Last Updated on 11/30/2022 by てんしょく飯
It has been a long time since giant IT companies became powerful enough to overtake nations and dominate the world. However, few people are saying it out loud, but these companies have already begun to decline. The most serious is “Meta” (formerly Facebook).
Meta is a “mess.”
CEO Mark Zuckerberg, 38, appeared pale at a company-wide rally held online on November 11, having just announced on November 9 that he was cutting 11,000 jobs, or 13% of his total workforce. When asked if there would be further layoffs, Zuckerberg could only reply.
I can’t promise anything.”
Zuckerberg launched Facebook in 2004. In 2012, he acquired Instagram, a photo-oriented social networking service that now has about 1.2 billion users.
But an incident occurred: it was discovered that Russian agents had bought a large number of Facebook ads to give Trump an advantage in the 2016 presidential election. They even find the misuse of personal information of 87 million people.
He said, “I didn’t do enough about the misuse of [the site]. It was my fault.”
In 2018, Zuckerberg apologized before the U.S. Senate. Facebook was already a “mess,” but in October 2021, he changed the company name to Meta to rebuild the company. With the Corona disaster as a tailwind, Meta appeared to be making a comeback. Market capitalization surpassed $1 trillion (about ¥140 trillion), and the number of employees grew from about 45,000 in 2019 to about 87,000 at the end of September ’22.
A shot in the arm for Metaverse?
But the unprecedentedly strong performance was only a “bubble”: final profits for the July-September period of 2022 fell by half from the same period a year earlier, and the company’s market capitalization dropped by a quarter.
Meta’s advertising accounts for about 98% of its revenue, and if the economy slows down, its advertising budget will drop dramatically and its business performance will deteriorate. Moreover, Facebook’s users are getting older, and Instagram’s younger users are being eclipsed by TikTok and other services originating from China.
In order to break free from relying on advertising revenue, Mr. Zuckerberg has turned to the “Metaverse” (……) as a way to revive his business. He has already launched a metaverse service called “Horizon Worlds,” which allows users to play and shop in a virtual space by wearing special VR glasses.
However, the quality is low, and the image posted by Mr. Zuckerberg in August 2022 was so “shabby” that it became a topic of conversation in reverse.
Nevertheless, this business alone has lost $9.4 billion (about ¥1.3 trillion) since the beginning of the year, and some shareholders have begun to wonder why it is costing so much money. It has also led to a decline in stock prices, and Meta is certainly in a difficult situation.
Sagawa Express & Yamato Transport also have a chance to win
It is not only companies operating social networking services. Amazon,” which dominates logistics, is also facing a difficult situation. In its financial results for the January-March 2010 period, the company turned into the red for the first time in seven years. Sales for the period were about $11.6 billion (about 16 trillion yen), but the company lost about $3.8 billion (about 532 billion yen).
The number of employees had increased from about 800,000 at the end of 2019 to about 1.54 million by September 2022. However, in response to deteriorating business performance, the company decided to lay off about 10,000 employees for starters.
Under the slogan “You can buy anything,” Amazon has branched out into the development of new products. For example, smart speakers that play music when you say “Alexa, play music,” and drones for home use. However, the hardware business, which manufactures and develops products, is losing about $5 billion a year, which is taking a toll on Amazon’s business.
Amazon’s core online shopping (EC) business is not safe either. If Sagawa Express and Yamato Transport, which have excellent logistics networks in Japan, start their EC businesses, they may be able to turn the tables on Amazon,” said Ohara.
It may not be impossible for Jeff Bezos, 58, the founder of Amazon, to revive the company. But Bezos will step down as chairman in 2021, after which he will be traveling in space and investing at will. In a recent interview by CNN, he made this statement.
–Do you intend to donate most of your ($11.6 billion) assets?
Yes, I do. We are in the process of creating a receptacle where we can donate this money effectively. What I don’t like about the world right now is that there is a lot of division going on. ……”
Bezos, who sits next to his girlfriend, actress Lauren Sanchez, 52, and says he wants to “unite humanity,” may not be interested in Amazon.
‘Amazon will go bankrupt.’
In 2018, he made this statement at an internal company meeting.
‘Amazon will go bankrupt. If you look at large companies, their average lifespan is about 30 years, not 100.”
Amazon was founded in 1994 in Bellevue, a city east of Seattle. With 30 years approaching, Bezos must be aware that Amazon’s growth is reaching its limits.
The IT giant, which had reached the height of its glory, has stumbled and is now going downhill. This is an inevitable fate, says Keio University Graduate School Associate Professor Sei Obata.
The IT revolution that began in the 1990s has transformed our lives and work. But growth has already reached its limits. Today’s IT companies are merely pretending that technological innovation has occurred by adding extra touches to social networking services and selling the latest equipment that we don’t need.
While giant IT companies are weakening, new startups are emerging one after another, especially in China and India, that offer similar services. They are able to generate high profit margins because they do not have unnecessary business and human resources. Meta and Amazon have been nipping their rivals in the bud through acquisitions as long as they have the strength, but they can’t keep doing that forever. Scott Galloway, author of “the four GAFAs,” says.
The collapse of the powerful is never a bad thing. Take Twitter, for example. There are a lot of super-bright engineers who have left Elon Musk. They may move on to new companies and develop better services than Twitter.”
Twitter co-founder and former CEO Jack Dorsey tweeted in August 2022.
My biggest problem, and my biggest regret, was turning Twitter into a corporation.
The founder’s single idea grew into a huge business at an astonishing speed. However, if the expansion stops, the company will surely be overtaken by younger companies and disappear. That is the fate of IT companies.