Meta, formerly Facebook, is a tech company with apps such as Instagram and WhatsApp under its wings. Now they are firing 11 000 people, a layoff that reduces the size of its team by 13%. And Meta is not the only tech company facing difficulties. Klarna, Storytel, Twitter and Kry are examples of other big names in the industry that are having trouble with meeting rising demands on profitability.
On November 9th Mark Zuckerberg, CEO of Meta, shared a letter to his employees in which he apologized for the decisions recently made which led to the consequences that the company is now facing. He wrote that he takes responsibility for the decisions made, and apologizes to his employees affected by the cutdowns. In the letter, Zuckerberg explains how Meta was able to go from such a successful company to having lost 70 percent of its market value during the year. He describes that “At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected. Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected.” Zuckerberg further says that in the new environment that prevails, Meta needs to become more capital efficient. The teams affected the most are said to be recruiting and business teams, due to less recruiting and changing business plans.
And Meta is not the only company having to cut down its costs and restructure. Tech companies have in total lost hundreds of billions in market value. Even Swedish companies, such as Kry and Klarna, have previously announced cutbacks. Earlier this year, Klarna had to let go of 10% of their staff.
Some people are asking whether a new IT crash is rising. “IT-bubblan” was a period during the later part of the 1990s and a few years into the 2000s, when relatively newly started companies with a focus on the Internet and/or mobile telephony, grew large in a short time, were overvalued and then forced into bankruptcy or to sales. Today rising inflation and interest rates, closing wallets and higher demands on profitability are a fact which is why some people are starting to draw comparisons to the turn of the millennium and talking about an IT crash 2.0. However, in the article “Flera tech-bolag varslar” (SVT, 2022) SVT:s tech correspondent Alexander Norén points out that big companies such as Klarna and Netflix won’t crash overnight. Stocks and valuations may fall, but today’s affected companies overall have a more stable ground than the companies during the last IT bubble.
In summary, it can be said that the big tech companies will, at least for a while, continue to be a part of our everyday life despite the challenges they face. Meta is one of a number of tech companies being pushed into a new and tougher reality. This type of company has emerged under favorable conditions in a time characterized by optimism and a large availability of capital. But years of success do not necessarily guarantee the future – and the tech industry remains an exciting and interesting, although once again uncertain sector.
