Two major pieces of news dropped in the past 24 hours—layoffs at Google parent Alphabet, and Netflix’s co-CEO stepping down from the role—so today’s Data Sheet is evenly split between the announcements.
First, let’s dive into Alphabet CEO Sundar Pichai’s letter announcing that the company is eliminating about 12,000 jobs, or 6% of its global workforce.
Much of Pichai’s message is, by now, boilerplate stuff for the tech industry. The company hired too aggressively over the past few years, expecting rapid growth to continue post-pandemic. Then the economy took a turn, necessitating some bloodletting. Affected employees will get generous severance packages. The CEO takes responsibility for the misread. Company executives remain excited about the future.
“Over the past two years we’ve seen periods of dramatic growth,” Pichai wrote. “To match and fuel that growth, we hired for a different economic reality than the one we face today.”
But read a little deeper into Pichai’s mea culpa, and there’s a clear issue weighing on his mind: Microsoft’s A.I. advances.
While much of the 577-word message is garden-variety stuff, Pichai goes out of his way on two occasions to highlight the company’s A.I. ambitions. Early in the memo, Pichai says he’s “confident about the huge opportunity in front of us,” specifically mentioning “our early investments in AI.” Later, Pichai teases the imminent arrival of A.I.-related leaps across its suite of services.
“Pivoting the company to be AI-first years ago led to groundbreaking advances across our businesses and the whole industry,” Pichar wrote. “Thanks to those early investments, Google’s products are better than ever. And we’re getting ready to share some entirely new experiences for users, developers and businesses, too. We have a substantial opportunity in front of us with AI across our products and are prepared to approach it boldly and responsibly.”
The comments suggest the company is keenly aware of whispers that it’s moved too cautiously on the A.I. front, particularly as Microsoft generates copious buzz about integrating preferred partner OpenAI’s captivating machine-learning technology into its products. For further evidence, look at the New York Times’ report Friday that Alphabet executives called in founders Larry Page and Sergey Brin, who aren’t a regular presence at the company, to review A.I. product strategy.
Google’s slower and steadier approach still might win the A.I. race. For now, Pichai clearly wants employees and investors to know that Microsoft will soon have a giant rival breathing down its neck.
Give Netflix co-founder Reed Hastings this much: The man had a vision.
Asked in 2002 about his driving motivations for the company, a fledgling DVD-by-mail outfit at the time, here’s what Hastings told Wired: “The dream 20 years from now is to have a global entertainment distribution company that provides a unique channel for film producers and studios."
Needless to say, mission accomplished and more.
Hastings announced Thursday that he’s transitioning from co-CEO to executive chairman, serving as a “bridge” between management and the company’s board. He’ll also focus more on improving Netflix’s stock price and tending to his philanthropic ventures.
The founding CEO lived up to two of his most-treasured values—innovation and flexibility—while upending the global entertainment landscape.
The latter principle served Netflix particularly well in recent months, as Hastings backed off his long-held aversions to offering an ad-supported tier and cracking down on password sharing. Both shifts have Netflix well-positioned to generate short-term revenue bumps and emerge from the streaming wars on solid footing. Netflix shares jumped 7% in midday trading Friday after the release of fourth-quarter earnings showed better-than-expected subscriber growth.
For co-CEOs Ted Sarandos and Greg Peters, who was anointed as Hastings’ successor Thursday, the challenge becomes building on Hastings’ legacy of innovation.
As it stands, Netflix is focused more on evolution than revolution, looking to squeeze more out of its core streaming business (a venture into mobile gaming is underway, though early results are mixed at best). Netflix isn’t a particularly diversified business relative to the biggest Big Tech giants, and the company isn’t investing heavily in cutting-edge technology like virtual reality and generative A.I.
That approach is likely wise for the time being, given the uncertain market for the metaverse, VR headsets, and other ambitious tech. Sooner or later, though, Netflix will need to make another major pivot—this time without Hastings’ vision leading the way.
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Jacob Carpenter
