Amazon, Twitter and Facebook: How Covid-era expansion has left tech firms grappling with new reality as tech bubble bursts

When the Covid pandemic sent the world into lockdown, everyone moved their lives online.

Professional meetings, shopping, socialising and education all became virtual, kick-starting an online, connected revolution that many observers had been predicting for some time.

Demand for contactless transactions, app-based interactions and health technology for pandemic-related services, such as vaccine certificates and Covid test results, saw industries which would have previously relied on more traditional methods move rapidly into the digital age.

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Now, almost three years on, major tech companies, including Facebook, Twitter and Amazon, have been forced to lay off huge swathes of their staff in a bid to cut costs, as they grapple with the reality of post-pandemic life.

Amazon is one of a number of tech companies laying off staff.
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“Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition and ads signal loss have caused our revenue to be much lower than I’d expected,” Meta chief executive Mark Zuckerberg told staff as he laid off 11,000 people – 13 per cent of his workforce – in the first round of job cuts in the firm’s history. “I got this wrong and I take responsibility for that.”

Nicky Logue, managing director at Glasgow-based social media agency Hydrogen, agrees.

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She says: “In 2020, as the world went into lockdown, a lot of companies pivoted heavily to social media. It was one of the few places they could actively advertise, or even speak directly to customers/clients. Many saw great results from this, as they were reaching a – quite literally – captive audience.

“With the world opening back up, time offline has increased, with people going back to doing what they love, which means that basic social ads aren’t enough. To attract attention, advertisers must make sure they stand out.”

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Controversial entrepreneur Elon Musk cut half of his staff after he took over at Twitter.

Zuckerberg’s firm is not alone. The Meta cuts come as online commerce site Amazon prepares to axe around 10,000 jobs, or around 3 per cent of its office staff worldwide, with some workers already believed to have left. The firm, which notched 20 per cent profit growth in the first year of the pandemic as stuck-at-home customers turned to online deliveries, had already introduced a recruitment freeze and halted some of its warehouse expansions, warning it had over-hired during the crisis.

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Meanwhile, Microsoft, payment processing platform Stripe and cloud-based business software firm Salesforce have all also announced lay-offs in recent weeks.

Perhaps the most high-profile platform to make recent lay-offs is Twitter, where controversial new owner Elon Musk made major cuts immediately after taking over the firm, telling staff in an email around half of them would be let go. Musk’s contentious advocacy of “free speech” – and the subsequent news that even more workers, many of them contractors on the content moderation team, have since been axed – has rung major alarm bells, with advertisers concerned over association with unmoderated content, sending the platform into further financial jeopardy.

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Dr Simone Kurtzke, marketing lecturer at the Business School at Napier University in Edinburgh, says that pandemic bloating is exacerbated by a natural plateau in social media usage.

Nicky Logue, managing director at Glasgow-based agency, Hydrogen.
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"To put it very simply, they may have run out of growth potential – ie have run out of new humans that can sign up to and use them,” she says. “Social media growth relies on new user acquisition, as their business model is chiefly around selling advertising and to do this, they must constantly get new users to sign up to, actively use the platforms, and stay on the platform as often and for as long as possible.

"This directly translates into advertising revenue as users are the ‘product’ they sell to advertisers. But this ‘product’ seems to have reached a natural limit and/or is on the decline."

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Meanwhile, as Silicon Valley executives were drawing up redundancy plans, the value of their companies was continuing to plunge.

In early November, the share price of Meta – parent company of Facebook, Instagram and WhatsApp – was down 73 per cent over the previous year. Alphabet – the parent company of Google – was down 42 per cent, tech giant Microsoft by 35 per cent and Amazon 46 per cent. Only Apple bucked the trend with a far shallower fall of just 8 per cent.

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Jonathan Bird, head of Delivered Social.

As Zuckerberg said about his own organisation, many companies expected the rapid growth seen in the early days of the pandemic to continue – and have been forced to backtrack on initiatives which have not taken off in the way they had hoped.

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Logue points to decisions by both TikTok and Meta to pull back on their original live social shopping plans. She says: “While social commerce has grown, it hasn’t quite reached the heady peaks expected.

“It’s these diversions from the core services – which in part spun out due to Covid – that led to expansions for some businesses that are now contracting.”

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However, Jonathan Bird, head of social media agency Delivered Social, says he believes a post-Covid move away from online life could be about to be reversed as people shy away from in-person work events and even socialising due to the rising cost of living.

He says: “If we were to look at video platforms, networking, we went through a period of Covid when they were religious, we had to have them. Then everyone wanted to get back to real life, but as things like cost of living increase, the actual prediction, potentially, is that there's going to be more demand for [online] because, arguably, people won't pay to go to those things.”

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Financial analysts also argue tech is still a major growth sector with plenty of potential.

Douglas McWilliams, deputy chairman of the Centre for Economics and Business Research (CEBR) and author of The Flat White Economy, says he believes by 2035, one job in five is likely to be in tech. A report published last year by CEBR for Virgin Media Business found the pandemic accelerated digital progress by 3.3 years in Scotland.

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"There isn't really much of a future other than tech,” he says. “We've got a fairly lethargic labour labour force, so we're going to need tech to be able to keep the economy moving forward.

"Some of the changes that have taken place are enabling. For example, the boost to remote working allows all sorts of things to happen in the economy that ultimately must boost growth.”

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He adds staffing levels at companies like Twitter and Facebook are still far higher than a few years ago, even after the lay-offs.

"They were projecting very rapid growth and so they were hiring ahead of business,” he says. “If you compare where they are now, even after the cuts, with where they were a couple of years ago, they're still way up.”

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McWilliams says he believes social media networks will also continue to thrive, but users could move away from major existing platforms, to create a more competitive marketplace. Meta owns not only Facebook, but Instagram and WhatsApp. New regulations on tech firms have been brought in across the world in a bid to reduce the reliance on the dominant brands.

Tech entrepreneur Martin Sorrell echoed McWilliams’s views in his digital ad business S4 Capital’s annual statement earlier this week.

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“It’s true growth has slowed, but it’s not as bad as people would have you believe,” he said, reporting a 29 per cent jump in quarterly net revenues to £250 million.

Joe Chernov, marketing expert and chief marketing officer at US software firm Pendo, says the Covid pandemic “accelerated” changes in society.

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He says: “I think what's happening is that we're just beginning to see the downstream impacts of Covid on social norms. Whereas once norms may have evolved slowly, today it seems as if Covid accelerated changes. And social media sites may be struggling to adapt to a society that's changing at an unnatural rate."

Some previously more obscure platforms are already beginning to reap the benefits of expansion beyond the “traditional” social portals.

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Searches for social media site Mastodon rose 4,404 per cent in the UK in November following Musk’s takeover of Twitter, according to analysis of Google data by website Cryptobetting.org, which warned the currently popular networks could go the same way as the likes of MySpace, Bebo and Google+.

Around 489,003 new users migrated to the site in the ten days after Musk’s takeover.

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Not-for-profit Mastodon, which was set up by German software developer Eugen Roschko in 2016, is open-source, meaning anyone can make a server on it and store user data, which in theory does not allow any company or group to have too much control.

However, precious time spent building profiles on older platforms makes many people reluctant to make the move permanently.

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Chernov says: “Every day, I tell myself today's the day I switch to Mastodon. But I've invested so much energy in Twitter over the years that I'm just not quite ready to pull the plug on it.

"I root for Twitter's success, which makes it incredibly difficult to watch what's happening to that community and the product team that built it.”

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