13 ms·

This will be the trend among most tech companies. Very clear the market has now negatively reacted to high operating expenses that largely stem from excessive

by tempsy 4y ago

This will be the trend among most tech companies. Very clear the market has now negatively reacted to high operating expenses that largely stem from excessive headcount. Most companies will likely not reduce pay if they can help it to maintain competitiveness, but if you’re a bottom or middle performer or on a non-revenue generating team suddenly your job security even at “safe” companies like Google is at risk.

treis 4y ago
>Very clear the market has now negatively reacted to high operating expenses that largely stem from excessive headcount. Reducing staff by ~10% or whatever after doubling it in the last couple years isn't exactly a strong signal of anything.
- tempsy 4y ago
  I’m speaking more to the stock price than Meta’s actions. Shares trading lower than they were 5 years ago. And many of the unprofitable growth companies down 80-90% in less than a year. Point is tech companies are highly sensitive to interest rates and now have to course correct in a world where the market is punishing excessive spending.
  - dafty4 4y ago
    The stock price dive at Meta is pretty clearly due to the $10B hit from Apple’s Do Not Track Feature. Meta should make a free Android phone that allows tracking.
    - tempsy 4y ago
      Nasdaq is down 30%. Clearly macro factors like rates and inflation and recessionary pressures are putting pressure on rate sensitive companies generally speaking. You can’t just say it’s ad tracking when dozens of mid and large cap tech stocks are down 30-80% ytd
      - paganel 4y ago
        > Clearly macro factors like rates and inflation To quote from the latest Economist [1]: > This logic has broader implications than most investors realise. Now imagine you will receive $100 a year, for ever. By the reasoning above, this has a finite present value, since compound interest means payments in the distant future are almost worthless. With interest rates at 1%, the payment stream is worth $10,000; at 5%, it is worth $2,000. But as well as reducing the value, the higher rate also changes the distribution of that value. With rates at 1%, less than a tenth of the stream’s value comes from payments made in the first ten years. At 5%, around two-fifths does. and > In other words, higher interest rates dramatically alter firms’ incentives when choosing which timeline to invest over. Sacrificing short-term profits for longer-term gains is one thing when you are trying to persuade investors that your superapp, machine-learning algorithm or gene-sequencing widget has the potential to up-end an industry. It is another when even the best-case scenario has its value so heavily skewed towards what can be done in the next decade. Startup founders are used to shaking off derision over implausible, Utopian dreams. It is more of a kick in the teeth to realise that even Utopia is not worth much unless it can be achieved in short order. Sorry for the long quotes, it was the best I could do, I highly recommend that article in its entirety. [1] https://archive.ph/9GbfH https://archive.ph/9GbfH
        subsubzero 4y ago
        Thanks for this, its confusing for many as to why growth companies(low/no-profit) are getting hit so hard due to rising interest rates and these quotes and the article linked explain the reasoning very well.
        robocat 4y ago
        The NPV values didn’t look weird enough, but I got the same results from: https://www.calculatorsoup.com/calculators/financial/net-present-value-calculator.php https://www.calculatorsoup.com/calculators/financial/net-pre... — Values used: Interest Rate = %5, Compounding = 1 times per Period, Line 0 = $0, Line 1 = 5000 periods of $100. However, I think the economist column/article misses some important points: 1: There is a stereotype that corporations only look at the next quarter’s earnings. The article argues the opposite, that corporations are long term focused. The article needs to address that point. 2: Stocks and dividends should be inflation proof (with some assumptions, such as revenues increase with inflation). 3. The article doesn’t seem to mention bonds, even though it talks about constant $ returns. What? The most interesting part of the article for me was “The original marshmallow test, it turned out, had a flaw. Exclude some children from better-off families (which seems to make them both more willing to delay gratification and more likely to succeed in later life) and much of its predictive power suddenly disappears.” [Slight edits]
