Facebook and Instagram will reinstate Trump after two-year ban

An image of President Donald Trump appears on video screens before his speech to supporters from the Ellipse at the White House in Washington on Wednesday, Jan. 6, 2021, as the Congress prepares to certify the electoral college votes.

Bill Clark | CQ-Roll Call, Inc. | Getty Images

Meta will allow former President Donald Trump to return to Facebook and Instagram in the coming weeks, the company announced, two years after his suspension was enacted following the 2021 insurrection at the U.S. Capitol.

“As a general rule, we don’t want to get in the way of open, public and democratic debate on Meta’s platforms – especially in the context of elections in democratic societies like the United States,” Nick Clegg, Meta’s president of global affairs, wrote in a blog post announcing the decision. “The public should be able to hear what their politicians are saying – the good, the bad and the ugly – so that they can make informed choices at the ballot box.”

Facebook, Twitter and Google-owned YouTube all made the unprecedented decision to block the sitting U.S. president from their platforms at the time, after they determined doing so outweighed the risk of potential further incitement of violence. The platforms’ bans varied in their degrees, however, with Twitter opting for a permanent ban and Facebook saying its suspension was temporary, eventually setting a timeline of two years before it reviewed the decision.

The suspensions came after a mob charged into the U.S. Capitol on Jan. 6, as lawmakers worked to certify the election of President Joe Biden. Then-Vice President Mike Pence was whisked away to a secure location by the Secret Service, recognizing the danger to him as he oversaw what’s usually a routine procedure in Congress.

Though Trump at one point urged the mob to remain peaceful, he also stoked the lie that the election was “stolen from us,” tweeting at one point during the day that Pence “didn’t have the courage to do what should have been done to protect our country and our Constitution,” presumably by obstructing the election results that denied Trump a second term.

“The suspension was an extraordinary decision taken in extraordinary circumstances,” Clegg wrote. “Now that the time period of the suspension has elapsed, the question is not whether we choose to reinstate Mr. Trump’s accounts, but whether there remain such extraordinary circumstances that extending the suspension beyond the original two-year period is justified.”

Clegg said in making the decision, Meta took into account conduct around last year’s midterm elections in the U.S. and expert assessments of the security environment. As a result, the company concluded “that the risk has sufficiently receded, and that we should therefore adhere to the two-year timeline we set out.”

Still, Clegg said Trump would be subject to “heightened penalties for repeat offenses,” which also apply to other public figures who are reinstated for civil unrest, under a newly updated protocol. If Trump violates Meta’s community guidelines again, the violating posts will be removed and he’ll be suspended anywhere from a month to two years, depending on the severity.

The updated protocol “addresses content that does not violate our Community Standards but that contributes to the sort of risk that materialized on January 6th, such as content that delegitimizes an upcoming election or is related to QAnon,” Clegg wrote. Meta may suppress distribution of such posts and for repeated offenses, temporarily limit access to Meta’s advertising tools. The company could also choose to remove the reshare button on posts that violate those guidelines or prevent them from being run as ads. Meta could take similar steps if Trump posted something that “violates the letter” of its community guidelines but that it deems newsworthy.

“We know that any decision we make on this issue will be fiercely criticized,” Clegg wrote. “Reasonable people will disagree over whether it is the right decision. But a decision had to be made, so we have tried to make it as best we can in a way that is consistent with our values and the process we established in response to the Oversight Board’s guidance.”

Setting the two-year suspension

Platforms like Facebook and Twitter earlier removed or labeled certain posts by the president that they believed to be harmful before ultimately choosing to block his account.

On the evening of Jan. 6, 2021 Facebook said that “two policy violations” on Trump’s page would trigger a 24-hour block on its platforms. The next day, the company said in a statement that it felt “the risks of allowing President Trump to continue to use our service during this period are simply too great,” and said the ban would last “for at least the next two weeks,” through the inauguration.

On the day of Biden’s inauguration, the company said it was referring the suspension to its independent Oversight Board, which Facebook established to make binding content decisions. The Oversight Board said Facebook should set a timeline for reevaluating its decision, which Facebook determined in June 2021 should be two years from Trump’s January 7, 2021 suspension.

