Amazon, Meta, Netflix: Why Big Tech Is Facing Massive Layoffs
Mark Zuckerberg: It was, you know, one of the hardest calls that I’ve…I’ve had to make in…in…in the 18 years of running the company.
Narrator: Company-wide announcements from tech CEOs have all had similarities recently.
Emilie Choi: This is a very difficult decision.
John Zimmer: Tough decision.
Narrator: Amazon is preparing to lay off up to 10,000 workers. Meta is cutting 11,000. Netflix has made big cuts, so has Shopify, Snap, Twitter. Well, maybe that’s a unique circumstance.
Here are the macro and micro reasons why the tech industry is seeing massive layoffs right now.
Picture it, Silicon Valley, 2019. These three major tech companies’ revenues were growing steadily as everything moved online. And their number of employees was also growing. Then, of course, the pandemic hit. People began shopping from home, binge watching, and just generally being online more. Not only did the revenues of many of these tech companies skyrocket, but so did their head count.
Meghan Bobrowsky: I think Amazon is the quintessential example here. If you’re promising two-day shipping, you have to deliver two-day shipping. Amazon, in response, just had to hire many, many more people.
Narrator: Not only did Amazon grow its delivery operation but it also grew from its Web Services.
Meghan Bobrowsky: Companies and businesses that might not have been online before, now had an online presence. You have to host that data somewhere, and so Amazon saw their cloud computing service do very well during the pandemic.
Narrator: Revenues stayed high through 2021 and many tech CEOs thought the growth would continue at the same rate they had seen for the last two years.
Spencer Neumann: We’re gonna continue to invest aggressively into the growth opportunities that we see.
Narrator: So they continued the hiring spree, and not just a lot of employees but some expensive employees because this is also when the talent wars ramped up where companies were vying for in-demand employees. Facebook launching the Metaverse is a prime example.
Mark Zuckerberg: From now on, we’re going to be Metaverse-first, not Facebook-first.
Meghan Bobrowsky: We saw about 100 or so people leave Microsoft for Meta, and some of these people who left the company said that they were being offered double their salary.
Narrator: But by 2022, consumer habits had changed in a big way. People were no longer stuck inside. Netflix saw a drop in subscribers for the first time in over a decade. People began spending more of their money on services and less on goods. Revenues for many tech companies started to stall or even decline for the first time.
Meghan Bobrowsky: Some of these CEOs sort of overestimated where that new middle ground is.
Narrator: Which is why they’re explaining, while apologizing that they grew too fast. Each tech company has also faced distinct problems. A major one, Apple’s privacy change, which required apps to ask users if they wanted to be tracked. It affected a key component of many of these social media companies’ digital ad-focused business models. Add in the threat from TikTok taking away viewership from other social media platforms.
Meghan Bobrowsky: When you have all these things happening at the same time, I think that’s what really did it for these companies and put them in.
Narrator: The bigger companies aren’t outliers either. Layoffs have been happening across the industry throughout 2022, but have recently surged. But even though these are a lot of layoffs, the companies are not shrinking back to pre-pandemic levels. Meta’s layoffs will bring the number of employees to about here. Amazon’s to about here. Netflix brought the employee count here.
Meghan Bobrowsky: To be clear, a lot of these companies are still growing. It’s just that the growth is slowing back to sort of pre-pandemic or early pandemic levels.
Narrator: CEOs also say the timing has to do with the threat of an economic downturn.
Evan Spiegel: Well, there certainly have been a lot of changes very quickly in the macroeconomic environment.
Emilie Choi: We’re in a very rapidly changing economic environment.
Meghan Bobrowsky: In some ways, these layoffs are a bit proactive. I mean, some of them have said we’re doing this now so that we never have to do this again.
Narrator: These layoffs, while concentrated in the tech industry, are still a lot. Tens of thousands of people.
Meghan Bobrowsky: For a lot of people, this reversal and these layoffs are something that they’ve never seen before.
Narrator: The tech industry had the exceptionally pronounced experience of growing during the pandemic, and now while the rest of the labor market is growing, they’ve having the exceptional experience of not.