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Comment by kevstev | Hacker News Reader

Google's profits dropped last quarter, and that is a rare occurrence for them. Metas revenue actually fell last quarter, with profits dropping 35%. IIRC, that's the first revenue drop they have had since going public.

This isn't about stock prices, this is about the strength of the underlying business.

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>Google's profits dropped last quarter, and that is a rare occurrence for them.

Google's net income went from $16.4B Q1 to $16B Q2. Such an insane amount of money.

[Q1]: https://abc.xyz/investor/static/pdf/2022Q1_alphabet_earnings...

[Q2]: https://abc.xyz/investor/static/pdf/2022Q2_alphabet_earnings...

Judging by the financials, the underlying business for both is strong, especially relative to many other kinds of businesses. The drop, still, does not look fatal when considering how much growth there was in 2020 and 2021.

Sure but the future is uncertain and when you’re selling ads it’s hard to control revenue. It’s much easier to control expenses.

> the future is uncertain

much less uncertain than any other companies IMO. They're printing money.

Today sure. But remember you have to boil the frog slowly lest it jump away.

They've pretty much thrown the frog straight into the boiling pot havent they?

In april they held a private concer featuring lizzo, then in july tell employees to increase productivity.

From lizzo to layoffs in two months.

I mean how? Advertising expenses drain much faster in down turn.

They have much better insight than the rosy numbers put forth in their quarterly earnings. I think they are sensing rough waves ahead.

Even if the economy overall chops along with small (but positive) real GDP growth, persistently high (relative to the last decade) interest rates are devastating to growth stock valuations

I agree, I mean the businesses overall are very strong. That said, as a shareholder, watching Google and FB's headcount soar over the last 5-10 years to stratospheric numbers, they have to have a point where they sit down and take a hard look at what everyone is doing and be realistic about whether the projects make sense. I am all about R&D and experimentation and moonshots and the like, but the sheer number of bodies, especially in relation to "hits" that have been made, it all feels very low. The latest Pixel phones come to mind as a real home grown hit at Google, but so many of their products seem rudderless and the result of a sprawling bureaucracy[1]. It certainly feels to me that at least 20% of the workforce could be cut with probably a net gain to the organization overall. Is it fatal? Of course not- but it could be if you just let the rot sit around.

FB/Meta is the same- They have made some low key progress with Groups, have essentially wiped out craigslist as a marketplace, made some great strategic investments like WhatsApp, and essentially cut their potential replacements off at the knees by quickly copying snapchat and to some extent tik-tok, but Meta also seems poised to throw billions and billions of dollars into this Metaverse furnace, and I just don't see that working out.

I say this as a shareholder of both firms, that I have held since their IPOs or shortly thereafter.

[1] Take their home products for instance. There are nNest protects (smoke detectors/motion detectors), thermostats, cameras and doorbells... its an absolute layup to turn this into a security system far better than the crap ADT pushes. Yet... they just haven't for over 10 years now. And then they try to force a shitty subscription on you to use their cloud features that are really worthless, and have cut off APIs to third parties so I can no longer have my doorbell play through my Sonos. Its kind of maddening to watch.

> That said, as a shareholder, watching Google and FB's headcount soar over the last 5-10 years to stratospheric numbers, they have to have a point where they sit down and take a hard look at what everyone is doing and be realistic about whether the projects make sense.

As an employee, shareholders have to remember that sometimes stock prices go down, instead of hoping for cost cutting via layoffs.

Shareholders have had it good for a long time, especially during covid, with stock prices higher now then before the pandemic. Time to pay back karma.

Agreed - stock price is irrelevant for the most part - it's the actual business and cash flows that are suffering and I think it's long past time there was some correction in the number of projects and people working on them.

Check my post history and you will see I wholly agree that stock price is an irrelevant metric.

Also, financial indicators are a lagging metric. If companies are anticipating a recession and cutting advertising and marketing budgets, that will impact G/FB's future revenues. If they hired anticipating 20% YoY growth, this is the time to cut.

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