The credit crunch has so far been most prominent in the banking and finance industries. Many internet companies have spend the past months in a state of denial, falsely beleive that technology stocks are somehow immune to the pressures of the global economy. But all that appears to be changing rapidly.
News came out this week that eBay may be slashing thousands of jobs, with some reports saying that up to 10% of the company’s workforce will be made redundant. Many eCommerce analysts are still saying that the internet is a growing sector, with eCommerce set to grow by 20% over the next year. However, news from eBay seems to be contradicting the tech analysts predictions.
A few weeks ago Eric Schmidt, Google‘s chief executive, dismissed the idea that his company could be in for difficult times if a deep recession took told. Google is increasingly reliant on the advertising industry to make its income, and as eCommerce sales fall, so does advertising revenue.
But Google’s advertising revenue does not only benefit Google.com. Thousands of websites rely on Google’s Adsense advertising programs to make money. Many people are currently making a living by selling advertising space on their websites, in addition to, and sometimes instead of, selling tangible goods online. If the global recession hits eCommerce in a big way, then the knock on effect could be catastrophic for many small businesses on the web.
Even more confident of the relative immunity of tech stocks is Microsoft, who as recently as September, stated that the global economic downturn will not affect them. “Our industry is not immune to what goes on in the global economy,” he said. “And yet as I travel… given the current circumstances, people still see a certain buoyancy in the market.” Steve Ballmer, Microsoft.
And Yahoo is also in turmoil. Yahoo was one of the worlds leading internet companies for a while, but its market share has steadily fallen for many years. Yahoo turned down a $44bn takeover bid from Microsoft this year, on the grounds that it was in a strong position still. However, recently chief executive Jerry Yang informed all Yahoo staff that there could be mass layoffs coming. Yang’s message said that Yahoo needed to “get fit as an organisation” and said that he had hired management consultants Bain & Co. Redundancies on a large scale look likely.
Finally, computer manufacturer Hewlett Packard has announced that there will be 25,000 job cuts.
If anyone thinks that the global economic crisis is not going to affect all business sectors, then they probably have their heads stuck firmly in the proverbial sand.
