Big tech bleeds, Southeast Asia ad tech hit, but not as hard

Cumulative lay off numbers in the tech sector in the last quarter of 2022 and first few weeks of the new year spell carnage. 

It all started with Twitter shedding off half its workforce in November 2022. Biggies such as Google, Microsoft, Amazon, Meta made eye-popping headlines with some of the biggest mass lay-offs we’re witnessing in tech history. Closer home, Shopee, a subsidiary of Singapore’s Sea Ltd., let go of as many as 7,000 people and GoTo, the merger of ride-hailing provider Gojek and e-commerce firm Tokopedia resulted in the retrenchment of 12% of total employees in Indonesia, Vietnam, Singapore, and India.

The impact of these layoffs is being felt all over, or at least anywhere that tech touches which today is everywhere. Adtech and martech are already caught in the ripple effect with Salesforce firing roughly 10% of its workforce as it reverses pandemic hiring. IAS joined forces reducing 13% of its headcount. And the list continues as Infosum let go of 12% of its workforce, Taboola lost 6%, Unity 4% and AppLovin laid off 13% people.

“In the US, we’ve seen a range of companies announce their intentions to downsize aside from those in tech industry—Goldman Sachs, PepsiCo and even vaping company Juul just recently laid off a third of its workforce. So, at this stage, no sector seems immune from layoffs in the market, and it’s likely their Southeast Asian arms will follow suit if they haven’t already,” said Elysha Young, associate director, trends, Asia Pacific, Mintel.

Pullback from years of aggressive hiring

While the economic downturn has forced the hand of most big companies, for many in the tech sector, Covid was a period of heady growth. They invested too much and hired too many new people presuming that consumers’ rapid uptake of e-commerce would continue apace. Companies in Southeast Asia were not exempt from that.

“With recession conditions are setting in, (tech companies) are cutting back spend and downsizing significantly in a bit of a period of correction,” added Young.

That said, all the companies that have announced layoffs are not in the same boat. US tech majors are facing the heat but are still hugely profitable. “The regional tech majors such as Shopee, Lazada and GoTo are working hard to move away from chasing valuations to focus on long-term business health. They are downsizing to manage cost line and brought forward profit milestones,” according to Himanshu Shekhar, Group M’s Indonesia, Thailand and Vietnam CEO.

In ad tech, the revenue model is based on the amount of dollars flowing into their platforms from where they can subsequently take a cut from. The money is not showing up in the way it once did for ad tech companies leading to job cuts. “Those companies that staffed up too heavily in client services, account management and sales will or have been forced to cut back. The media spend on their platforms is simply not sufficient,” said Duncan Craig, founder, DC Comms, an adtech PR agency.

“Some global companies will and have cut back their presence in some (new) markets or will curtail market expansion plans.”

However, most experts feel that while the bulk of the job losses in adtech were in the US; the impact in APAC has been milder than their headquarters. Moreover, the effect is likely to be even less severe in local offices than regional headquarters, at least for now. 

In fact, Mintel is even optimistic that for adtech and martech companies, the extensive layoffs of knowledge workers across sectors could actually be an unexpected boon for client retention and acquisition.

Asia: Silver lining amid spate of global sackings?

In times of recession, advertising and marketing spend are often the first to be cut, even though remaining top of mind for consumers during these periods is vital to retain share of market.

Solutions that help automate these processes may well be sought after by understaffed marketing teams in companies across sectors as they shift investment away from traditional marketing initiatives and look for more data-led solutions.

As per Craig, Australia will be the focus for firms that continue to operate in APAC because the market is more advanced digitally. In APAC, adtech firms will look to win key global or regional clients and the smart companies will zero in on pockets of growth such as CTV, retail media, AI optimisation, gaming, and identity and first-party data offerings. 

Optimism aside, both adtech and martech companies have to future-proof themselves besides just surviving the upcoming economic roller-coaster. 

In today’s evolving media landscape, where consumers are opting out of having their data taken at every turn, the companies will struggle to offer the same targeting that they could. With Apple’s App Tracking Transparency, suddenly companies like Meta can’t monitor their users’ every move. As per Mintel’s Global Consumer research shows that consumers in Southeast Asian markets such as Indonesia and the Philippines say that it is important for them to know that companies protect their personal information (89% and 91%, respectively).

“Adtech companies will need to design offerings that don’t rely on huge amounts of data in the first place. This might mean moving away from hyper-personalisation and a bigger focus on content that engages and resonates more strongly. This will enable the collection of first party, rather than third party data,” said Young.