    - stocknoob 4y ago
      Do not track is an easy scapegoat, but I think the rise of TikTok is a larger factor. Meta lost users.
      - badwolf 4y ago
        I think this, along with a slew of other factors as well. Meta pivoting to burn money on a VR universe that nobody actually seems to want. Meta burning FB users by constantly altering their FB news feed, making it less and less a place for friends, and more a place to see endless reposted memes and ads for drop-ship products and stolen IP tshirts. Meta burning Instagram users by trying to force everyone's favorite photo-sharing app to be a shittier version of TikTok, as well as the above constant feed refactors...
      - disgruntledphd2 4y ago
        It's definitely the ATT changes, literally cratered all their direct response ads on iOS (i.e. rich people). TikTok is definitely a concern but turning off the money pump is a much, much bigger one.
      - retinaros 4y ago
        if this is tiktok they shouldnt worry for long i bet it will be banned before end of year
    - Infinitesimus 4y ago
      Oh but they did! Meta leadership has always anticipated this risk. The problem is that they have not been able to fully mitigate it. Facebook Phone (rebranded HTC) was released in 2013 https://en.wikipedia.org/wiki/HTC_First https://en.wikipedia.org/wiki/HTC_First but had poor sales. The metaverse is their next play to build a world where they are a bit more shielded from Apple/Google/Microsoft's hardware influence. Pivoting a large business is really hard.
      - mistrial9 4y ago
        I appreciate when people inside FB/Meta speak directly like this (as someone who loathes the Metaverse project)
        Infinitesimus 4y ago
        To clarify, I'm not affiliated with Meta. Just an internet nerd who likes following how organizations think and evolve
  - nappy-doo 4y ago
    Not really. Meta raised 10B (really their first debt ever) in April 2022, and GOOG has like 14B in debt. Google could pay that with less than a quarter's worth of earnings, and I think Meta's not far behind. IMO, the market is overreacting. Both companies look pretty cheap to me.
    - nluken 4y ago
      Markets are forward looking. FB's growth numbers don't look great, and if you don't buy into their bet on the Metaverse you might be less inclined to see a bright future for that company.
      - edmundsauto 4y ago
        Markets are forward looking, but people making the decisions are plagued by recency bias and fighting the last battle. No comment on the relative contribution of different incentives, but being "forward looking" doesn't mean "correct" and it can also include an overreaction based on recent data points.
    - acchow 4y ago
      If FB revenue stops growing, markets are going to keep punishing it. A PER of 11 won’t feel cheap with 0% growth
- VirusNewbie 4y ago
  The article says its 50 people at Google who are affected. And they have a chance to apply to other teams.
lumost 4y ago
In fairness, at a mega-corp there is very little data on whether an employee would be successful in a different group. Some groups have bad charters/bad team dynamics/bad skills match. An internal transfer has a huge amount of visibility into these aspects when they transfer, much more than an external hire would. Its a pretty good deal to suggest to employees that they find a new team rather than performing a layoff, I wouldn't be surprised if the profitable/successful teams can still add head count for people they like.
- tempsy 4y ago
  >Among some Meta employees, the process of reapplying for jobs within a limited window internally is known as a sort of human-resources purgatory they call the “30 Day List.” I mean from the article it’s pretty clear giving employees a month to find a new job internally is more like Hunger Games than some guarantee you will be successful. It sounds like a way for companies to not have to admit they are doing layoffs.
  - ras3022 4y ago
    Especially as it's not obvious how much headcount the other teams have. i.e. giving not-cut (the profitable/successful) teams a 1% headcount increase and cutting 10% of total staff is roughly equivalent to a 9% layoff.
- zerkten 4y ago
