselves blocked from Slack and other work systems.

According to CNBC, some of the contract workers were based in India, among other locations. Due to some full-time employees, contractors had no internal notice before the cut. Also, all of Twitter’s internal communications team were dismissed.

Musk addressed the layoffs in his tweet that Twitter was losing $4M a day and the dismissed employees were offered 3 months of severance which was 50% higher than the legal requirement. Musk informed that to save Twitter, he had to sell billions of dollars of Tesla’s worth of shares.

ANALYSIS

Some facts that you might not be aware of when stepping into the technology field

Computer science and other technology-related majors are now trending college majors since those majors’ graduates have all chances to get employed with high income. Moreover, with the advantage of the modern age of technology, graduates with ideas in mind have the opportunity to start up their businesses and quickly make profits. We can see that many top billionaires in the world started to flourish after their technology businesses thrived.

However, the easier graduates from the technological field earn a job, the quicker technologists are dismissed. The longevity for programmers is only around 15 years. A large number of programmers are asked to resign when they reach their thirties. At the age of over 35, it becomes more difficult for technological workers to get employed. Why? Technology is something that must be updated every single second so programmers are required to catch up with the latest knowledge. Employers believe that graduates who are fresh in the area are the ones who are familiar with updated technology the most so they would prefer the youth. Yes, experienced programmers can update new knowledge but the time for them to switch to new methods is maybe too time-consuming as technology is defined as up-to-date. By employing fresh graduates who have already learnt about this new knowledge and practiced it at their colleges, companies will be able to change quickly to the most modern technology. Besides that, experienced workers cannot devote as much as freshmen because of many worries with the addition that a competitive and fast-changing market like technology requires employees to work around the clock.

Why did Twitter face loss?

Recently, the global economic downturn is getting more severe. Many companies had no choice but to go bankrupt. In terms of social media enterprises, their main source of profit is advertisements. It goes with common sense that if businesses suffered from the financial crisis, they could not have budgets for advertising campaigns on social media.

Another reason is that the rocky takeover of Musk has been followed by some advertisers’ stops and pauses at investing in this platform. Some businesses also left Twitter, namely Balenciaga. It is acknowledged that a considerable amount of users left Twitter too and this will amount to the decrease of advertising demand on the platform.

Why did tech giants lay off thousands of employees?

When the lockdown was still demanded in most countries of the world during the pandemic, people had to stay at home so they used social networking sites and did online shopping a lot. The higher demand for online services rose so tech companies had to hire more employees to meet the requirement. But now, lockdowns were canceled and cooled down in most countries so the demand for online services has decreased. In other words, tech firms do not need as many employees as before; not to mention that their profits plummeted since advertisers paid less money on social media advertisements as people spent less time on these platforms.

As mentioned earlier, overzealous hiring during the pandemic has led to layoffs in number. This applied exactly the rule of supply and demand in this situation. When the demand for internet services rises, the supply of them will rise to meet the equilibrium and the demand for the workforce will rise too. New start-ups are invested in by venture capitalists because of the common low interest rates over a decade and as the pandemic came by, it was even more abustle. Big enterprises also took advantage of the uptrend of prices in the industry and expanded their size to earn as much as they can. Amid the downturn in the share market, tech dividends ascended rapidly, hence the payouts for employees surged. However, the rising inflation and current online activity slowdown caused tech companies to operate at a loss and their revenue wasn’t sufficient to pay all the costs, including labor costs and thus cutting down the labor force. For now, the number one focus of tech firms is profitability, not growth.

What do tech firms have to face?

Rising inflation is the first obstacle for tech firms. Recently, the Central Bank is making a great effort to curb inflation and the interest rate increase. This affects the buy power of customers, especially international customers who are impacted by the currency exchanges. When advertisers see that their budget for social media advertisements is not enough for their target number of viewers, they start to find other methods of advertising.

Higher interest rates are a hurdle for tech firms to make revenue. The spending power will plummet. Both producers and consumers have to spend more on interest payments. For this reason, stock values will be affected along with the slowdown of company growth due to lower earnings. Share prices of Meta and Amazon fell by 20% as reported in third-quarter reports. High interest rates also prevent venture capitalists from risk investment since the prices keep rising.

Investments have to be reduced since companies do not have enough budgets to expand their businesses. Since tech firms’ revenues from advertisements suffered from a cutback, companies must scale down.

Funding becomes scant as investors can’t see the positive future of technology in this economic downturn and tech firms keep finding losses. Even giants in the industry find difficulty in keeping up the revenue they gained for around a decade.

Do the majority of tech workers become unemployed?

Though layoffs are at a high rate, tech workers can still find new jobs because over 170 thousand jobs were added to the market, which is also a positive trend from last year. However, job choices for them are not large. Tech workers cannot always find a suitable workplace for them. Some skilled workers are forced to work in smaller companies but it does not mean no opportunities for them to develop.

For start-up businesses, funding is cut back so it’s hard to call for investment during this age. They have to face great loss or even shutdowns.