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Published on: February 8 2023 by pipiads

Why Big Tech Is Facing Massive Layoffs: A Look at Amazon, Meta, and Netflix

In recent months, major tech companies like Amazon, Meta, and Netflix have announced significant layoffs. While the pandemic initially led to a surge in revenue and headcount growth for these companies, changing consumer habits and other challenges have resulted in a reversal of fortune. In this article, we explore the macro and micro reasons for these layoffs and what they mean for the tech industry.

Reasons for Layoffs:

- The pandemic led to a surge in online activity and revenue growth for tech companies

- Companies like Amazon had to hire more employees to meet demand for services like two-day shipping and cloud computing

- The talent wars resulted in companies offering high salaries to in-demand employees

- Changes in consumer habits, including a shift towards spending more on services and less on goods, led to revenue stagnation or decline for some tech companies

- Distinct challenges, such as Apple's privacy change and the rise of TikTok, also affected some companies

Impact of Layoffs:

- Layoffs have been happening across the tech industry and have recently surged

- While companies are not shrinking back to pre-pandemic levels, growth is slowing

- Timing of layoffs may be proactive, as companies prepare for a potential economic downturn

- Tens of thousands of people have been affected by these layoffs, marking an unprecedented reversal of fortune for the tech industry

The tech industry's experience of rapid growth during the pandemic has now led to a significant reversal of fortune. While layoffs have hit major companies like Amazon, Meta, and Netflix, the industry as a whole is still growing, albeit at a slower rate. These challenges highlight the need for companies to remain agile and adaptable in a rapidly changing landscape.

Why Tech Layoffs Don’t Reflect the Job Market | WSJ

The labor market is currently strong with a record low unemployment rate, despite recent headlines of major layoffs in the tech industry. However, there are various factors that contribute to this disconnect.

Factors causing the disconnect:

- The delay in reflecting recent layoffs in the data, as some companies announce cuts too late in the month for them to be captured in the Labor Department's reports.

- The shrinking workforce and historically low labor force participation rate, with millions leaving the workforce during the pandemic.

- The intense competition for workers due to the gap between the number of jobs available and the number of people looking for work.

Impact of tech layoffs:

- Tech layoffs are not big enough to register in the overall labor market, as the tech industry makes up only 3% of employment in the US.

- Small businesses are actually driving more of the job growth in the US than mega-cap companies.

- The tech industry is facing one of its biggest tests and downturns in the past decade.

While the labor market is currently strong, the tech industry and other sectors may face more layoffs in the future depending on how the job market reacts to Fed policy and inflation. The disconnect between recent headlines and the overall labor market can be attributed to various factors, including data quirks and a shrinking workforce.

Early-Stage Startups Face VC Investment Slowdown | Tech News Briefing Podcast | WSJ

- Venture capital investment in US early stage startups has seen a significant pullback in the second quarter of this year, according to data from Pitchbook.

- This pullback is due to the sell-off in technology stocks in the public market and concerns over inflation and a potential recession.

- This has led to venture capitalists becoming more conservative about investing in startups, causing nervousness across the spectrum.

Why is this pullback so drastic and what will it mean for the development of young startups?

- The broader market sell-off combined with concerns over inflation and a potential recession is making venture capitalists more conservative about investing in startups.

- Early startup funding has typically not been affected by stock market dips, but the pullback in large money managers that were pumping up valuations for startups last year means that early-stage companies can't raise follow-on rounds of funding.

- Early stage VCs are nervous about backing companies that might not be able to generate added funding in future financing rounds.

- Startups are turning to their existing investors for emergency funding rounds, putting them in a tough position as it will be hard for them to raise cash at higher prices than what they raised last year.

How are early stage startups handling this?

- Some startups are in a tough position because they raised a lot of money at high prices last year before they really developed products that were proven to have traction in the market and be popular with users.

- Startups are facing pressure to show that they can grow in a sustainable way and show a strong path to profitability.

- Investors are expecting companies to grow but grow in a profitable way and show that they can survive without burning through cash.

How does this environment compare to previous slowdowns?

- This pullback is severe and the toughest fundraising environment in the last 10 to 15 years, according to venture capitalists.

- Most venture capitalists are bracing for a tighter market over the next couple of years.

What will happen with all the money raised by VCs?

- It's an open question as to how that capital will be deployed in the future.

- One possibility is that funds could start doing deals that involve some debt elements or more investor protections for equity that they buy.

- The time of easy money seems to be over for startups.

- Venture capitalists are becoming more cautious about investing in startups, causing nervousness across the spectrum.

- Startups are facing pressure to show sustainable growth and profitability.

I Asked Wall Street Millionaires For Investing Advice

Investing during a financial crisis on Wall Street: Insights from professionals and investors

During one of the worst financial crashes in history, the goal is to talk to people and figure out the best way to invest during this crash. This article explores the insights from professionals and investors on Wall Street.

Interviews with Investors:

- How are you investing during this market crash right now?

- I'm buying more. I love it. Buy the dip, baby!

- I'm entirely invested in ETFs, mutual funds, Bitcoin, and some crypto. I'm long-term and invest in different real estates in different states.

- I think it's a good time to get in, but you gotta take a long view of it. Definitely gotta plan for not months but years, five years, ten years. And stick with it.

Interviews with Professionals:

- I think in the past two crises, COVID and financial, there was a lot the government could do to help with a rapid recovery. It's a different circumstance this time.

- I think we will be falling for the next few months but will be looking at great companies like Tesla, Amazon, Nvidia, all the companies that in five years from now will still be rocketing to all-time highs.

The Stock Exchange Experience:

- After trying to get into the stock exchange and being rejected over a hundred times, a Wall Street legend was finally able to help.