  Other teams may be able to add headcount, but my experience with big companies is that the organization wants to manage the number of tenured people, and people who are now sitting in non-terminal levels. Given how many people externally are competing for spots there is less of an incentive to prioritize internal people. I don't necessarily agree with this, but you have to be aware of all the stakeholders perspectives.
  - disgruntledphd2 4y ago
    Based on my experience at FB, they way prefer to get internal transfers as they require less ramping up time. It's often not worth changing orgs though, as your equity doesn't get reset so you may end up with much less than a new hire
jejeyyy77 4y ago
Personally, being laid off sounds pretty good right about now. Paid vacation before going back into a hot job market for a full remote job.
- tempsy 4y ago
  Depends what your salary expectations are, I guess. Finding a role with the same compensation as a Meta/Google is more difficult than finding one of many dozens of companies that will pay you low six figures and some questionable equity package.
  - jejeyyy77 4y ago
    True, prob won't be comparable to a really good equity package from Meta/Google. But seeing a lot of $200K+ cash comp for full remote companies.
    - moonshinefe 4y ago
      Any recommendations for sites/services to look at job openings that aren't obvious? Or are you seeing these through your network or something?
  - assttoasstmgr 4y ago
    - pb7 4y ago
      So you agree it's a downgrade in quality of life? Not sure what the point of this comment is other than being rude to people earning more than you.
      - rjh29 4y ago
        Adjusting to drinking your own coffee rather than ordering Starbucks via uber 3 times a day is an easier adjustment from going to affording food to not affording it all. Didn't think it needed to be spelled out but there you go.
madeofpalk 4y ago
> or on a non-revenue generating team Apart from Search and AdSense, What team at Google isn't a non-revenue generating team?
- sudosysgen 4y ago
  GCP, GSuite, Google Play Services/Android, Pixel, YouTube, Maps, off the top of my head.
  - danellis 4y ago
    Presumably also Nest and Fi.
- dasil003 4y ago
  Off the top of my head: Workspace, GCP, Android Maybe they are not strictly black in the P&L sense, but they are strategic revenue-generating business priorities.
xracy 4y ago
> Very clear the market has now negatively reacted to high operating expenses that largely stem from excessive headcount. Are you saying that because stock prices are dropping that the market has reacted to excessive headcount? Cause I think a better explanation for that, is that in the past 2 years we've had inflation, and that was reflected in the profits of the companies for 2020-21, and now that the fed is lowering interest rates, we're expecting that inflation to stop, and so that's affecting the stock market. This seems to have very little to do with these companies business models, and everything to do with them failing to recognize that their profit changes are readily explained by inflation/deflation. Which seems to be a better explanation of what the markets are reacting to.
- water-your-self 4y ago
  Yeah but overfitting is still a better strategy, for a number of reasons. Match your competition. Equity grants on the uphill, reduce them on the downhill. What if the market goes up and stays up? Fed does or doesnt hike rates? Do you really want to play hiring catch up when everyone else has a 2 year head start? Also, your board of directors doesn't give a shit about the reason, they only care what is being done in response.
  - xracy 4y ago
    I disagree that overfitting is a better strategy. Because if you recognize why things are happening are unrelated to profit/work at the moment you can accept that you're going to have losses regardless, and try and plan past that in the long term. Which should lead to better profits when you're not entirely dependent on the federal reserve. In particular, hiring benefits don't take effect immediately, it's going to be a while before productivity is realized from the new hires. So it is very short-sighted to freeze that before an economic downturn, when you want new forms of revenue and innovation to allow you to outlast the competition and grow a business into something that will become the "next big thing". Also, as a commentary, it makes it more clear that your stock is actually stable, because the only thing that's really changed is inflation and catch up to reality from the fed turning off the money hose.