In a blog post announcing the timeframe, Facebook executive Nick Clegg said the decision on whether to reinstate Trump’s account would be based on “whether the risk to public safety has receded,” accounting for “instances of violence, restrictions on peaceful assembly and other markers of civil unrest.”

Should Trump be allowed back onto the service, Clegg said at the time, there would be “a strict set of rapidly escalating sanctions that will be triggered if Mr. Trump commits further violations in future, up to and including permanent removal of his pages and accounts.”

Trump has since moved his musings to Truth Social, an app he’s backed that closely resembles Twitter and is led by former Rep. Devin Nunes, R-Calif.

Twitter’s new owner Elon Musk lifted the platform’s suspension of Trump last year, though the former president has yet to resume tweeting from his account.

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WATCH: House Minority Leader Kevin McCarthy recorded venting his opinions about Jan. 6

House Minority Leader Kevin McCarthy recorded venting his opinions about Jan. 6

DOJ files second antitrust suit against Google, seeks to break up its ad business

The U.S. Justice Department on Tuesday filed its second antitrust lawsuit against Google in just over two years. It’s the latest sign that the U.S. government is not backing down from cases against tech firms even in light of a mixed record in court on antitrust suits.

Google shares were down 1.3% Tuesday afternoon.

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This lawsuit, which is focused on Google’s online advertising business and seeks to make Google divest parts of the business, is the first against the company filed under the Biden administration. The Department’s earlier lawsuit, filed in October 2020 under the Trump administration, accused Google of using its alleged monopoly power to cut off competition for internet search through exclusionary agreements. That case is expected to go to trial in September.

Google’s advertising business generated $54.5 billion in the quarter ended Sept. 30 from Search, YouTube, Google Network ads and other advertising.

Google also faces three other antitrust lawsuits from large groups of state attorneys general, including one focused on its advertising business led by Texas Attorney General Ken Paxton.

The states of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia joined DOJ in the latest lawsuit.

Google’s advertising business has drawn critics because the platform operates on multiple sides of the market — buying, selling and an ad exchange — giving it unique insight into the process and potential leverage. The company has long denied that it dominates the online advertising market, pointing to the market share of competitors including Meta’s Facebook.

In its lawsuit, the Justice Department and the states argue that Google sought to control all sides of the market, realizing “it could become ‘the be-all, and end-all location for all ad serving.'”

“Google would no longer have to compete on the merits; it could simply set the rules of the game to exclude rivals,” they allege.

According to the complaint, even one of Google’s own advertising executives questioned the wisdom of Google’s broad ownership in the space.

“[I]s there a deeper issue with us owning the platform, the exchange, and a huge network?” the executive allegedly asked. “The analogy would be if Goldman or Citibank owned the NYSE.”

The harm of Google’s practices, they allege, is that “website creators earn less, and advertisers pay more, than they would in a market where unfettered competitive pressure could discipline prices and lead to more innovative ad tech tools that would ultimately result in higher quality and lower cost transactions for market participants.”

As a result, they added, more publishers are forced to turn to alternative models like subscriptions to fund their operations.

Another part of Google’s strategy, the complaint alleges, was to acquire other companies to grow its power in the advertising market and “set the stage for Google’s later exclusionary conduct across the ad tech industry.” Those acquisitions included a 2008 purchase of publisher ad server DoubleClick and and a “nascent ad exchange” that would become Google’s AdX. This allowed Google to require publishers in some instances to use all of its tools to gain access to any one, rather than working with rival tools for parts of the online ad-buying process.

“In effect, Google was robbing from Peter (the advertisers) to pay Paul (the publishers), all the while collecting a hefty transaction fee for its own privileged position in the middle,” the enforcers allege. “Rather than helping to fund website publishing, Google was siphoning off advertising dollars for itself through the imposition of supra-competitive fees on its platforms. A rival publisher ad server could not compete with Google’s inflated ad prices, especially without access to Google’s captive advertiser demand from Google Ads.”

Google continued to identify potential threats to its dominance, the complaint alleges, like when yield management tools became available to help publishers find better prices for their inventory in real-time outside of Google’s ecosystem.

“So, in response, Google employed a familiar tactic: acquire, then extinguish, any competitive threat,” the complainants wrote, pointing to Google’s 2011 acquisition of yield manager AdMeld.

