Yahoo to Slash 20% of Workforce

Facts

• Yahoo announced Thursday it will lay off over 1.6k employees from its advertising technology division, or 20% of its total staff this year. The company already terminated 1k positions on the day of the announcement, with the rest expected to come in the second half of the year.¹
• CEO Jim Lanzone said the decision isn't due to financial troubles but rather to make strategic changes to the company's Yahoo for Business advertising unit, which isn't profitable²
• Yahoo says it will shift efforts to its 30-year agreement with advertising network Taboola — in which it took a 25% stake in November — and close its own ad platforms, like Gemini and its supply-side platform (SSP) — changes Lanzone estimates will increase competition for ad placements by 800%.³
• The new division, to be called Yahoo Advertising, is an effort to streamline operations as many advertisers have cut back their marketing budgets in the face of economic turmoil. The company also hopes it will stop it from competing directly with giants like Google and Facebook's Meta.⁴
• A company spokesperson said that severance packages will be given to domestic employees laid off, though no specifics were given related to the size or value of the packages.⁵
• This is part of a growing trend, as tech companies have fired more than 60k employees in the last month alone, a reversal from its hiring surge during the pandemic. Industry analysts expect more staff cuts to come throughout 2023 as the Federal Reserve (Fed) continues to hike interest rates.⁶

Sources: ¹The Hill, ²Axios, ³TechCrunch, ⁴BBC News, ⁵CNBC and ⁶CBS.

Narratives

• Narrative A, as provided by GOBankingRates. These mass layoffs are undoubtedly real, but so is the strong economy. This is because most of the cuts are confined to the tech industry, particularly for software engineers, recruiters, and product, marketing, and operations managers. However, this doesn't mean those jobs are obsolete, but that major corporations simply overhired during the pandemic and are now correcting course. Other sectors are open for business right now, and tech workers will soon catch up as their industry is expected to boom in the coming decade.
• Narrative B, as provided by CNBC. This isn't just a tech sector problem, as temp workers, particularly in manufacturing, have seen a wave of 110K workers being laid off in the last five months of 2022. Though unemployment seems to be holding steady, the mixture of white and blue-collar job losses, coupled with impending stagflation as the Fed retains its high-interest rates, could amount to a very real, albeit unique, recession.