Adrian Weckler’s tech year in review: Stocks crash and job losses follow as Elon Musk’s Twitter move hogs the headlines
The big tech story of 2022 was the tech industry’s sudden, brutal decline.
From having boomed during the pandemic, things turned south almost overnight in early summer. Valuations and market caps fell by up to 80pc, from companies like Zoom and Docusign to the bluest of blue chip giants in Apple and Google.
“We overhired for the world we’re in,” Stripe’s Limerick-born co-founder Patrick Collison said about its layoffs in Dublin and San Francisco. “We were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown.”
This is an explanation that was repeated by dozens of tech CEOs and founders.
“At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth,” said Mark Zuckerberg, announcing 11,000 layoffs (including 350 in Dublin) last month. “Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected. Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected.”
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Patrick Collison (left) and John Collison of Stripe which announced job cuts. Photo: David Paul Morris/Bloomberg
In Ireland, the effect has been felt as much as anywhere. Meta and Stripe have seen the sharpest cuts among multinationals, while indigenous tech firms like Intercom, Flipdish and LetsGetChecked have also been laying people off. The news isn’t all bad, with companies like TikTok, Workday and Microsoft all still hiring. But as we move into 2023, it looks like the layoff pressures aren’t over yet.
2. Crypto’s crash
If the wider tech industry suffered significant setbacks, it has been even worse in the crypto world. From a high of $56,000 (€53,000) a year ago, bitcoin has now slumped to €16,000, with other major crypto coins following suit. The industry was plagued by several major setbacks and scandals, culminating in drama several weeks ago when the crypto exchange FTX, headed by Sam Bankman-Fried, collapsed sinking billions of customer deposits. As usual, the circumstances around what was one of the industry’s biggest exchanges are shrouded in mystery and suspicion. While opinions are as polarised as ever in what might happen now, some big institutions are starting to call it.
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Sam Bankman-Fried, founder and former chief executive officer of FTX Cryptocurrency Derivatives Exchange. Photo: Jeenah Moon/Bloomberg
“The apparent stabilisation of bitcoin’s value is likely to be an artificially induced last gasp before the crypto-asset embarks on a road to irrelevance,” tweeted the European Central Bank at the beginning of December.
If crypto had a tough time, spare a thought for the collectors of crypto-derived Non-Fungible Tokens (NFT). A ‘Bored Ape Yacht Club’ NFT that Justin Bieber spent €1.2m on in January was worth just €65,000 by November. NFTs marketed by Premier League football clubs have also seen their value plunge for the unfortunate fans who were suckered into buying them.
3. Helen Dixon’s get-tough move on Big Tech
For much of the four years since GDPR has been in effect, Helen Dixon’s Irish Data Protection office has been a target for critics from some parts of Europe. The main complaint has been that the Irish DPC goes too slowly and too softly on big multinational tech firms whose bases are located in Ireland. But 2022 may have been the year that those criticisms were answered. In September, Ms Dixon slapped a €405m fine on Instagram for not protecting children’s data.
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Data Protection Commissioner Helen Dixon. Photograph: Steve Humphreys
This was followed in December by a €265m fine on Meta for not preventing millions of users’ phone numbers, emails and other personal data being ‘scraped’ and published on the internet. Added to the €225m fine imposed on WhatsApp in late 2021, it means that the Irish regulator has now hit Meta with almost €1bn in regulatory fines in the last 15 months.
While that only adds up to around a month’s global profit for Meta, it comes at a time when Mark Zuckerberg’s company is in trouble. In a period when it is cutting thousands of jobs worldwide to save money, €1bn is no longer the petty cash consideration it might once have been.
It’s also a big step up from the mere €450,000 fine on Twitter two years ago that sparked an outcry over its small size.
Even the regulator’s sharpest critics have taken note; Max Schrems, the Austrian privacy campaigner who has been the Irish DPC’s bete noir, called the latest €265m fine “a good start”. That’s the first even vaguely nice thing he’s had to say about Ms Dixon’s office in five years.
4. Twitter’s Elon Musk saga
For sheer drama, there was little to compare to Elon Musk’s takeover of Twitter in 2022. From first agreeing to buy it on a whim (without due diligence) to being made fulfil the purchase on threat of legal action, to his gutting of the company’s resources, it has been hard to take one’s eyes off the saga.
