The light and dark of layoffs in the Internet industry

Reporter Li Tian reported from Beijing

"The era of traffic is over, and the industry may not have much innovation until the next wave of new technologies comes out. The business of large factories has its own advantages, and the business that has not been done has been done by other enterprises, in this case, many marginal or experimental businesses will be cut down, and personnel redundancy will occur. An online recruitment industry source recently told the China Business Daily reporter.

According to the reporter's understanding, the layoffs of Internet companies have appeared on a large scale since the second half of 2021 and continued to the first half of 2022. The original lively spring tricks have been paved with a cold color by the news of layoffs from Internet companies. What are the characteristics of the inflow and outflow of talents in the Internet industry? What kind of signal does this round of layoffs send?

Downsizing and updating

In the Internet industry, layoffs are often referred to as "optimization." Internet practitioner Xu Zhao (pseudonym) described to this reporter: "From the perspective of the Internet, for example, some innovative businesses, if it is still a heavy asset investment business and can not do data and achievements, it is easy to be optimized. ”

The reporter learned from Lagou Recruitment, which specializes in providing recruitment services for the Internet industry, that at the end of 2021, the trend of "optimization" of Internet industry personnel is obvious.

Since December 2021, the number of users on the platform who have been leaving has increased, and by March this year, more than 2.76 million users were unemployed, an increase of 2.1% compared to the same period last year. These people are mainly from Beijing (15.1%), Shenzhen (10.6%), Guangzhou (10.1%), Shanghai (9.6%), Chengdu (8.3%), and focus on the three industries of consumer life, games and artificial intelligence.

On December 29, 2021, Zhaopin conducted a survey around the people who were laid off on the Internet that year, which showed some characteristics of Internet companies in layoffs.

For example, unlike the traditional industry that "the larger the scale of the enterprise, the harder the job bowl" left to the outside world, the scale of Internet companies and the proportion of layoffs are almost positively correlated: the larger the scale of the enterprise, the more inclined to take layoff measures.

The layoffs are concentrated in younger age groups. Among the respondents who have been laid off, 28.6% said that they have worked in the company for less than 1 year, 36.2% have worked for 1 to 2 years, and 23.2% have worked for 3 to 5 years. The emergence of this phenomenon is related to the compensation policy for layoffs. According to the provisions of the Mainland Labor Law, the compensation that enterprises should give to departing employees is: according to the standard of one month's wage paid to the employee for each full year of service in the employer ("N+1"). In addition, this phenomenon is also related to the fact that enterprises generally give priority to the feelings of "elderly" employees in order to ensure the stability of the company. However, in the statistics of Zhaopin Recruitment, the number of those who have been compensated is actually a minority, and only 33% of the dismissed respondents said that they received "N+1" compensation. 25% of respondents said that before being laid off, the company did not even communicate with them.

The reporter learned from the boss direct recruitment that this spring, the recruitment scale of the Internet industry still maintained growth, only a year-on-year growth rate of 13%, at a low point since 2019, and the fierce competition for job hunting further increased.

The reporter learned that under the influence of policy regulation, in the spring of 2022, the education and training industry and the real estate industry have experienced a contraction in the scale of recruitment. In addition to the industry in which the job was originally worked, the preferred industry for job seekers is the Internet, which further intensifies the job competition in the Internet industry.

It is worth noting that the popular resume delivery areas on Lagou recruitment are games, software services and consumer life, which coincides with the top three areas of posting positions, and basically coincides with the areas where personnel are heavily optimized.

"This is actually sending a signal that while various industries are downsizing, they are also actively changing blood." The talent strategy of the Internet industry, from scale priority to quality priority, is accelerating the landing. Lagou recruitment related researchers said that there may be a new trend in the industry: enterprises have improved the standard definition of excellent talents, invested more cautiously in labor costs, and "cost reduction and efficiency increase" have become a new strategy for some enterprises to ensure development.

Conduction link

According to the local statistics of Zhaopin recruitment at the end of 2021, the reasons provided by Internet companies to the laid off are mainly "difficulties in the production and operation of enterprises", accounting for 43.4%. The second is "enterprises to adjust the organizational structure, personnel optimization", accounting for 37%. However, those who have been laid off do not see it this way in private. 61.3% of the respondents believe that the company's large-scale layoffs are due to "the economic situation is not good, and the traffic of the Internet industry has peaked."

Xu Zhao told reporters that from the perspective of enterprises, the topic of layoffs is generally avoided, because a little more talk is easy to leave room for speculation for the outside world. He said that there are generally two reasons for layoffs: "bright" and "dark". "Ming, is the business adjustment, reasonable personnel optimization strategy; dark, is to find profit margins."