by tempsy 4y ago

treis 4y ago

>Very clear the market has now negatively reacted to high operating expenses that largely stem from excessive headcount. Reducing staff by ~10% or whatever after doubling it in the last couple years isn't exactly a strong signal of anything.

tempsy 4y ago
I’m speaking more to the stock price than Meta’s actions. Shares trading lower than they were 5 years ago. And many of the unprofitable growth companies down 80-90% in less than a year. Point is tech companies are highly sensitive to interest rates and now have to course correct in a world where the market is punishing excessive spending.
- dafty4 4y ago
  The stock price dive at Meta is pretty clearly due to the $10B hit from Apple’s Do Not Track Feature. Meta should make a free Android phone that allows tracking.
  - tempsy 4y ago
    Nasdaq is down 30%. Clearly macro factors like rates and inflation and recessionary pressures are putting pressure on rate sensitive companies generally speaking. You can’t just say it’s ad tracking when dozens of mid and large cap tech stocks are down 30-80% ytd
    - paganel 4y ago
      > Clearly macro factors like rates and inflation To quote from the latest Economist [1]: > This logic has broader implications than most investors realise. Now imagine you will receive $100 a year, for ever. By the reasoning above, this has a finite present value, since compound interest means payments in the distant future are almost worthless. With interest rates at 1%, the payment stream is worth $10,000; at 5%, it is worth $2,000. But as well as reducing the value, the higher rate also changes the distribution of that value. With rates at 1%, less than a tenth of the stream’s value comes from payments made in the first ten years. At 5%, around two-fifths does. and > In other words, higher interest rates dramatically alter firms’ incentives when choosing which timeline to invest over. Sacrificing short-term profits for longer-term gains is one thing when you are trying to persuade investors that your superapp, machine-learning algorithm or gene-sequencing widget has the potential to up-end an industry. It is another when even the best-case scenario has its value so heavily skewed towards what can be done in the next decade. Startup founders are used to shaking off derision over implausible, Utopian dreams. It is more of a kick in the teeth to realise that even Utopia is not worth much unless it can be achieved in short order. Sorry for the long quotes, it was the best I could do, I highly recommend that article in its entirety. [1] https://archive.ph/9GbfH https://archive.ph/9GbfH
      - subsubzero 4y ago
        Thanks for this, its confusing for many as to why growth companies(low/no-profit) are getting hit so hard due to rising interest rates and these quotes and the article linked explain the reasoning very well.
      - robocat 4y ago
        The NPV values didn’t look weird enough, but I got the same results from: https://www.calculatorsoup.com/calculators/financial/net-present-value-calculator.php https://www.calculatorsoup.com/calculators/financial/net-pre... — Values used: Interest Rate = %5, Compounding = 1 times per Period, Line 0 = $0, Line 1 = 5000 periods of $100. However, I think the economist column/article misses some important points: 1: There is a stereotype that corporations only look at the next quarter’s earnings. The article argues the opposite, that corporations are long term focused. The article needs to address that point. 2: Stocks and dividends should be inflation proof (with some assumptions, such as revenues increase with inflation). 3. The article doesn’t seem to mention bonds, even though it talks about constant $ returns. What? The most interesting part of the article for me was “The original marshmallow test, it turned out, had a flaw. Exclude some children from better-off families (which seems to make them both more willing to delay gratification and more likely to succeed in later life) and much of its predictive power suddenly disappears.” [Slight edits]
  - stocknoob 4y ago
    Do not track is an easy scapegoat, but I think the rise of TikTok is a larger factor. Meta lost users.
    - badwolf 4y ago
      I think this, along with a slew of other factors as well. Meta pivoting to burn money on a VR universe that nobody actually seems to want. Meta burning FB users by constantly altering their FB news feed, making it less and less a place for friends, and more a place to see endless reposted memes and ads for drop-ship products and stolen IP tshirts. Meta burning Instagram users by trying to force everyone's favorite photo-sharing app to be a shittier version of TikTok, as well as the above constant feed refactors...
    - disgruntledphd2 4y ago
      It's definitely the ATT changes, literally cratered all their direct response ads on iOS (i.e. rich people). TikTok is definitely a concern but turning off the money pump is a much, much bigger one.
    - retinaros 4y ago
      if this is tiktok they shouldnt worry for long i bet it will be banned before end of year
  - Infinitesimus 4y ago
    Oh but they did! Meta leadership has always anticipated this risk. The problem is that they have not been able to fully mitigate it. Facebook Phone (rebranded HTC) was released in 2013 https://en.wikipedia.org/wiki/HTC_First https://en.wikipedia.org/wiki/HTC_First but had poor sales. The metaverse is their next play to build a world where they are a bit more shielded from Apple/Google/Microsoft's hardware influence. Pivoting a large business is really hard.
    - mistrial9 4y ago
      I appreciate when people inside FB/Meta speak directly like this (as someone who loathes the Metaverse project)
      - Infinitesimus 4y ago
        To clarify, I'm not affiliated with Meta. Just an internet nerd who likes following how organizations think and evolve
- nappy-doo 4y ago
  Not really. Meta raised 10B (really their first debt ever) in April 2022, and GOOG has like 14B in debt. Google could pay that with less than a quarter's worth of earnings, and I think Meta's not far behind. IMO, the market is overreacting. Both companies look pretty cheap to me.
  - nluken 4y ago
    Markets are forward looking. FB's growth numbers don't look great, and if you don't buy into their bet on the Metaverse you might be less inclined to see a bright future for that company.
    - edmundsauto 4y ago
      Markets are forward looking, but people making the decisions are plagued by recency bias and fighting the last battle. No comment on the relative contribution of different incentives, but being "forward looking" doesn't mean "correct" and it can also include an overreaction based on recent data points.
  - acchow 4y ago
    If FB revenue stops growing, markets are going to keep punishing it. A PER of 11 won’t feel cheap with 0% growth
VirusNewbie 4y ago
The article says its 50 people at Google who are affected. And they have a chance to apply to other teams.

lumost 4y ago

In fairness, at a mega-corp there is very little data on whether an employee would be successful in a different group. Some groups have bad charters/bad team dynamics/bad skills match. An internal transfer has a huge amount of visibility into these aspects when they transfer, much more than an external hire would. Its a pretty good deal to suggest to employees that they find a new team rather than performing a layoff, I wouldn't be surprised if the profitable/successful teams can still add head count for people they like.

