How the Gafa cope with the shock of the slowdown

The big tech companies are doing better than expected given the slowing economy. Most of them, with the exception of Meta, Facebook’s parent company, continued to grow in the most recent quarter, although slowing the pace compared to a year ago. They have developed several strategies to deal with the drop in their income. Review.

1. Reduce costs

After hiring tens of thousands during the pandemic, the big tech companies changed their strategy in the spring. The first to react were also the most fragile. Such is the case with Uber, for example, which posted a net loss of $5.9 billion in the first quarter of 2022. Company VTC announced in May that it would lay off 3,700 employees, or 14% of its workforce.

Amazon, which had invested to keep up with the surge in demand during the pandemic, was also forced to cut costs quickly. The Seattle-based company reduced its headcount by 6% (90,000 fewer jobs) between April and June. It’s also trying to better manage its warehouses, subleasing them to other companies when it’s not using all of their space.

Meta, whose action has plummeted on the stock market since the beginning of the year, is also putting the brakes on hiring. Teams working on products that are not considered essential will see staff reductions. These include Facebook Dating and Gaming (games and dating sites), the kids’ messaging app Messenger Kids, and Remote Presence, which was trying to build an online video calling service.

Other groups with stronger results have recently followed suit. Apple, for example, plans to slow growth in hiring and other spending over the next year. Google, meanwhile, has imposed a two-week recruitment hiatus, time to take stock of who is really needed and who isn’t.

2. Prepare for the future

Despite their current difficulties, the Gafa want to continue investing in areas that will eventually allow them to compete with their rivals. “We will continue to invest in artificial intelligence, our search engines and the cloud,” the CEO of Alphabet, Google’s parent company, told analysts.

Same speech alongside Mark Zuckerberg. “We want to continue investing in the long term in order to emerge stronger from this crisis,” says the Meta boss. Priorities are the algorithm that helps diversify users’ news feeds, the new Reels short video format, promotional products and the metaverse.

For Amazon, that means continuing to invest in warehouses, including a 2.9 million-square-foot hangar in western New York that will cost the e-commerce giant $550 million. This is the first investment of this magnitude to be approved since the market collapse.

3. Find new recipes

One of the easiest ways to increase profitability in times of crisis is to charge users more. Abused by the markets after a drop in its user base, Netflix took action in March by raising subscription prices in the United States.

Meta followed suit, increasing the price of its virtual reality headsets by $100, which will now range from $400 to $500 depending on the number of gigabits. Amazon has raised the price of its Amazon Prime subscription in France, the UK, Germany, Spain and Italy after raising it in the United States in February.

Another possible strategy is to diversify your income. “Our strategy at this time is to expand our solution portfolio beyond our core business,” explains a Twitter boss to “Echos”. In particular, the platform aims to enable brands to promote products and events. It’s also increasingly moving towards e-commerce, for example by signing a partnership with Shopify.