blog.pragmaticengineer.com
The article discusses the recent layoffs in the Big Tech sector and what it suggests for the industry in 2023. Mentioned companies include Microsoft, Google, Amazon, and Apple, highlighting the shift in hiring practices and the potential industry slowdown. The author provides insights on how these companies’ diversified business models and nimbleness in responding to market changes play a role in their strategies. The significance of not being heavily reliant on ad revenue is also discussed, comparing the business models of Microsoft and Amazon to Google and Meta.
Main Points
Layoffs by major tech companies signal industry slowdown
Microsoft’s announcement of eliminating 10,000 positions and Google announcing layoffs impacting around 12,000 positions signal a potential slowdown in the tech industry for 2023.
Microsoft’s diversified business model
Microsoft’s diverse revenue streams, including Cloud, Office, Windows, Gaming, LinkedIn, and Ads, make it a representative model for the B2B tech industry, excluding advertising.
Comparable diversification of Amazon and Apple
Amazon and Apple have comparable diversification in their revenue sources to Microsoft, with segments accounting for more than 5% of revenue.
Microsoft and Amazon’s minimal reliance on ad revenue
Unlike Google and Meta, Microsoft and Amazon are not heavily dependent on ad revenue, with significant portions of their income coming from other sources.
Big Tech’s nimble response to business slowdowns
Big Tech companies are responding quickly to anticipated business slowdowns by freezing hiring, showing their nimbleness and data-driven decision-making processes.
Expected correction in Big Tech hiring frenzy
The hiring frenzy of 2021-22 is expected to correct, with a reduction in hiring by Big Tech in 2023, as evidenced by the significant changes in the hiring market from Jan–Jul 2022.
Insights
Big Tech's increased layoff activities signal a potential slowdown in the tech industry for 2023.
Microsoft announced eliminating 10,000 positions despite earning record profits in 2022. Google announced layoffs impacting ~12,000 positions.
Microsoft's diversified business model is representative of the B2B tech industry, excluding advertising.
Microsoft’s major revenue sources include Cloud, Office, Windows, Gaming, LinkedIn, and Ads, with Cloud making up 31%.
Amazon and Apple offer comparable diversification in revenue sources to Microsoft.
Amazon has five segments and Apple has five segments as well, each accounting for more than 5% of their revenue.
Microsoft and Amazon's business models are not heavily dependent on ad revenue, unlike Google and Meta.
Google and Meta rely significantly on ads, with Google making 81% and Meta 97% of their revenue from ads. This reliance is a factor in Meta’s historic growth challenge.
Big Tech companies are more nimble and data-driven in their operations, allowing them to predict and respond to business slowdowns more quickly than traditional companies.
This has been evidenced by freeze hiring as an immediate response to anticipated business slowdowns, contrasting with traditional companies that may have a longer-term outlook.
A correction in the hiring frenzy of 2021-22 is expected, indicating a reduction in hiring by Big Tech in 2023.
The hiring market has changed significantly from Jan–Jul 2022, demonstrating a grim situation compared to the previous year.
Links
- Gergely
- The Scoop issue
- in next week's issue
- in this week’s The Scoop
- Visual Capitalist
- the company’s historic growth challenge
- The Scoop #19: The start of a tech winter?
- Read the full issue here