Time of free lunches and massages is over at Big Tech

Start the day with a free breakfast from the caterer and a latte macchiato from the barista. Then a morning full of meetings with the Macbook of the company. At 12:00 pm lunch for over an hour – with a choice of fresh sushi, Thai curry or a poké bowl. During the afternoon, visit the office masseur (Google), drop off the colorful laundry (Meta) and then take the free taxi home (Uber).

For a long time it could not be done at the American offices of large tech companies. To seduce young talent, the tech giants tried to distinguish themselves from each other with perks – perks to lure staff. For example, Meta is the most flexible with working from home and the company provides the best lunches. Apple throws the best staff parties, plus big discounts on the latest devices. In addition to heated toilet seats, Netflix also has its own cinema with more than two hundred seats at its campus headquarters in Los Gatos, California.

Those times of plenty are over. In the run-up to the annual figures of the major tech companies – which were presented this week – almost all major tech companies have announced major cutbacks. There are also serious cuts in the workforce: Twitter was the first (3,750 redundancies), followed not much later by Meta (11,000), Alphabet (12,000), Microsoft (10,000), Amazon (18,000) and Spotify (600). Software company Salesforce also laid off 8,000.

Wave of layoffs at six major tech companies

Last week’s annual figures showed the reasons for the measures. Due to disappointing advertising revenues, falling consumer spending and production problems in China, 2022 became the worst financial year for the major tech companies since the financial crisis of 2008. Investors also lost confidence en masse: Meta, Alphabet, Amazon, Apple and Microsoft shrank by roughly 3,900 billion dollars in market capitalization.

The disappointing results of the major tech companies each have their own explanation. For example, Alphabet, the parent company of Google and YouTube, was hit hard by disappointing advertising revenues. CEO Sundar Pichai had to announce a profit drop for the fourth quarter in a row. YouTube ad revenue fell 8 percent from a year ago.

Apple, in turn, was plagued by supply problems. Due to the strict lockdowns, factories in China were unable to deliver, and customers sometimes had to wait months for their new iPhone 14. It saw overall iPhone sales fall by 8 percent; for the first time in four years, CEO Tim Cook had to report a drop in turnover for the last quarter.

And while Meta’s revenue decline (minus 4 percent, $32.2 billion) in the same period was less severe than analysts expected, founder Mark Zuckerberg set the tone. At the presentation of the quarterly and annual figures, Zuckerberg crowned the year 2023 as the ‘year of efficiency’. To reinforce that message, he announced that he wanted to cut costs for $ 5 billion. The word ‘efficiency’ came up more than thirty times in the call with analysts.

“What are we actually spending?”

What went wrong in recent years? The tech companies come from a time of exploding demand. Due to the lockdown periods, consumers had more packages delivered, they streamed more TV programs and they bought a Macbook for the home workplace, because the holiday was cancelled. To keep up with demand, companies like Apple, Amazon, Meta, Twitter and Spotify were only hiring new people. After all, the ‘personnel’ factor is, next to the running computer servers, the most important pillar of growth for tech companies.

Microsoft’s workforce grew more than 50 percent to 221,000 employees in the past three years—Amazon and Meta nearly doubled in size during that time (1.5 million and 87,000, respectively).

Last summer, Meta founder Mark Zuckerberg was the first to recognize the danger of this and to name it out loud. “Realistically,” Zuckerberg said during the weekly Meta staff interview, “maybe some of you shouldn’t be working here.”

Spotify CEO Daniel Ek also did this this week, when he confessed in a memo that he had invested “too ambitiously” – without the necessary revenue growth. In the same memo, he announced the layoff of 6 percent of Spotify employees.

According to ING analyst Jan Frederik Slijkerman, the eternal growth of tech companies, now that they have become top-heavy and less and less productive, seems to have come to an end. “You notice it in the presentations of annual figures. Other questions are being asked,” says Slijkerman. “Previously everything was focused on ‘how high is the growth rate’. Now suddenly the question arises: what are we actually spending?”

With the speed with which they were hired, the tech employees are now being fired again. According to Slijkerman, the momentum is also good for bad news conversations. “It is a good time for all these companies to clean up. With disappointing annual figures, you can sell a round of layoffs a lot better than if everything is going well economically.”

No more free lunches

Those who still retain a job in the tech sector after the restructuring round can expect a reduction in the working week. Upon taking office as Twitter CEO, Elon Musk abolished free lunches and required staff to come to the office five days a week again.

Read also:The man who advises Europe on Big Tech warns: ‘The world has never seen such a concentration of power’

Spotify and Google introduced a stricter declaration policy: staff are only allowed to travel for work in exceptional cases. The monthly ‘well-being day’, a day off for staff to relax, was abolished at Salesforce. Too expensive.

Having your dirty laundry done at the office at Meta is no longer possible. And the round of layoffs at Alphabet (Google’s parent company) hit, according to the American CNBC also a striking group of employees. The 27 masseurs who worked daily on the shoulders of the tech millennials at the Mountain View headquarters have to look for new work.

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