Digital media and adtech companies will likely use Meta’s sacking of 11,000 as a trigger for their own business slimming.
Meta, Facebook’s parent, has admitted growing too fast and hiring too many during the heady lockdown days of the pandemic when consumers were stuck at home, living and buying online.
And when advertising growth started to slow, Meta was caught holding lumpy overheads, a commitment to throw capital at building the metaverse and increasing competition from younger players such as TikTok.
The move to a “leaner and more efficient” company adds to the growing avalanche of cuts across digital and social media companies seeing a dip in business following a pandemic surge.
Digital advertising spend is slowing in the face of an economic downturn, marked by racing inflation, war in Europe and supply chain issues.
Meta also faces advertising targeting issues from Apple’s decision giving its users the option of tracking.
Forrester VP, principal analyst J.P. Gownder: “Some tech companies have already laid off workers, like Twitter, Intel, Salesforce, Microsoft, Zendesk, among others.
“It's a good bet that tech companies that haven't yet laid off employees are carefully considering whether or not to do so.
“It wouldn't be surprising to see more layoffs in the next few months, particularly among firms whose fiscal year ends on December 31.
“They want to set up finances for success in 2023. Widespread economic concerns -- some prompted by rising interest rates, others by the war in Ukraine, high fuel costs, and supply chain issues -- are prompting these moves in anticipation of lower demand.”
Even the big players, Google and Microsoft, are feeling a downturn.
CommSec analysts: “US megacap and growth-orientated technology companies have had a particularly difficult earnings season after heavyweights, such as Alphabet, Microsoft, Meta Platforms and Amazon all issued downbeat sales outlooks as they contended with rising concerns over a potential economic slowdown, rapid inflation and soaring borrowing costs.
Microsoft posted its smallest rise in sales in five years and Google parent Alphabet grew just 6% last quarter, its slowest since September 2013 (barring a small quarterly decline in 2020), according to Refinitiv.
Amazon issued a disappointing fourth quarter forecast and missed on revenue estimates.
And over at Meta, the social media platform is having something of an identity crisis
Forrester research director Mike Proulx: “The company has one foot in a risky long-term metaverse bet and another foot failing to compete with TikTok.
“Neither bodes well for Meta in the short-term and more severe cost-cutting measures were inevitable as the company attempts to regroup heading into a bleak 2023.
“Expect more headwinds for Meta as Gen Z continues to exit Facebook and favour TikTok over Reels, and CMOs consolidate their slashed media budgets towards safe and sure bets.”
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