Ok, I will be the usual HN contrarian. $366K net profits per employee at the scale of Google isn’t that impressive. Especially as a software , service company which hold arguably a monopoly.
Which drives home the need to cut compensation costs. Three sixty in available spend relates to about a $180k salary. Below market. And that's assuming we're zeroing out shareholders. (EDIT: Whoops, nvm.)
“ Trade private equity in technology companies. Former aerospace investment banker and before that, algorithmic equity derivatives trader. FinTech + Space + Materials seed investor."
This is an incredible earnings, you'd think if there were a true recession advertising spend would go down the tubes. That doesn't seem to be happening, if anything the opposite is sort of being laid out on the books here between alphabet and meta.
Putting on your conspiracy hat... there seems to be a very coordinated effort to claim that "big tech" is over and done for. Just look at all the articles regurgitating some form of that. That the end of "free money" killed tech.
If anything, these results show quite the opposite. Google and the like have been quite resilient. Sure, obviously unprofitable companies are done for. We all knew that was coming. But all signs are pointing to a 1-2 year period of realignment rather than anything truly seismic.
Even facebook was able to refocus some of its bets on the metaverse fairly quickly.
All that seems to have changed is that investors are no longer OK with 50+% YOY hiring growth and gigantic bets on obviously moonshot projects taking up a good chunk of the portfolio.
I think partly this is driven by the fed, but maybe more so some eager investors looking to put their weight on the scales in their favor… go figure. Don’t know how that’s conspiracy theory stuff. I agree, it’s surprising how resilient the advertising business is for these two companies.
"Companies that increased ad spend saw success in the long run. Sixty percent of brands that increased their media investment during the last recession saw ROI improvements. Brands that increased paid advertising also saw a 17% rise in incremental sales. By contrast, marketers who cut ad spending risk losing 15% of their revenue during a recession."
It's not unusual for businesses to lay off people and divert the capital towards go-to-market during a recession.
Also the companies who are able to pay for marketing in a recession are biased to be in a strong position already. I wouldn't think that because they spend on ad revenue they performed well, I would take it as they were able to spend on ad revenue and thus survive and do well. Whereas their competitors had no ability and had to likely manage cash flow issues.
> DeepMind, previously reported within Other Bets, will be reported as part of Alphabet's corporate costs, reflecting its increasing collaboration with Google Services
Does this mean anything real or is it just accounting details?
It's sort of both - they aren't off on their own doing random stuff. They are doing some stuff that helps google's core business. As such, they shouldn't be accounted for as "off doing random stuff".
Kind of crazy to see GCP only losing $480M in a quarter. I know that sounds ridiculous, but looks like it's on track to actually start posting a profit within a year? That's nice!
Google Cloud also includes Google Workplaces (Faka gSuite, faka Google Apps). That's a high profit area that might be masking GCP's losses. For all we know GCP's losses have remained the same with the growth from Google Workplaces hiding it.
What's your point? When I managed IT I would have considered those 'cloud apps' as opposed to onsite/self hosted, and paying for them would have come out of my OpEx not CapEx budgets. Are they not Cloud?
The point is it paints them as a stronger competitor to AMZN and MSFT when the product categories are different, regardless of how customers do accounting.
Almost no one is predicting any more than a mild recession if one even happens. Labor markets may be loosening a bit but ultimately this is all in the fed's court.
At this point, markets have figured out the song and dance. The fed issues an extremely hawkish statement. Then it hikes rates a bit less than last time while saying it has a commitment to keep their finger on things till inflation comes down. Markets react in a tempered manner. Repeat.
The layoffs truly suck for those affected by them. But it's not looking at all like 2008 let alone 2000. The businesses are not fundamentally in bad shape. They just bloated and will have moderately underwhelming earnings for a few quarters.
Well... If you don't trust the system you're discussing it is honest to say that up front so people know how to have a conversation with you. Otherwise it comes across as rude.
Big reporting week for big tech - Meta (yesterda), Apple, Amazon and Alphabet (all today). I'm curious to see how things play out given all the layoffs and chaos of tech over the last year.
> Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond.
translation: "Investors, please chill about ChatGPT already"
Should they chill though? I'm sure Google has the talent to match ChatGPT but their fundamental business model relies on sending people to the highest bidder and this maybe works when everything else is spam and ad infested hellhole but ChatGPT style AIs value comes from the high quality user experience which is not driven by the highest bidder.
What if answering machine business is just a few billion dollars business and completely removed the need of search? What if it is a kind of business that makes hundreds of billions but makes it through selling the product itself? This is fundamentally different from what Google offers.
I think most people agree with you that Google can beat OpenAI on the eng/tech. Scary part for Google is: how do you monetize it? They might “beat” OpenAI with a better chat AI, but if that cannibalizes their $100bn search ad business…they are in trouble
Apple released an iPhone, cannibalising their iPod market.
Google built a great search engine long before they worked out how to monetise it properly. If they can’t get AI working in their products someone else will, and google will go the way of zune.
> Apple released an iPhone, cannibalising their iPod market.
This is a terrible example. Everyone knew cell phones were a bigger market than mobile MP3 players, Apple was using this mobile expertise gained in iPod to move to a larger market. We don't know if ChatGPT will be a larger market than search currently is. Digital cameras (include sensors used in webcams and cellphones) are currently a smaller market than selling film was at peak. If ChatGPT will destroy Search volume, and if it will bring in 1/20th the revenue than it might be best for Google to delay adaptation as long as they can.
> If they can’t get AI working in their products someone else will
Google is using 'AI' in all their major products. It's possible that soon AI will make their most profitable products obsolete.
When the iPhone launched everyone knew smart phones were a thing for businesses - locked down blackberrys giving email access. The mobile web wasn’t really a thing.
Google’s issue has never been engineering talent. Their issue has always been product management/program management. They don’t have vision or strategy.
> The idea that maybe Microsoft or Apple or Google or FB doesn't have enough good engineers to code a best-in-class language model is absurd.
Yet Meta's 175billion parameter blenderbot is absolute garbage. Despite claiming stats like 'being twice as knowledgeable' or ' Compared with GPT3, on topical questions it is found to be more up-to-date 82 percent of the time and more specific 76 percent of the time'
The reality with ML is at this point it's cheaper to let someone else do the research and then as long as you have sufficient data you can copy the approach.
The complexity is in making it cost efficient to run, making it intuitive to use, etc. That's a problem that google is more than capable of executing on. They'll need to reorganize to pull it off though. They'll even sprinkle ad results in.
Really I think the question is around "symbiotic relationship."
Google has failed to win decisively in the search result ranking arms race. Concrete example: sites that rip from stackoverflow have been ranking higher than stackoverflow in google search results. Other search engines fare worse.
If Google trained a discriminator that penalized these practices I think their search product would dramatically improve and the web as a whole might benefit - although tabloid article farms might sue.
That's just applying a completely different and irrelevant metric to dismiss the point of the previous poster.
The arms race of "fast trash" websites vs quality search results is not being won by Google or anyone else as of today. Google having a business model that doesn't even incentivize them to win that race =/= Google not losing that race. It's closer to them giving up in defeat, which is a loss for all of us (many times over).
what? the web page throws has good info that gets fed into the LLM. it's that users no longer visit the web page and see ads which pays for the sites operation
What if the website does add value to the LLM, but only in the training/indexing stage? Like, if I create a website that painstakingly measures and lists the weights of thousands of widgets, then the LLM ingests that knowledge and then never sends the user to my page.
Maybe it's more convenient for the user to pay the LLM for the info (paid via ad attention or whatever), but if I'm the one who made the measurements, then shouldn't I be paid too? If the user never "pays" me, then I'm going to stop publishing measurements, and the whole LLM falls apart.
Likewise for generative art. The people who made the training data are a critical part of the ecosystem. Cutting them out seems like cutting out some critical part of a food chain.
And that will be a tough problem to solve but Google may do something similar to what they do with YouTube Premium and paying creators an amount that is based on how much of their content the subscribers of Premium have watched.
Google Search could pay some small percentage back when they use their work. But it would be a weird one so not sure that's really going to happen.
How is google going to know where to send the check? And who negotiates the rate? We aren't talking about people uploading content to google search. We're talking about information google might take from other people's sites.
