How overestimated covid-predictions landed multinationals in revenue crisis
By Zion Rufus
Many companies currently grappling with the effects of the post-pandemic era and one of the worst economic downturns in history, have cited overestimation of COVID-accelerated possibilities as a major contributor to massive fall in revenue.
Showing a pattern of great acceleration, these COVID projections drove the economy as existing trends experienced dramatic surges. This also boosted market confidence as tech share prices soared, shifts to e-commerce rotated massively, market signals of cryptocurrencies improved as businesses began to ramp up investments, adapt to the rapid speed of digital transformation, and increase hiring.
However, in October, nearly $1tn was wiped off the value of the world’s biggest tech companies; in November, most of these multinationals began to execute job cuts, blaming it on a variety of interconnected factors such as overzealous hiring during the pandemic, a slowdown in e-commerce activity, and people spending less time online as in-person events return.
In a letter to employees, Stripe CEO Patrick Collison had shared that “at the outset of the pandemic in 2020, the world rotated overnight towards e-commerce. We witnessed significantly higher growth rates over the course of 2020 and 2021 compared to what we had seen previously. The world is now shifting again. We are facing stubborn inflation, energy shocks, higher interest rates, reduced investment budgets, and sparser startup funding. (Tech company earnings last week provided lots of examples of changing circumstances.)”
Meta CEO, Mark Zuckerberg also disclosed that he had misjudged the market trends and overestimated the COVID-accelerrated predictions.
In a letter to employees, Zuckerberg shared: “At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected. 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. I got this wrong, and I take responsibility for that.”
Defending the mass layoffs at Twitter, Twitter CEO, Elon Musk disclosed that the company had no choice but to reduce its workforce “when the company is losing over $4M/day”.
After firing about 50% of its workforce, Twitter reportedly laid off about 4,400 contractual workers on Monday.
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