Headlines this week - Nov 6, 2022
"Tech Austerity" has arrived. New monetization models. Meta in crisis (but not dead). Traveling and dating are trendy again. Elon Musk in Twitter. VC decelerating. Tech Cold War (chips, AI, batteries)
IN SUMMARY - TOP 15 THEMES THIS WEEK
(1) The age of “Tech Austerity” may have started: cost-cutting has become a priority
The season of 3Q22 results, full of challenges for growth and profitability for tech companies, is bringing plenty of announcements of efficiency initiatives, including (very explicitly) job cuts:
A Host of Tech Companies Announce Hiring Freezes and Job Cuts - Amazon said it was pausing corporate hiring, while Lyft and Stripe said they were cutting jobs. (NYTimes)
Layoffs Hit Tech Sector With Force as Amazon, Lyft Warn of Economic Downturn - Twitter is planning thousands of job cuts, and other companies are paring back after unprecedented growth during the pandemic (WSJ)
Apple Pause, Lyft Layoffs Herald New Phase of Tech Austerity - Twitter also bracing for steep cuts under new owner Elon Musk. Tech companies had previously slowed hiring earlier in year (Bloomberg)
Amazon Freezes Hiring Levels in Profitable Advertising Business - CFO said last week that company was ‘investing’ in ads unit. E-commerce giant responds to slower pace of sales growth (Bloomberg)
Tech groups cut jobs and pause hiring amid ‘leaner times’ - Stripe and Lyft become latest to announce lay-offs as Amazon keeps lid on headcount (FT)
(2) At the same time, many tech companies are exploring new monetization models
Social media companies (with Twitter at the forefront) are looking at subscriptions
Subscriptions Could Be Key to Social-Media Companies’ Futures - The best social-media investment right now could be the one users are willing to pay for (WSJ)
Amazon and Apple also view an opportunity in growing subscription revenues
Amazon Expands Music Catalog and Podcasts Ad-Free for Prime Members - Prime’s additions come as other retail membership programs bundle entertainment (WSJ)
Apple raises prices on Apple Music, Apple TV Plus, and Apple One - It’s joining the long list of companies hiking their prices (TheVerge)
YouTube wants to be an aggregator of (subscription-based) streaming video services
YouTube Launches Streaming-Service Store as Competition Intensifies for Viewers - Google’s video platform begins selling subscriptions to Paramount+, Showtime, others amid advertising slowdown (WSJ)
Even crypto is emerging as a (potential) alternative to advertising revenues
Meta plans to let Instagram influencers launch NFTs - Social media company is pushing for new revenue streams amid digital advertising challenges (FT)
How Elon Musk Could Put More Crypto Into Twitter - Takeover opens up possibilities for blockchain, other features. Tesla CEO Musk has sent mixed signals concerning crypto (Bloomberg)
At the opposite side of the industry, Netflix is shifting from 100% subscription revenues to a new ad-supported product, launched this week
Netflix launches ‘Basic with Ads’ — its much anticipated commercial-supported plan - In 2019, Netflix said in a letter to shareholders “we… are advertising free,” and added that being commercial-free is a “deep part of our brand proposition.” That all changed Thursday when the streaming leader launched “Basic with Ads,” the platform’s much anticipated ad-supported subscription plan. (CNN)
(3) Meta is officially a company in crisis, and there are lots of discussions about them
The company’s CapEx levels are at the center of the controversy. The Metaverse is a key driver, and investors have questions
Meta shareholders vent anger at Zuckerberg’s spending binge - CEO seems intent on using majority control to push ahead with big bet on metaverse despite Wall St scepticism (FT)
There Has to Be a Better Way to Lose $800 Billion - Intelligent failures in business are based on small bets. Meta bet the company. (WSJ)
Meta doubles down on its risky big bet - Investors unhappy with billions spent on metaverse have themselves to blame (FT)
But some (clever) people see “silver linings” in the current crisis: user engagement is not decreasing, the advertising market is not dying, and TikTok’s growth may be slowing down
Meta Myths - It seems the company’s many critics are finally right: Facebook is dying, for real this time. The problem is that the evidence just doesn’t support this point of view. The truth is, if not 100% good news, much better than most of those dancing on the company’s apparent grave seem to realize (Stratechery)
On the TikTok front, US regulators might also help (according to what we heard this week)
FCC commissioner says government should ban TikTok - The Council on Foreign Investment in the U.S. (CFIUS) should take action to ban TikTok, Brendan Carr, one of five commissioners at the Federal Communications Commission, told Axios in an interview. (Axios)
Snap, Meta shares pop after FCC commissioner says U.S. should ban TikTok - The comments do not necessarily signal any pending actions against TikTok. The Treasury and Justice Departments are the ones leading a review and negotiations with the company (CNBC)