- I think there's no better time to learn about the market and invest and trade the market than during a crisis because the volatility makes for a great learning experience.

- If you're an investor looking to get into the market for the first time, you've got to learn how to do this. You can make money on an up market and a down market.

Investing during a financial crisis can be challenging, but it's essential to have a long-term perspective and invest in great companies. It's also a great time to learn about the market and invest in stock. Finally, be patient, and stick with it.

TikTok vs. Instagram Reels vs. YouTube Shorts: Who Will Win the Short-Video Race? | WSJ

Short-form Video Platforms: TikTok, Instagram Reels, and YouTube Shorts

Short-form video has become a battleground in social media with TikTok, Instagram Reels, and YouTube Shorts competing for users and advertising revenue. Let's compare these platforms and see which one is winning over users so far.

TikTok:

- Rapid growth in the US and India, with over 1 billion downloads on Apple iOS and Android by February 2019.

- Scrutiny over data privacy concerns, with President Donald Trump considering banning the app due to concerns over user data sharing with the Chinese government.

- Partnerships with e-commerce platforms like Shopify to enable direct advertising for businesses.

- Projected to make $12 billion in advertising revenue this year, up from $4 billion last year.

Instagram Reels:

- Meta, the parent company, has been reluctant to release data about monthly active users.

- Reported a more than 30% increase in engagement with Reels across Facebook and Instagram.

- Meta reallocating resources towards short-form video content creators to compete with TikTok.

YouTube Shorts:

- More than 1.5 billion people watch YouTube Shorts every month.

- Rolled out ads globally in May and plans to make ads shoppable.

- Allows creators to use the analytics tools on YouTube's main platform.

Comparison:

- SimilarWeb data shows users spend more time on TikTok than on Instagram Reels or YouTube Shorts.

- Inmar Intelligence survey shows 44% of people prefer TikTok, followed by 29% for YouTube Shorts and 20% for Instagram Reels.

- TikTok appears to be the farthest along in turning on advertising and making it a big part of their growth story for the future.

- YouTube Shorts has a unique advantage with analytics tools, but is missing special effects options like TikTok.

- Instagram Reels is harder to pinpoint in the race due to Meta's reluctance to release data.

While TikTok remains a concern for some users and lawmakers, the platform's algorithm still attracts the most users among short-form video platforms. However, YouTube Shorts is quickly catching up and has potential for growth as a big advertisement platform. Instagram Reels is also a contender, with Meta reallocating resources towards short-form video content creators. The race continues and billions of dollars will be poured into these platforms in the next few years.

Robinhood’s Stock Has Plunged and Its Traders Are Leaving | What Went Wrong | WSJ

Robinhood, the online brokerage that made free trading simple, revolutionized the trading industry. Its IPO was highly anticipated by investors, but it did not go as planned. The company faced regulatory scrutiny and a shift in market forces, leading to a 75% decline in its share price.

Factors that led to Robinhood's rise:

- Millions of new individual investors flocked to the markets during the pandemic

- Robinhood's payment for order flow system, which allows it to offer free trades while still making money

- A few meme stocks like GameStop and AMC were sent to new highs as individual investors flooded the market

- Robinhood's app was easy to use

Factors that led to Robinhood's fall:

- Regulatory scrutiny over payment for order flow system

- The markets tumbled due to inflation and the Fed raising rates

- Robinhood's rapid growth resulted in inefficiencies and duplicate roles

- Proposed rule changes by SEC on how brokerage firms handle customer stock trades

Impact on Robinhood:

- Robinhood's monthly active users fell by 34% from a year earlier

- Revenue dropped by 44%

- Reliance on riskier, speculative products like crypto and options trading

- Robinhood's users tend to be younger and have less money in their brokerage accounts compared to larger competitors like Charles Schwab or Fidelity

The path forward for Robinhood may depend on how it handles business in a market that isn't as hospitable as it used to be. The company may need to focus on longer-term projects and new product launches to stay competitive in the industry.

EU countries reach deal to cut gas consumption by 15% over coming months: WSJ

There is breaking news from Europe where the European Union has reached a deal to cut natural gas use by 15%. This comes as prices spike due to supply concerns as Putin is tightening the spigot once again. The article discusses the details of the deal, the reasons for the spike in prices, and the potential impact on the natural gas market.

Details of the Deal:

The EU's deal to cut natural gas use is voluntary for now, but it could become mandatory at some point. The goal is to ensure that countries have enough gas in storage to heat homes and hospitals during the winter. However, the deal is watered down and comes with many carve-outs and exemptions because many nations do not rely on Russian gas very much, if at all.

Impact on Different Countries:

It is unclear if countries like Spain or France will go along with the proposed cuts in gas use because cutting back on their economy could be a challenge. Additionally, Germany is in dire straits as it is getting almost no gas from Russia, and gas flows to Germany are going to be cut by half beginning tomorrow. This is all due to the gas problem that signals a cut in gas flows to Germany.

Reasons for Price Spike:

The spike in natural gas prices is due to the supply concerns caused by Putin tightening the spigot once again. The gas problem is also caused by the other two pipelines into Germany being shut off for months due to contractual fights with Ukraine and Poland.

Potential Impact on Natural Gas Market:

With Europe weaning off Russian gas, it could be big for names like Delorean, Sempra, Venture Global, etc. if they can provide more American natural gas to Europe. Natural gas prices are spiking in Europe, but people in the US should feel lucky that they are not facing the same situation.

The deal to cut natural gas use by the EU is a voluntary one, but it could become mandatory in the future. However, the carve-outs and exemptions make it unclear how effective the deal will be. With Germany getting almost no gas from Russia, the situation is dire, and gas prices are spiking in Europe. As Europe looks for alternatives, there could be an opportunity for American natural gas providers to fill the gap.

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