Xu Zhao believes that the industry is now facing a universal situation: "When money is not easy to earn, enterprises shrink the scale and reduce labor costs, which is the general direction." Especially when listed companies are difficult to start from the source of growth in the case of business contraction, they can also optimize reports by choosing to throttle expenditure and "improve the ratio of people to efficiency". The execution logic is: "Specific to which business and department to lay off, it is certainly not profitable but also costly".

In fact, in 2019, the Internet industry has already felt the "chill" of traffic. According to questMobile China Mobile Internet 2019 Semi-annual Report released by QuestMobile, a research institute focusing on mobile app data and mobile user behavior data analysis on July 23, 2019, from January 2018 to June 2019, the year-on-year growth rate of china's mobile Internet user monthly active users (MAU) users fell from 6.2% to 2.8%, and from February 2019, the MAU scale did not continue to grow. In Q2 2019, the size of monthly active users fell by 1.93 million. In addition, the growth rate of per capita single-day use time per user has also slowed down year-on-year, from December 2018 to June 2019, from 22.6% to 6%, and the per capita single-day use time is 358.2 minutes.

The reporter noted that the Yuanshan Research Institute wrote that although the business of each company is different, from the perspective of the capital market, the high valuation supporting Internet companies mainly stems from two expectations: the total user scale and the value growth contributed by a single user. However, when the scale of users has grown weakly for a long time, at the same time, in the Internet industry, whether it is mainstream enterprises in the fields of content, e-commerce or local life, it has been painful for many years that the unit price of customers has not gone up. At the same time, regulatory policies limit how traffic can be activated. Some companies have found ways to open source by increasing membership fees and increasing advertising capacity, and at the same time, in terms of throttling, they have adopted the direct method of layoffs.

Zhaopin said that the flow of personnel in the field of online games was affected by policies such as the suspension of the issuance of game version numbers.

Internet industry researcher Ma Jihua told this reporter that in his view, the layoffs of Internet companies are the result of multiple factors. First, the demographic dividend period enjoyed by large Internet companies is basically over, user growth is close to the ceiling, and they are successively in a period of deceleration and gear shifting, changing the business layout, and layoffs are the needs of transformation. Second, affected by the prevention and control of the new crown pneumonia epidemic and the economic development environment, Internet companies also need to open source and reduce expenditure and internal potential, and layoffs will help save costs and develop in the long run. Third, after the change of regulatory thinking, the domestic promotion of anti-monopoly and curbing the disorderly expansion of capital, the era of reckless growth of Internet companies has ended, and companies that rely on financing and burning money to develop have to start shrinking their business, which will cause a considerable scale of layoffs.

Behind the "optimization"

Xu Zhao believes that the significance of this round of layoffs remains to be seen. He said that Internet companies are basically asset-light businesses, and a large part of the cost investment is in manpower. When a company wants to turn around and needs to cut a certain business, in fact, the compression and adjustment of manpower is also a natural move, but it will attract special attention from the outside world.

Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of Zhejiang University's International United Business School, said in an interview with the media that Internet companies choose to lay off employees instead of reduce wages, which means that Internet companies are shrinking in business expansion, especially in terms of diversification.

Zhaopin believes that the Internet industry has entered a period of adjustment, the growth rate of the industry has slowed down, and the growth of talent demand will tend to be cautious. Xu Dandan, founder and CEO of Lagou Recruitment, said that the industry's talent strategy has changed from scale priority to quality priority. Correspondingly, the investment of enterprises in high-quality talents will also increase. "It can be said that the Internet job market has shifted from the incremental dividend model to the era of stock game."

The reporter noted that there are also market views to analyze this phenomenon from the perspective of enterprise life cycle. In 1972, Harvard University Professor Larry E. Greiner proposed the organizational life cycle theory, the growth and development of enterprises is roughly divided into five stages of entrepreneurship, aggregation, standardization, maturity, redevelopment or decline, each stage of organizational structure, leadership style, management system and employee mentality has its own characteristics, each stage in the development process will encounter management problems, resulting in organizational crisis. The relevant market view is that most of the large Internet companies in China are not yet old, in fact, they are still in the standardized stage of the organization. The main crisis of enterprises at this stage is that the organization is too large, the number of departments with poor profitability is increasing, and the middle managers are gradually bureaucratized, similar to the situation encountered by Apple in the mid-80s, so the last place is eliminated, and optimizing the department structure is a necessary measure for these enterprises at this stage.

Ma Jihua believes that the Internet layoff storm in 2022 may mark the transformation of China's Internet companies from a period of scale expansion to a period of stable growth, and Internet companies have begun to change from fighting for capital to fighting for traffic to fighting for operation and management, which is also in line with the characteristics of the digital economy brought by 5G.

"In short, in the case of increased economic and social uncertainty, Internet companies must also live a fine management." Ma Jihua commented.