To me, Meta's 2022 FY results were a textbook profile for "this company should lay people off". (flat revenue across a whole calendar year, coupled with ballooning costs)
Google's 2022 FY results are not Meta's: modest but solid revenue growth, costs a bit over-inflated, but not at all beyond the pale. The layoffs didn't seem fiscally necessary, prima facie, unless they have reasons to believe in extremely conservative forecasts for future revenue growth. It would have been fascinating to be a fly on the wall in the board room for that decision.
I think the execs got peer-pressured into it. Other companies were doing it, and they ignored the fact that other companies were in much more dire straits.
As a result we now have all the psychic costs of the layoff, but few of the benefits, as it wasn't really even necessary anyway. I'm betting that our headcount will be back up to where it was before the layoffs by summer.
I personally doubt the mimetic explanation is the explanation they gave to themselves, which is the one I'm more interested in (even if the mimetic explanation is the most likely root cause).
Reflecting on it, maybe one explanation is that the alternative to a layoff would have been slamming the breaks on their (very complicated!) hiring apparatus so hard, and for so long, that it had the potential of grinding to a halt and rusting.
Maybe, they judged that the long-term cost of a layoff was less than the long-term cost of a completely impotent hiring system. IDK.
I had never before considered the possibility that for these gigantic companies the hiring process is like a huge independent machine full of moving parts that can’t easily be stopped.
That’s an interesting thought and I can also believe it’s true.
I also think that perhaps a part of the reason for layoffs at companies like Google in these times is simply because they can easily do it now without people reading much into it.
Yeah but they were smaller then. Google's hiring aparatus is massive now. It's clearly far too tricky to surgically change hiring. They struggled as is with the hiring freezes.
Middle management convincing the VP that this candidate super-aligns with company strategy (AI or whatever) and said VP must create an exception for the hiring freeze.
Sure, that's basically a hiring freeze or slowdown. They did that. What they clearly suck at (btw I'm not defending them, just pointing out the reality) is refocusing hiring priorities. There are tons of candidates already in pipelines, etc. so that seems to be somewhat complex.
For the context of this decision, this is strictly false: Larry and Sergey are on the board and on the executive committee. If it wasn't a board decision, it was at least an executive committee decision.
It's a mix of both. But there's also the IC-led interviewing component, as well as the regular hiring committee meetings. There's deep norms in those rituals that disappear/diverge if they stop meeting regularly.
> modest but solid revenue growth, costs a bit over-inflated, but not at all beyond the pale
Net income dropped 34% compared to the same quarter last year. 21% drop comparing FY2022 to FY2021. That feels significant, especially when revenue grew over the same periods.
It's mostly driven by changes to Other Income (+12b to -3b), which is dominated by shares Google owns in other companies being marked to market. Basically this exaggerates both the good times (unrealized gains boost the net income, even though it's all on paper) and the bad times (the inverse). The operating income is probably a better way to reason about how sound the core business is.
Cuts have no impact on 2022 Q4 metrics, because the laid off employees are still on the books through 2023 Q1.
It's anybody's interpretation as to why it would trade higher. Raising buybacks to pre-2022 levels, in conjunction with rising ad impressions and reducing opex are all positive factors.
Meta dropped like rock in 2022, and walstreet assumed it's dying. Their valuation got crushed much more than their peers.
Q4 showed that their business is actually still working and company is making necessary changes, so they recovered to be roughly in line with big tech peers.
Past results isn’t what you use to decide how to position for the future. It is about expected future(s) and how to set yourself up for longer term success.
Of course, but one must acknowledge that past growth is a large (often, dominating) contributing factor to future growth.
But that's part of my question: what did they predict that merited a layoff, when their cost structure wasn't ballooning out of control, and which made the alternative of maintaining a hiring freeze throughout 2023 insufficient?
I’m guessing that a certain percentage of new hires over the past boom years aren’t working out. It’s easier to identify them and do a massive layoff than have to justify each case individually. The fact that everyone else is also laying people off gives them the cover to avoid the huge morale hit than comes with a layoff announcement.
What do you mean by this comment? The title matches the link and is also correct. This is Alphabet reporting, which includes Google and other related entities.
