Exclusive: Amazon tightens its belt

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Good morning! If you’re wondering how the economy is doing, look to Amazon. Just don’t be surprised if the outlook is a little worrying.

Scoop: Amazon's cost-cutting measures

Amazon is starting to tighten its belt. One of the country’s largest employers, it's showing it’s not immune to the economic uncertainty weighing down everyone from Alphabet to Zoom. And because Amazon’s a rare bright spot in the increasingly gloomy tech sector, its cost-cutting measures should send a dire message to most other businesses.

Recruiters are unable to extend offers to candidates in some divisions, like Amazon Music, sources told me. In other divisions, such as devices, hiring has been significantly, if not entirely, curtailed. College recruits for that division will also now be sent to other units, the sources said.

Amazon disputed the notion there was a freeze in hiring in devices, which houses Alexa and perhaps soon iRobot: “The message shared last week identified the roles recruiters will prioritize in the short term,” an Amazon spokesperson said in an emailed statement.

The company says it continues to hire — which has been Amazon’s public message since the downturn started — and instead says it is simply refocusing recruitment efforts on more-strategic roles.

“Amazon continues to have a significant number of open roles available across the company,” the spokesperson said. “We have many different businesses at various stages of evolution, and we expect to keep adjusting our hiring strategies in each of these businesses at various junctures.”

But even recruitment for open roles has gotten more difficult. Across Amazon, including in AWS, recruiters are also limited in how high a salary they can offer prospective employees.

In the past, for example, recruiters could use an internal calculator to estimate what a person’s four-year salary would look like and offer as much as 120% of that prediction, a mechanism that helped woo top talent who otherwise may have drifted to Microsoft or Google.
Now, anything above 80% of the projected salary requires manager approval, according to sources with direct knowledge of Amazon’s current hiring practices.
While Amazon ceremoniously raised its pay bands earlier this year, the limits on salary offers have effectively negated those increases, the sources added. “We’re committed to offering competitive compensation and benefits for all employees,” the Amazon spokesperson said.

The hiring changes underway are already having big ramifications. Amazon just had its largest quarter of head count reductions.And it appears head count could be further reduced across the board, not just in warehouses. AWS, for example, is doing a considerable amount of “restructuring,” according to sources, which employees say is the company’s preferred mechanism for laying off workers.

“As a regular course of business, we consistently review team structures to ensure that employees stay connected to customers and are empowered to build and innovate,” the Amazon spokesperson said.

Some businesses are often viewed as a bellwether for whole sectors. Salesforce, with its historically strong growth and wide breadth of products focused on business users, is often a signal for enterprise technology, while Snap and others give solid indicators on the state of the ad industry.

But Amazon is a bellwether for the whole economy. And if it’s taking more aggressive steps to control spending, there’s a long road ahead for everyone.

— Joe Williams

Make your office sparkle (and small)

In 2017, on-demand consulting firm Catalant moved into a 27,000-square-foot office in Boston’s Fort Point neighborhood. It doesn’t really need that big of a space anymore, but Catalant still thinks it’s worth having an office. And the key to making the space worthwhile? Making it cool.

The future of the office is unclear. But at least for now, Catalant is looking into a smaller, more “creative” space when the company’s lease ends next June, CEO Pat Petitti told me.

“That could be an unbelievable view of the waterfront, or it could be having a gym in the building, or it could be a private roof deck,” Petitti said. “We want it to be a place that's still in this area, and that employees want to go to feel like they can collaborate easily.”
For reference, the vibes of Catalant’s current office are still cool. When I visited yesterday, workers filled almost every private meeting room, and upbeat music played in the area where most people sat. The other half of the office was fairly empty, though.
Like many tech companies, Catalant is also reducing its office space to about half of what it uses right now. Most Boston-area employees are only in the office one day a week (usually Wednesdays), and Catalant’s workforce is spreading across the U.S.

Catalant is still bracing for whatever happens to the office next. The company plans to sign on to a shorter lease because it’s hard to predict how much more or less people will use the office in the long term, but Petitti made clear that he thinks it’ll never entirely disappear.

