Last year, Mark Zuckerberg declared 2023 the “year of efficiency.” His company, Meta, soon laid off a third of its workers. Amazon, Google and Microsoft also cut tens of thousands of jobs.
Their worlds did not stop. Not only that, the companies were awarded. Their share prices soared. Some departments were more productive. And the companies — including X, formerly known as Twitter, which has cut nearly 80 percent of its staff by the end of 2022 — continued to operate.
Other managers took note. And one month into 2024, tech companies have entered a new phase of cost-cutting.
After widespread layoffs last year, the biggest companies — including Amazon, Google and Microsoft — have been making smaller, targeted job cuts in recent weeks, focusing on fewer projects and shifting resources to core products like artificial intelligence. Some tech startups — like Flexport, Bolt and Brex — have cut deeper to stave off potential extinction. The command from the top is the same: Do more with less.
“There are three main buckets of layoffs that we’re seeing,” said Nabeel Hyatt, a general partner at venture capital firm Spark Capital, which invests in technology companies. “Big, fat tech oligopolies looking for more growth and profits. There are mid-sized companies that over-hired during boom times. and there are the smaller startups that are just trying to gain traction to survive.”
The new layoffs are the latest correction in years of a booming global economy and near-zero interest rates that have allowed tech companies to dump cash to attract top talent in the pandemic. Many of the companies hired tens of thousands of new workers during this period to keep up with digital demand.
The past two years have forced tech executives to think differently. With lockdowns lifted and people venturing back into the world, tech usage has shrunk compared to pandemic highs. More than 1,000 tech companies cut more than 260,000 jobs in 2023, according to data compiled by Layoffs.fyi, which tracks job cuts across the tech industry.
Downsizing tech workers would have been anathema in Silicon Valley just a few years ago. The tech culture has long been one in which a manager’s status was determined by the number of people who reported to him or her and how effectively a company dealt with the recruitment efforts of competitors. Tech executives often viewed recruiting the next generation of computer scientists as a full-contact sport.
But now the stigma of layoffs has eased. More executives at tech companies have admitted to overhiring in the pandemic. Larger companies are making strategic cuts in areas where they plan to invest less and where certain types of jobs are no longer needed. Smaller companies that could easily raise capital just a few years ago are cutting back to stay afloat.
In the first 30 days of this year, there were 25,000 layoffs at about 100 tech companies, according to Layoffs.fyi. Microsoft, Google, Apple, Meta and Amazon are set to provide more insight into the state of the industry when they release quarterly financial statements this week.
Waves of job losses tend to happen suddenly and simultaneously, said Sheel Mohnot, a partner at venture capital firm Better Tomorrow Ventures. “When a company in or near your space does it, it gives you air cover to do it,” he said. “It becomes easier for a company to say, ‘It’s not us – it’s the industry.’
Meta, which owns Facebook and Instagram, exemplifies the arc of layoffs.
Last year, Mr. Zuckerberg cut out what he called “managers managing managers.” This year, the company has been more targeted with its finishes, specifically limiting the number of “technical program manager” roles on Instagram, according to two people familiar with the company’s plans. A technical program manager, or TPM, oversees different projects within a department and is responsible for keeping teams on schedule — exactly the kind of middle manager role that Mr. Zuckerberg intended to cut.
Business Insider previously reported on Meta’s move to shrink the role. Meta declined to comment.
Amazon also cut hundreds of jobs this month at its streaming arm, including Prime Video, MGM Studios and Twitch. Google has made thousands of cuts in various areas, including YouTube and the hardware division that makes the Pixel phone, Fitbit watches and the Nest thermostat. In an internal memo obtained by The New York Times, Google CEO Sundar Pichai hinted that there is no imminent end to rolling layoffs and that the company will remove more “layers to simplify execution and increase speed in some areas’ the business.
“Many of these changes have already been announced, although to be upfront, some teams will continue to make specific resource allocation decisions throughout the year where appropriate, and some roles may be affected,” wrote Mr. .Pichai.
Mid-sized startups with hundreds of employees are also shrinking. Some are facing the prospect of an initial public offering, which has caused them to take a hard look at their finances. Such companies “know they have to consolidate their balance sheets,” Mr. Mohnot said. “The market values earnings.”
Certain sectors have been hit particularly hard this month, notably the video game industry. Companies like Unity Software, Riot Games, Eidos-Montréal and Activision Blizzard and Microsoft’s Xbox have downsized in recent weeks.
Those cuts are partly due to the consolidation of game studios, said Joost van Dreunen, an analyst who tracks the industry. After several blockbuster game debuts last year, a relatively muted line-up of titles is expected this year, with fewer workers needed to launch those games, he said. Consumers and coders are also waiting for new consoles like Nintendo’s Switch 2, which leads to a more immediate drag on customer spending and the development of new titles.
Discord, the social networking and group chat app popular with gamers, this month cut 17% of its staff, or 170 jobs, after quintupling its headcount since 2020.
“We took on more projects and became less efficient in how we operated,” Jason Citron, Discord’s CEO, wrote in a memo to employees.
Few expect the wave of consolidation to slow anytime soon. Those in the tech industry now joke about ZIRP companies – short for Zero Interest Rate Phenomenon, describing startups that couldn’t raise capital if they didn’t have access to cheap and free-flowing venture dollars.
Many of these startups, unable to attract further venture capital as interest rates have risen, are cutting staff and focusing on fewer products.
“They may just have tried a lot of things to find a business model that works,” Mr. Mohnot said. “But now, it’s the time of reckoning.”
