Meta, Amazon, Twitter…: The party’s over in American tech
Silicon Valley, long invulnerable to global turmoil, appears to have been affected by the cooling of the global economy for once. “We are facing an unstable macroeconomic environment, increased competition, ad targeting challenges and increasing costs for our long-term investments,” Mark Zuckerberg, CEO and founder of Meta (Facebook), said in October. In a particularly tense situation, social networks saw ad revenue decline in the latest quarter, dragging their Nasdaq values down with them. “In recent years, tech companies have made and spent money like the rock stars of the 1980s,” explains Wedbush’s Daniel Ives. They expected strong growth in a low-interest-rate environment where money was cheap.
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But the war in Ukraine and skyrocketing inflation since early 2022 mean it’s game over. And after being recruited with a vengeance, his giants now defend a vigilance that disrupts their usual escape. But some purges are purely opportunistic and unrelated to this intense context. So Amazon is resigned to watching the move when its $127 billion in third-quarter revenue has never been higher. On November 16, the US e-commerce giant announced it was laying off 10,000 employees, or about 3% of its workforce. Those departures will primarily be attributed to its connected speaker, Alexa, and the teams working in several offices in the Boston, Seattle, and San Francisco areas. “Some teams are making adjustments that mean certain positions are no longer needed,” said spokeswoman Kelly Nantel.
Hyperactive activist funds
In my mind, job cuts may continue under the influence of activist funds, a new category of actor that uses context to destabilize. On November 15, London-based fund TCI Fund Management wrote to the Alphabet group and its subsidiary Google to encourage them to cut their workforce. “The cost per employee is too high,” the letter to Chief Executive Sundar Pichai said. Investors are waking up and attacking Silicon Valley. According to Bloomberg Law research, activist fund campaigns have never been more numerous than in the second quarter of this year: 28 transactions were launched in the first quarter of 2021, compared to 8 transactions.
Downsizing, cutting costs: beyond activists, this little muse is becoming more widespread among financiers. In a message published on October 24, one of Meta’s minority investors, Brad Gerstner, openly urges the group to tighten its belt. “It’s time to go on a diet,” says the head of Altimeter Capital, an American fund. Financier David Sachs, a friend of Elon Musk and former Paypal colleague, welcomed Twitter’s restructuring, as did others. “American technology is built on a model of rapid hyper-growth, with large investments focused on a single product. This fragile model of growth at a loss is increasingly challenged, says Diego Ferri, an analyst at EY Faber-Roman. may encourage the emergence of a model.”
The talent war is over
The paradigm shift is shaking up the traditions of Silicon Valley, accustomed to a hiring frenzy. Buoyed by good financial results, Amazon is doubling its workforce from 613,000 in 2018 to 1.3 million in 2022. The same goes for Meta, which has massively recruited teams to implement Mark Zuckerberg’s delirium in the metaverse. .
These waves of layoffs are the first result of silencing the “war for talent.” Strong competition among employers has led to rising wages and very high turnover. Hiring a developer would be a headache for small startups if large groups had the ability to outbid. Cash holders see this period in a favorable light. With the current crisis, “it’s getting easier to hire,” Bardeen founder Artem Harutyunyan rejoices. “Creators received seven offers per month, only two,” he said.
Limited French influence
Despite the downturn in the US labor market, tech workers are still faring better than others. Tech workers in San Francisco, who earn an average salary of $93,000 a year, are relatively unaffected by inflation. And those who lose their jobs do not remain unemployed for a long time. The sector helped create 159,000 IT developer jobs in the United States last year, CBRE notes in its latest Scoring Tech Talent report. What basically absorbs the current shock.
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The fate of Qafam workers abroad remains more uncertain. So far, French workers have been spared this wave of layoffs. “The impact in France always takes longer than in other countries,” says the manager of the American group. Among the 1,300 departures announced by Snapchat are 70 employees from French company Zenly, which it bought in 2017 for $300 million. When Silicon Valley coughs, tech’s French unicorns turn their backs. For the moment. Since the beginning of 2022, more than 128,000 US tech workers have lost their jobs.