Analysts interviewed by PROPMARK point out the causes for the global wave of layoffs and what to expect later
Finding new digital monetization parameters and keeping innovation high are among the main challenges for big techs. After the global wave of layoffs that began at the end of the year and continued this month, analysts point to possible causes for the crisis of the technology giants and outline scenarios about the future of platforms, in addition to talking about the impacts on digital marketing.
For Srgio Santos, consultant in business transformations and head of the Master in Business Transformation at ESPM, the reasons for layoffs are multifactorial. The main one, even commented by Mark Zuckerberg (founder of Meta), is that many of the big techs were excited by the results during the pandemic, when everyone was at home and online went through the roof, and they organized themselves for a greater demand. Evidently, today there are more people using applications, social networks, etc., but the big techs were too optimistic and structured themselves for a level of demand that is not happening, he observes.
Insider Intelligence analyst Debra Aho Williamson points out that competition with platforms like TikTok and disrepute with the metaverse were some issues that also contributed to Meta having the worst year in terms of financial results, with a 2% drop in revenue.
2022 was disastrous for Meta: layoffs, intense competition with platforms like TikTok and criticism about ambitions with the metaverse. Getting back into positive territory in 2023 will require discipline and sustainable growth for Facebook and Instagram. Stabilizing these apps will likely require Meta to downplay its ambitions for the metaverse, Williamson reckons.
Another looming source of competition is retail media networks, where advertisers can reach shoppers directly on retail websites, apps and other platforms. These companies, which include Amazon and Walmart, represent the third wave of digital advertising and are competing for commercial advertising with companies like Google and Meta.
Insider Intelligence forecasts that Meta’s worldwide ad revenue will grow 8.2% this year to $121.9 billion, giving it a 19.4% share of the global digital ad market. Google is number 1 with 28.8%.
Macroeconomic factors, such as recession, inflation and low market growth, also affect the mood of investors, who become more conservative and reduce investments in innovation projects.
The big techs were basically born betting on market growth, revenue growth, and this leveraged their share and company value. In this current context, for the first time they are prioritizing productivity and that is why they end up having a series of layoffs, recalls Srgio Santos.
For the consultant, the wave of global layoffs will certainly affect companies in Brazil. Another point is that we are in a moment of change of government and it will depend a lot on what will happen in the economy during the year in terms of market growth.
It is still difficult to predict, to have a definition, as we are in the first month of government and so many things have happened, such as the attack on institutions in Brasilia, at the beginning of the year, which strengthened a scenario of uncertainty. This has a direct impact on investments, especially those focused on advertising.
In his view, due to this scarcity of investment and an aversion to risk, in the short and medium term, the big techs will have projects with characteristics much more in terms of incremental innovation than disruptive. In fact, a concern of big techs has been the rate of innovation that has been falling in recent years. This is an important trend that will shape the big tech market, analyzes Santos.
real challenge
On the side of the advertising agencies, the diagnosis is that the restructuring and adjustments in the routes of the big techs are characteristic of a dynamic market, which is not immune to a global crisis.
We are attentive to these movements and we see no reason for distrust as long as these companies continue to deliver results for our clients. As communication partners of major brands, we make our media investment recommendations based on proprietary econometric models, which consider factors external to the business itself, and based on the needs of each one of them, explains Andreia Abud, VP of media at WMcCann.
The publicist points out that big techs are important media partners for the brands they serve and, every year, investment in digital grows more, as shown by the latest Agency Scope survey. On the other hand, monetization remains a real challenge for big techs.
In this context, we understand that there will be more and more space for dialogue and articulation with the platforms to discuss the demands of our market and those of our customers in a more assertive way, points out Andreia.
Read the full interview in this week’s issue.