(4) Traveling and dating are trendy again, according to the results of Uber / Airbnb / Match
Investors were happy with Uber’s results, even if they had a loss, and bookings could be weak in the next few months
Uber’s Revenue Is Up 72 Percent From Last Year, but It Posts a Loss - The company had strong revenue growth but lost money in part because of its investments in other ride-hailing businesses. (NYTimes)
Uber Earns Its Five-Star Rating From Wall Street - In a bad tape for tech, Uber is managing both its expenses and its investors comparatively well (WSJ)
Airbnb surprised investors positively
Airbnb Knows It’s Making Too Much Money Now - The company’s ‘Navy SEALs’ are winning. Maybe too much. (Bloomberg)
Match (and other dating apps) are currently riding a growth wave
Match Shares Climb on Quarterly Sales, Cost-Control Pledge - Dating-app owner pledges to control costs in tough environment. Tinder is a key focus alongside Hinge and Asian business (Bloomberg)
Match Group Has Still Got Some Game - In a market that keeps getting let down, the dating giant looks like a Steady Eddie (WSJ)
(5) Netflix has launched its ad-supported service, but they’re still in the middle of a (hard) negotiation with Hollywood for the content
Studios apparently want to change the deals, which were developed for a subscription-based model
Hollywood seeks a cut as Netflix debuts ad-supported streaming - New service rolls out in 12 markets this week as company seeks to shore up revenue (FT)
Netflix With Ads Launching as Talks Continue With Studios Over Content - Disney, NBCU and Sony are among the companies still negotiating licensing with the streaming service (WSJ)
(6) Elon Musk’s first days at Twitter do not disappoint (I). He’s trying to diversify from advertising (partly forced by circumstances)…
Pressure is growing on Twitter’s revenues, with some advertisers leaving, apparently due to concerns on (more tolerance to) toxic content
General Mills, Audi and Pfizer Join Growing List of Companies Pausing Twitter Ads - Advertisers are concerned about a flurry of executive departures at Twitter and new owner Elon Musk’s plans for content moderation (WSJ)
Elon Musk’s Twitter Faces Exodus of Advertisers and Executives - At least five Twitter executives have left in recent days, as one of the world’s largest ad companies said clients should pause spending on the social media platform. (NYTimes)
Elon Musk’s Proposed Twitter Changes Revive Debate on How to Quash Spam - Subscribers would get perks, but doubts arise over whether malicious accounts could be prevented (WSJ)
Chief Twit Elon Musk Makes a Mostly Disastrous Start - Twitter’s new owner is on track to make a mess of content moderation, one of the company’s biggest challenges. (Bloomberg)
So Elon Musk has reached the conclusion that the company can’t depend only on advertising
Twitter Cannot Rely Entirely on Advertisers, Musk Says - Twitter Inc. cannot rely entirely on advertisers, new owner Elon Musk tweeted in response to author Stephen King’s criticism that the platform reportedly plans to charge users about $20 a month to keep their Blue Check verification. (Bloomberg)
And he’s working on a subscription offer
Musk outlines Twitter premium subscription plan for $8 a month - Billionaire takes his first step towards overhauling social media platform that he now owns (FT)
Twitter Plans to End Ad-Free Article Offering for Blue Subscribers - Move comes as company’s new owner, Elon Musk, continues to make changes to social-media platform (WSJ)
Even before it’s effective, people have started to complain against this plan
Elon Musk’s Pay-to-Play Strategy Will Make Twitter Too Clubby - The plan to distinguish users along financial lines will weaken Twitter and increase the divide between between the haves and the have nots. (Bloomberg)
(7) Elon Musk’s first days at Twitter do not disappoint (II). He’s also launched an aggressive layoff program
He started by the executive team and the board
Elon Musk Ousts Twitter Board, Named Sole Director - Overhaul of nine-member board comes after billionaire completed $44 billion deal (WSJ)
Now the plan seems to be to exit 50% employees, to (radically) reduce costs
Musk Plans to Eliminate Half of Twitter Jobs to Cut Costs - Twitter’s new owner aims to reduce workforce starting Friday. Remaining employees will be asked to return to office (Bloomberg)
Elon Musk plans to cut up to half of Twitter workforce - Job losses expected before end of week as new owner continues clear-out (FT)
As this started, Musk linked it with the (advertising) revenue pressures. Given the cost of the acquisition, it’s clear he needs cash returns…
Elon Musk Says Twitter Has Had Massive Revenue Drop as Layoffs Begin - Chief of social-media company cites activist groups pressuring advertisers, as many staffers brace to lose jobs (WSJ)
Twitter job cuts begin as Musk warns of ‘massive’ revenue drop - Brands including GM, VW, General Mills and Carlsberg pause advertising on the platform (FT)
(8) AI is trying to change the way we work
Microsoft sees a potential to “reshape thousands of professions”