As the takeover was only completed in late October, it’s hard to know definitively yet what the long-term effect on the platform has been. But so far, its been chaotic. Mr Musk fired most of his US staff, leading to critical shortages of expertise in areas that deal with hate speech and dangerous content. By the middle of December, organisations tracking such content reported a sharp rise in racist and anti-Semitic slurs. This may be related to Mr Musk’s decision to give an amnesty to thousands of accounts which were suspended for breaking Twitter’s rules on racist or hateful speech that could incite violence.
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Twitter executive Sinéad McSweeney
In Ireland, Mr Musk appears to have come a cropper in his attempt at a drive-by firing of the company’s Irish lead, Sinead McSweeney. Ms McSweeney was one of many who did not respond to Mr Musk’s email that gave recipients an ultimatum to be “hardcore” or get out. The company then removed her access to systems such as email, as if she no longer worked at the firm. Ms McSweeney went to the High Court, which told Twitter they couldn’t fire someone that way. Mr Musk may be firing so many people to try and pay the $1bn in interest payments on the $44bn he foolishly agreed to pay for the company, which is, and was, way over its actual value. But he might find that, unlike in the US, casually firing people in Ireland can turn out to be a very expensive business.
5. The transatlantic data ‘ban’ pantomime goes around the sun one more time
Another year, another threatened ban on transatlantic data that looks set to be fudged by a cobbled-together treaty that will probably be struck down by the European Court of Justice.
In early 2022, the Irish Data Protection Commissioner moved ahead with a decision to stop Facebook and Instagram being allowed transfer data to the US from the EU. This was because the European Court of Justice ruled that it had to, due to inadequate protection for privacy in the US.
But under EU rules, that Irish decision had to be sent to other countries’ regulators before being enforced. A handful of them took issue with some part of the decision, triggering an enforcement delay of several months, at least.
The new deal between the US and EU is doomed to be struck down again by the European Courts
That delay looks to be just about long enough to let Meta wait for the latest US-EU transatlantic data agreement to be finalised; this is expected any week now. So Meta’s bosses, once again, get to sit back and relax, knowing they won’t have to consider restricting Facebook and Instagram in the EU for a while, as they were again warning they might have to do in their annual reports.
“Yes, but only for now,” some privacy industry commentators said. “The new deal between the US and EU is doomed to be struck down again by the European Courts. Then the data ban will be back in play.”
Indeed. Just like the last time, right? In the many years that I’ve been following this issue, from ‘Safe Harbour’ (struck down) to ‘Privacy Shield’ (struck down), here’s how the loop plays out. First, there’s a transatlantic agreement.
Then comes an internal EU challenge. The transatlantic agreement is struck down by EU courts, with a data ban threatened. In steps the European Commission and US authorities with a new transatlantic agreement and it’s back to step one.
We’re currently in cycle number three of this loop. And there will be a fourth and a fifth, probably spanning the next decade.
Why? Because neither the US nor the EU will compromise on what they believe to be inalienable, imperative positions. The US simply won’t accept that privacy rights in Europe mean it can’t monitor domestic data traffic in a way it deems essential for its own national security.
And the EU looks unlikely to accept that the US can perform whatever kind of data sweeps it wants on EU citizens using services, like Facebook, in the EU.
6. Irish tech companies remained relatively well funded
Despite the crash in the second half of the year, there was some notable funding activity in the first half. Tech funding from venture capital rose to a record €778m in the first six months of 2022, despite slumps in public tech stocks and private tech company valuations.
That was a 21pc rise on the amount raised at the same time last year, which was a record at the time.
The overall growth was due to a huge increase in deals between €10m to €30m (up 50pc to €257.5m) and deals over €30m (up 36pc to €371m). However, the number of funding rounds valued at under €10m fell sharply.
And there was a 50pc fall in funding from overseas investors, which fell to €152m from €303m in the second quarter.
Fintech was responsible for the largest share of funding deals, at €220.3m or 29pc of the total. This was followed by software on €187m (24pc) and life sciences on €134.6m (17pc).
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