The era of moonlight is (mostly) over. Tech companies are taking a more worldly approach this year.
Stock charts both explain the shift in boardroom sentiment and tell the story of an epic Covid-fuelled rise and fall. The tech-heavy Nasdaq fell 33% last year — its worst performance since 2008. Big Tech, which spent the last several years dreaming big, is now starting to think small. More than 1,000 tech companies laid off employees last year, resulting in more than 150,000 job losses, as shown by Layoffs. It’s an eye-popping number that could actually be worse: More than 23,000 tech workers have already been let go as of January 13 this year, the same tracker shows.
Many of these workers were newly hired under the mistaken belief that the increased demand of the pandemic would become the new normal. But a good percentage were older employees working on projects that, given today’s market environment, range from financially irresponsible to projects that fall well outside their parent company’s wheelhouse. .
The most high-profile examples are Meta Platforms and Amazon.com, which have cut a combined 29,000 employees so far. Meta is still reeling from an online advertising slump and the many billions of dollars that CEO Mark Zuckerberg is throwing into a new virtual world called the Metaverse. Amazon is coping with the retail slump by slashing spending in unprofitable business areas such as its Alexa-controlled electronics products.
Meta Chief Technology Officer Andrew Bosworth said in an internal memo late last year that his company “solved a lot of problems by adding headcount,” according to a recent newsletter published by The Verge. He reportedly said that headcount comes with overhead, which “makes everything slow.”
Despite its much-hyped virtual ambitions, Meta said in a blog post last month that it is still devoting 80% of its total investment dollars to improving its own legacy business. In a recent interview with The Verge, Mr. Bosworth acknowledged that meta is “changing our investment strategy” to the extent that some projects will have to demonstrate value sooner to justify their higher burns.
The ax appears to be falling on the original Moonshot factory as well: The Wall Street Journal reported that Google-parent Alphabet is laying off more than 200 employees at its Verily Life Sciences unit, as well as more than 40 at its robotics software company Intrinsic. is laying off. Both are part of Alphabet’s Other Bets segment, which racked up $5.9 billion in operating losses over the past four quarters while generating barely $1 billion in revenue.
These cuts are unlikely to be the last at the Google parent, which added more than 30,000 new employees in the first nine months of 2022, even as its own advertising business begins to slow.
Small tech companies are feeling the burn, too. Redfin CEO Glenn Kelman recently told the Journal that if he could go back in time 18 months, he would advise profit-seeking companies to “stop doing stupid things.”
He speaks from experience: The real-estate brokerage laid off 13% of its staff and shuttered its automated home-flipping business late last year after finding the operation too risky and costly to continue. Its so-called iBuying business then grew to over 40% of its total revenue in the second quarter. Channeling an old playbook for the new year, Mr. Kelman said in his company’s third-quarter report that Redfin “will have more cash and sell more assets” by focusing on its online audience and better brokerage services.
Competitor Zillow abandoned its own iBuying business a year earlier than Redfin for similar reasons. It has since focused on finding better ways to help its customers buy and sell other people’s homes. It’s now using artificial intelligence to do things like help apartment hunters look up available listings on New York City buildings and help sellers generate floor plans for online listings based on photos. Zillow is also incorporating its technology into an updated product to grow the businesses of traditional agents.
An area that has long worked to disrupt is now focusing on enhancing what is already there. In ride-share, Uber Technologies has now added taxi booking to its platform in several cities, essentially feeding business to a competitor (but without taking a small cut, of course). Uber users in the UK can also book trains, buses and rental cars through its app. With Uber Explore, users in multiple cities can also book restaurant reservations and experiences.
So last year to reinvent the wheel. The best tech investment of 2023 may be for companies to spend minting their coins.