Microsoft Wants AI To Change Your Job—If It Can Work Out the Kinks - Microsoft believes its artificial intelligence tools are poised to reshape ‘thousands’ of professions. There are just a few legal and ethical hazards (Bloomberg)
Soroco, a startup, is using AI to build solutions that increase workers’ productivity
Billionaire Harvard Alum Aims to Make Office Work More Efficient - Murty’s startup uses machine learning to boost productivity. Task mining is in early stages, but seeing widespread adoption (Bloomberg)
(9) Google is planning to launch an AI app that will create art using text as an input
They apparently want to capitalize on the recent hype around language models
Google Plans Slow Rollout of AI App Creating Art From Text - Alphabet Inc.’s Google is preparing an app that will use artificial intelligence to let consumers create images by typing a few words. (Bloomberg)
(10) Telecom operators struggle to monetize 5G profitably
Reliance Jio, a paradigm of a low-cost operator, wants to raise prices to make it work
India’s big bet on 5G - Network operators hope rollout will have an outsized impact on both the mobile telecoms market and the country’s economy (FT)
(11) Venture Capital seems to be decelerating, globally
Both in the US and China, metrics show a clear deceleration
Silicon Valley’s Share of Startup Deals Drops Below 20% for First Time - The decline comes as entrepreneurs and investors increasingly set up shop outside the tech mecca (WSJ)
China’s Venture Funding Tumbles Precipitously After Crackdown - Investment in chips bucks trend thanks to Beijing-led effort. China is now among the worst-performing VC markets globally (Bloomberg)
The headwinds affecting the IPO market are not helping. Companies like Instacart, not able to help employees turn their shares into cash, are now considering cash bonus
Instacart to Give First Companywide Cash Bonus After Delaying IPO - The bonus is a shift in the San Francisco company’s efforts to reward and retain employees (WSJ)
(12) China and the US have started a Tech Cold War about chips, but it is unclear if this will be sustainable
Some level of “supply-chain decoupling” seems unavoidable
We must prepare for the reality of the Chip Wars - The question of how far decoupling will go depends on China’s next move as well as the extent of new US rules (FT)
But it will not be cheap
US-China decoupling ‘expensive’, warns Japan chipmaker executive - Kioxia monitoring risk of retaliation by Beijing over Washington’s export controls (FT)
And some people think that it won’t be possible
China and the US remain locked in mutually assured co-operation - The two nations are compelled by their consumers to collaborate as well as compete (FT)
(13) The same dynamics might now expand into AI (and Quantum Computing)
Eric Schmidt (Google’s ex-CEO) is urging the US government to make decisions in a “battle for AI supremacy” with China
Inside Eric Schmidt’s push to profit from an AI cold war with China - A prominent private-sector voice amplifying rhetoric that pits the U.S. against China in a battle for AI supremacy, Schmidt’s borrowing from a Cold War-era playbook to urge the government toward decisions the AI industry wants it to make. (Protocol)
Some people see this as a threat for research momentum. However, history shows that these processes may also act as catalysts
Will nationalism end the golden age of global AI collaboration? - Until now, the borderless, open-source software movement that has helped bring together AI developers and tech from the U.S. and China has risen above geopolitical tensions. Could national security crackdowns tear it apart? (Protocol)
If more aggressive policies were implemented, Microsoft could have a problem
Microsoft helped build AI in China. Chinese AI helped build Microsoft. - As “AI race” rhetoric reinforces fear of the U.S. losing dominance on the world stage, Microsoft could face hard decisions surrounding the robust AI ecosystem it helped build in China. (Protocol)
Quantum Computing could be next, but there are still many uncertainties
Biden’s push for new quantum controls has one big problem: Nobody knows where to draw the line - The Commerce Department is talking with quantum computing companies in an effort to develop additional trade restrictions on the technology. The discussions fit into the Biden administration’s plan to protect emerging and foundational tech. (Protocol)
(14) Yet another Cold War might be starting for electric car batteries, and their raw materials
Some countries are approaching this field as a “new oil”
Indonesia considers Opec-style cartel for battery metals - World’s largest nickel producer exploring governance structure similar to that used by oil group (FT)
Tesla is trying to hedge battery supply chain risks, and they’ve even considered a stake in a leading mining company
Tesla held discussions over taking stake in Glencore - Talks over buying up to 20% of miner reflect carmakers’ concerns over supplies of battery metals (FT)
(15) Shein becomes the largest global apparel retailer, and is now the example to imitate for Chinese startups
Shein copycats chase its explosive growth - Rivals seek to ride coattails of Chinese fast— fashion giant set to become world’s biggest specialist clothes seller (FT)