Google’s parent company Alphabet has announced cost-cutting measures to deal with the economic effects of the coronavirus. In a memo shared with staff by Chief Executive Officer Sundar Pichai, plans to slow hiring for the rest of 2020 were outlined.
The company will continue to hire in a small number of strategic areas. Google says these are the areas whose growth is critical to the success of other businesses and users. Hiring will be focused on employees who will address the greatest user and business needs.
But overall, the pace of hiring will be slowed down significantly.
Google hired around 20,000 employees last year and the plan was to add the same number of employees in 2020.
This year, 4,000 new employees have started working for the search giant so far. The company also aims to on-board around a thousand employees who were hired previously but haven’t started yet.
Apart from cutting back on hiring, Google is also trimming costs in other areas
In addition to slowing down hiring, the company will also readjust investment in other segments such as data centers and machines as well as nonbusiness essential marketing and travel.
Recently, it was reported that the Mountain View-based firm is also cracking down on temporary workers’ access to skills training resources. These employees will get access only if their jobs depend on it. Otherwise, they will need to pay for the resources on their own.
On the bright side, Google isn’t at least cutting jobs. Yelp is going to lay off 1,000 employees and furlough an additional 1,100. Groupon and Dish have also announced job cuts.
Alphabet’s revenue model is heavily dependent on adds. And because of coronavirus-fueled economic downturn, advertising demand has taken a hit. The demand for travel, retail and entertainment ads has reduced significantly because of the pandemic.
For instance, travel companies Norwegian Cruise Line and Korean Air reduced digital spending to almost zero in mid-March. Airbnb has also halted all marketing.
Google and Facebook, who have seen their advertising business almost grow triple in combined size in the last five years, are expected to witness a slump.
Wall Street analysts expect the annual revenues of the two giants to decline for the first time in their history.
Twitter and Pinterest both expect revenue to slide. And Microsoft has also frozen hiring temporarily in the face of the outbreak.
In the long run, Google’s position will likely get stronger
As Pichai notes in the memo, the entire global economy is suffering and Google is not immune to the effects of the coronavirus. Many partners in the company’s ecosystem are hurting and it was inevitable that the effect would rub off on Google.
Thus, it makes sense for the company to scale back in some areas.
Ultimately, though, Google will likely emerge stronger than before as some small businesses might fold because of the crisis
But for now, the path ahead is rough. In fact, some analysts believe that Google, Facebook, and Twitter will feel the damage for several years. Alphabet will likely report its financials for the first quarter next month.