Tech companies have been working on a “screw profit, focus on growth” thing for about a decade now, living off of Venture Capital influxes and the like. The VC money was slowly drying up before COVID, but COVID made a short-term boom in the tech sector, and a lot of businesses overexpanded during this time.
Now, the growth in the sector is slowing, and all that VC money is really, really drying up fast. So you have a lot of companies making similarly “bad” decisions at the same time because they’re chasing growth that just isn’t possible anymore. So now they’re turning to tricks and scams to squeeze more value out of their userbase, whether that’s locking up APIs so they can charge more money for data access (Twitter, Reddit) or just straight turning off services because they cost too much (Snapchat shutting down gfycat after buying them).
Essentially, the casino that was the tech sector is finally waking up with a hangover and realizing that maybe it made a lot of really poor bets, and now they’re scrambling to break even so their wife won’t know how much money they threw away on hookers and blow.
The tech economy’s not doing so well and ai has become the new craze, so investors aren’t throwing money at social media sites, wjich is making them strain for any source of revenue they think might have a chance
Interest rates have gone up and this (generally) makes it harder to take out huge loans and run at a loss, which has been the standard big tech strategy for a long time. The bills are coming due for these companies that have existed solely on credit, and they are flailing trying to achieve the financial growth their shareholders demand without the huge advantage of free capital.
The thing that confuses me is that these are all happening at the same time. What gives?
Tech companies have been working on a “screw profit, focus on growth” thing for about a decade now, living off of Venture Capital influxes and the like. The VC money was slowly drying up before COVID, but COVID made a short-term boom in the tech sector, and a lot of businesses overexpanded during this time.
Now, the growth in the sector is slowing, and all that VC money is really, really drying up fast. So you have a lot of companies making similarly “bad” decisions at the same time because they’re chasing growth that just isn’t possible anymore. So now they’re turning to tricks and scams to squeeze more value out of their userbase, whether that’s locking up APIs so they can charge more money for data access (Twitter, Reddit) or just straight turning off services because they cost too much (Snapchat shutting down gfycat after buying them).
Essentially, the casino that was the tech sector is finally waking up with a hangover and realizing that maybe it made a lot of really poor bets, and now they’re scrambling to break even so their wife won’t know how much money they threw away on hookers and blow.
That indeed makes sense. Thanks for the explanation :)
In some parts of the tech sector this is a very literal case
The tech economy’s not doing so well and ai has become the new craze, so investors aren’t throwing money at social media sites, wjich is making them strain for any source of revenue they think might have a chance
I actually read an article on the Verge about this after making my comment. The article basically said exactly this.
Yeah, same! As if they made an arrangement about this.
Interest rates have gone up and this (generally) makes it harder to take out huge loans and run at a loss, which has been the standard big tech strategy for a long time. The bills are coming due for these companies that have existed solely on credit, and they are flailing trying to achieve the financial growth their shareholders demand without the huge advantage of free capital.