Meta, Amazon Push On With Job Cuts. These Numbers Show Why.

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Meta

Platforms and

Amazon
.
com are moving ahead with layoffs they said they planned to make. A tough market for advertising sheds light on why they and other big technology companies are cutting back. 

A review of first-quarter advertising spending shows companies are seeking a better return on their ad dollars, according to analysts at Truist Securities who cited data from the marketing-technology company Skai.  

“Spending growth across channels slowed in Q1 [as] the volume of ads clicked/seen rose while unit pricing dropped,” Truist analysts wrote in a research note on Wednesday. “Advertisers [are] focused on improving their existing ad spend rather than growing it, given the current economic uncertainty.” 

The slowdown was particularly pronounced in the ‘Paid Social’ segment, predominantly represented by

Meta
’s
(ticker: META) social-media networks Facebook and Instagram. Advertising spending in that area dropped 25% from the prior quarter. 

That is a big part of the reason Meta is pushing ahead with a planned 10,000 job cuts following 11,000 layoffs in November. Meta executives told managers at Facebook, Instagram, WhatsApp, and metaverse unit Reality Labs they should prepare for announcements of job cuts on Wednesday, Bloomberg reported, citing an internal memo.

Meta didn’t immediately respond to a request for comment from Barron’s early on Wednesday. Meta shares were down 1.2% in morning trading on Wednesday.

Trends were better in the ‘Retail Media’ segment, largely consisting of

Amazon

(AMZN), where advertising spending was down 14% from the previous quarter.

Amazon on Tuesday began laying off some employees in its advertising unit as part of an effort to rein in costs. Amazon’s senior vice president of advertising, Paul Kotas, said in a memo to staff that employees in the Amazon Ads unit in the U.S. and Canada were being informed of their layoffs. The memo, shared with Barron’s by a company spokesman, said that in other regions, the company was following local policies that would take additional time.

“We have made deeply-considered decisions about how best to move forward, resulting in role eliminations for a small percentage of our organization,” the memo said.

Amazon shares were up 0.3% in morning trading on Wednesday.

Things are also tough in the Google-dominated ‘Paid Search’ sector, where advertising spending was down 20% in the first quarter from the prior quarter. However, there was some good news for Google and its parent

Alphabet

(GOOG): Skai’s data didn’t show any shift of advertising spending to

Microsoft
’s
(MSFT) Bing from Google, despite the buzz around Bing’s inclusion of artificial-intelligence technology.

Write to Adam Clark at [email protected]