Area of turbulence ahead
The economic slowdown triggered by the Covid crisis and the consequences of the war in Ukraine, including energy shocks, higher inflation, higher interest rates, reduced investments due to uncertainty, … is now affecting the digital services world.
Twitter slashes 50% of its staff
Twitter, following its acquisition by Elon Musk is crudely reducing its workforce by half. Some Twitter employees have simply discovered their layoff during a meeting when they were disconnected from the corporate servers. Already, a few days after the acquisition of the company by Elon Musk, 50% of the 7,500 workforce has been fired. Among those fired, the Human Rights team has been dismantled: the team worked to protect users facing human rights violations around the globe, including activists, journalists and people affected by conflicts like the war in Ukraine. People in charge of the accessibility experience team, which improved the product for people with disabilities, the internal communications team, the Meta team, which was exploring ethical AI and algorithmic transparency, … were dismissed.
Massive layoffs expected at Meta
Meta, the company behind Facebook, Instagram, WhatsApp and others, at first announced in June that it would reduce its 2022 target for hiring engineers by 30%, from 10,000 to around 6,000 to 7,000. Now, Meta Platforms CFO David Wehner in its Q3/2022 earnings statement, flagged forthcoming “efficiency” measures, including in the company's headcount, which many analysts translate as an announcement of massive job cuts. According to The Wall Street Journal, it could impact many of the company’s 87,000 employees. Meta market value has fallen 25%, right after it announced its Q3/2022 results; the company is especially under criticism for its extensive investment in the metaverse.
Edit on November 10, 2022: Meta annouced it plans to cut more than 11,000 jobs, or 13% of its workforce, as it seeks to scale back expenses and transform its business in a more competitive digital advertising market.
The firing wave goes all the way across the high-tech sector
Amazon has officially halted “new incremental” hiring across its workforce. Apple has “paused almost all hiring”, probably until end of 2023. BT is expected to cut more than 13,000 job positions as part of its cost reduction strategy. Coinbase, the largest US based crypto exchange, said it would be reducing its workforce by 18%, laying off approximately 1,100 employees. Intel is planning "a major reduction in headcount," which may lead to 20% cuts in the sales and marketing departments. Last month, Microsoft cut about 1,000 jobs.
Stripe and Fiserv become the signal for layoffs in the payment industry
Directly in our industry, Stripe announced it would also conduct layoffs, according to CEO Patrick Collison, who announced plans to slash 14% of the San Francisco company’s workforce (1,120 of its 8,000 employees). The internal note was even more specific: "We’re reducing the size of our team by around 14% and saying goodbye to many talented Stripes in the process. If you are among those impacted, you will receive a notification email within the next 15 minutes."
Fiserv, a major payment processor, has engaged in a plan to reduce its staff, but no figures are readily available. “We (…) have recently made adjustments that impact a small percentage of our global workforce,” said Fiserv Spokesperson Ann Cave, as reported in Payments Dive. At the end of 2021, Fiserv reported 44,00 employees.
Crisis may also mean transformation
Elon Musk, who was originally a founder of X.com and the CEO of Confinity, which, once merged, became Paypal, has vowed to make Twitter a significant payments player. According to his presentation to investors, Musk wants this payments business to bring in US$ 15 million (EUR 15 million) next year, and enjoy exponential growth after that, leading to US$ 1.3 billion (EUR 1.3 billion) in revenue by 2028. Analysts are elusive about what this payments business could be, but some anticipate the idea might be to turn Twitter into a super app, modeled on China's WeChat, where payments constitute most of the revenue. “There’s no WeChat equivalent outside of China. You basically live on WeChat in China. If we can recreate that with Twitter, we’ll be a great success,” Elon Musk said.
However, many doubt such a transformation can be achieved. “Twitter is Twitter, and Twitter is going to stay Twitter, and never be anything else,” said Jed Rice, CEO of digital bill payment company Aliaswire and a former PayPal senior director, quoted by Payments Dive. Rice said he gives Musk 100-to-1 odds of successfully creating a Twitter payments business, even with three years to prove him wrong. The big barrier is that social media users who become accustomed to using a social media site for one particular purpose aren’t apt to adopt new payment features, Rice said. What’s more, companies that have created successful payments tools took many years to get them right and still have difficulty adding to them, says Payments Dive.