“I think the office continues to matter,” he said. “Having a space that is the company home, and where people can go when they want to come in, is really important.”
But Petitti added that companies are going to need to think hard about the amount of space they realistically need, especially if they need to cut costs during a recession.
“Space is one of the biggest costs companies have outside of laying off, and they can control it,” he said. “Nobody wants to lay their employees off … You’ve got to look at really expensive items like space.”

— Sarah Roach

Peloton’s lost momentum

Now that the world is reopened, people are increasingly choosing fresh air over a Peloton class. New data from Wi-Fi networking startup Plume Design found that during the first six months of 2022, the average amount of data streamed to at-home fitness bikes was down 23% year-over-year, the single largest contraction Plume measured among home Wi-Fi device usage.

It’s a bleak stat given Peloton’s recent turmoil. The company announced plans to cut 780 employees, and saw losses of $1.2 billion and a 28% year-over-year drop in revenue in its most recent quarter. Users who’ve stuck with Peloton are also working out less and less, down 26% year-over-year.

Read the full story here.

People are talking

Cloudflare co-founder and CEO Matthew Prince and VP Alissa Starzak said the company isn’t likely to terminate services to controversial customers:

“Just as the telephone company doesn't terminate your line if you say awful, racist, bigoted things, we have concluded in consultation with politicians, policy makers, and experts that turning off security services because we think what you publish is despicable is the wrong policy."

Medium's Tony Stubblebine doesn't think the platform is the best place for journalists in the long-run:

"For me, fundamentally, the mistake was thinking that journalism was where Medium was going to shine."

Making moves

Zendrive is spinning off insurance startup Fairmatic. Jonathan Matus, co-founder of driving analytics company Zendrive, will become Fairmatic's CEO.

Steven Stone joined Rubrik to lead the Rubrik Zero Labs threat intelligence initiative. Stone previously served as a VP at Mandiant.

Mark Lenhard is the new CEO of Zepz Group, the parent company of WorldRemit. Lenhard was previously the COO of Bill.com.

Rajeev Misra stepped down as SoftBank’s corporate officer and executive VP. He will remain CEO of SoftBank Investment Advisers.

Necip Fazil Ayan is joining LinkedIn’s Knowledge Graph, the company’s large-scale data and engineering project. Ayan previously served as the director of Facebook’s AI team.

John Mocny is leaving Canoo, where he led the EV company's manufacturing, amid plans to outsource production.

In other news

Disney's looking into its own version of Amazon Prime, where customers could get perks or discounts as an incentive to use its parks and streaming service.

Meta's building a team focused on adding paid features to its platforms. It'll be called New Monetization Experiences, and head of research Pratiti Raychoudhury will lead it.

Arm is suing Qualcomm, alleging that it violated its licensing agreement by transferring licenses from its recently acquired Nuvia subsidiary without Arm’s consent.

Washington, D.C.'s attorney general is suing MicroStrategy and its CEO Michael Saylor for allegedly evading $25 million in taxes by faking his residence.

Klarna reported heavy losses in the most recent quarter. Its pre-tax loss reached more than $580 million, up threefold from last year.

Toyota is pouring billions more into EV batteries, including spending $2.5 billion on scaling up production at a North Carolina plant.

Netflix wants to charge advertisers $65 per thousand viewers for its ad-supported tier, significantly higher than rival streaming platforms.

Ticketmaster will let event organizers issue NFTs as tickets. It’s partnering with Flow, a blockchain operated by a16z-backed Dapper Labs, for the service.

Team building is out. Co-founder couples therapy is in.

Moving in with your romantic partner can cause bumps in the road. And for Dan Shipper and Nathan Baschez, co-founders of newsletter company Every, starting a business together felt like moving in with a partner. So, like a couple working through their problems, they took their spats to their couples therapist. The practice creates a space “dedicated and planned that you’re going to be diving into the more uncomfortable stuff,” Baschez said.

One overlap between romantic couples therapy and business couples therapy? Money troubles. Instead of talking through personal finance stresses, therapists help founders work through tensions caused by company budgeting decisions. Got to be worth a try, right?

Exclusive: Amazon tightens its belt

Scoop: Amazon's cost-cutting measures

Make your office sparkle (and small)