tempsy 4y ago
>Among some Meta employees, the process of reapplying for jobs within a limited window internally is known as a sort of human-resources purgatory they call the “30 Day List.” I mean from the article it’s pretty clear giving employees a month to find a new job internally is more like Hunger Games than some guarantee you will be successful. It sounds like a way for companies to not have to admit they are doing layoffs.
- ras3022 4y ago
  Especially as it's not obvious how much headcount the other teams have. i.e. giving not-cut (the profitable/successful) teams a 1% headcount increase and cutting 10% of total staff is roughly equivalent to a 9% layoff.
zerkten 4y ago
Other teams may be able to add headcount, but my experience with big companies is that the organization wants to manage the number of tenured people, and people who are now sitting in non-terminal levels. Given how many people externally are competing for spots there is less of an incentive to prioritize internal people. I don't necessarily agree with this, but you have to be aware of all the stakeholders perspectives.
- disgruntledphd2 4y ago
  Based on my experience at FB, they way prefer to get internal transfers as they require less ramping up time. It's often not worth changing orgs though, as your equity doesn't get reset so you may end up with much less than a new hire

jejeyyy77 4y ago

Personally, being laid off sounds pretty good right about now. Paid vacation before going back into a hot job market for a full remote job.

tempsy 4y ago
Depends what your salary expectations are, I guess. Finding a role with the same compensation as a Meta/Google is more difficult than finding one of many dozens of companies that will pay you low six figures and some questionable equity package.
- jejeyyy77 4y ago
  True, prob won't be comparable to a really good equity package from Meta/Google. But seeing a lot of $200K+ cash comp for full remote companies.
  - moonshinefe 4y ago
    Any recommendations for sites/services to look at job openings that aren't obvious? Or are you seeing these through your network or something?
- assttoasstmgr 4y ago
  - pb7 4y ago
    So you agree it's a downgrade in quality of life? Not sure what the point of this comment is other than being rude to people earning more than you.
    - rjh29 4y ago
      Adjusting to drinking your own coffee rather than ordering Starbucks via uber 3 times a day is an easier adjustment from going to affording food to not affording it all. Didn't think it needed to be spelled out but there you go.

madeofpalk 4y ago

> or on a non-revenue generating team Apart from Search and AdSense, What team at Google isn't a non-revenue generating team?

sudosysgen 4y ago
GCP, GSuite, Google Play Services/Android, Pixel, YouTube, Maps, off the top of my head.
- danellis 4y ago
  Presumably also Nest and Fi.
dasil003 4y ago
Off the top of my head: Workspace, GCP, Android Maybe they are not strictly black in the P&L sense, but they are strategic revenue-generating business priorities.

xracy 4y ago

> Very clear the market has now negatively reacted to high operating expenses that largely stem from excessive headcount. Are you saying that because stock prices are dropping that the market has reacted to excessive headcount? Cause I think a better explanation for that, is that in the past 2 years we've had inflation, and that was reflected in the profits of the companies for 2020-21, and now that the fed is lowering interest rates, we're expecting that inflation to stop, and so that's affecting the stock market. This seems to have very little to do with these companies business models, and everything to do with them failing to recognize that their profit changes are readily explained by inflation/deflation. Which seems to be a better explanation of what the markets are reacting to.

water-your-self 4y ago
Yeah but overfitting is still a better strategy, for a number of reasons. Match your competition. Equity grants on the uphill, reduce them on the downhill. What if the market goes up and stays up? Fed does or doesnt hike rates? Do you really want to play hiring catch up when everyone else has a 2 year head start? Also, your board of directors doesn't give a shit about the reason, they only care what is being done in response.
- xracy 4y ago
  I disagree that overfitting is a better strategy. Because if you recognize why things are happening are unrelated to profit/work at the moment you can accept that you're going to have losses regardless, and try and plan past that in the long term. Which should lead to better profits when you're not entirely dependent on the federal reserve. In particular, hiring benefits don't take effect immediately, it's going to be a while before productivity is realized from the new hires. So it is very short-sighted to freeze that before an economic downturn, when you want new forms of revenue and innovation to allow you to outlast the competition and grow a business into something that will become the "next big thing". Also, as a commentary, it makes it more clear that your stock is actually stable, because the only thing that's really changed is inflation and catch up to reality from the fed turning off the money hose.