“Today’s lawsuit from the DOJ attempts to pick winners and losers in the highly competitive advertising technology sector,” a Google spokesperson said in a statement. “It largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court. DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow.”

The DOJ Antitrust Division’s progressive chief, Jonathan Kanter, had recently been cleared to work on Google-related matters, The Wall Street Journal reported earlier this month. Bloomberg had previously reported that Kanter was not permitted to work on issues involving the company while the Department evaluated Google’s request to review his grounds for recusal. Before his time in government, Kanter represented some of Google’s rivals and critics, including Yelp and News Corp.

A Google spokesperson said in a statement last year that Kanter’s prior work and statements “raise serious concerns about his ability to be impartial.”

Google is far from the only tech giant that has seen scrutiny from the federal government. At the Federal Trade Commission, Meta is also the subject of two antitrust suits, as is Microsoft’s proposed acquisition of Activision.

Google and other tech companies have also faced increasing scrutiny from abroad, particularly in Europe, where Google has also fought multiple competition cases and new regulations threaten major changes to tech business models.

The company reports earnings on Feb. 2.

This story is developing. Check back for updates.

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WATCH: Google faces fast and furious pace of lawsuits as antitrust scrutiny intensifies

Layoffs at Alphabet sign Big Tech managing ballooning expenses

A sign is posted in front of a Google office on April 26, 2022 in San Francisco, California. Google parent company Alphabet will report first quarter earnings today after the closing bell.

Justin Sullivan | Getty Images News | Getty Images

Google parent Alphabet (GOOGL) on Friday became the latest technology giant to lay off thousands of workers — a move we expected from the Club holding given falling advertising revenue and growing fears of a recession.

Google, Amazon, Microsoft, Meta, Twitter severance packages compared

Google headquarters is seen in Mountain View, California, United States on September 26, 2022. (Photo by Tayfun Coskun/Anadolu Agency via Getty Images)

Anadolu Agency | Anadolu Agency | Getty Images

Tech companies have laid off tens of thousands of workers in recent months as the industry grapples with a reduced risk appetite from investors and increases in borrowing costs. Laid-off employees across the tech sector enter an uncertain job market, with head count reductions taking place across all experience levels and teams. Few companies, with the possible exception of Apple, have been immune.

Laid-off workers will receive severance packages of varying size and duration, depending on where they work. Here’s what some of the biggest tech names have promised their employees.

Alphabet

Google-parent Alphabet slashes headcount by 12,000

Microsoft

Amazon

Salesforce

Meta

Mark Zuckerberg, chief executive officer of Meta Platforms Inc., center, departs from federal court in San Jose, California, US, on Tuesday, Dec. 20, 2022.

David Paul Morris | Bloomberg | Getty Images

At the time, Zuckerberg promised “every” laid-off employee 16 weeks of severance, plus two weeks for every year of service, as well as vesting of restricted share units and health insurance coverage for a predetermined amount of time.

In December, some laid-off workers from a nontraditional apprenticeship program told CNBC they were receiving substandard severance packages compared with those of other recently laid-off employees. Instead of Zuckerberg’s promised 16 weeks, they received only 8 weeks of base pay, among other material differences.

Twitter

Layoffs at Twitter began shortly after Elon Musk completed his takeover deal in October. Twitter had been expected to lay off more than 3,700 employees, or over 50% of its workforce. Ultimately, many more employees quit after Musk announced that Twitter employees would be expected to commit to a “hardcore” work environment.

Under the terms of Musk’s buyout deal, existing severance agreements were to be honored by new management. But a group of Twitter employees filed a class-action suit in November, shortly after layoffs were executed, accusing Twitter of laying them off in violation of California’s layoff-notification law.

Musk had previously said that laid-off employees would receive three months of severance pay. But some Twitter employees said that when they got their severance letters, they were offered only one month of severance in return for a non-disparagement agreement and a waiver of their right to sue the company.

The class-action suit was updated shortly after filing with allegations that Twitter was offering some laid-off employees half of what they had been promised.

Twitter also laid off more than 4,000 contract workers without giving them prior notice, CNBC previously reported.

— CNBC’s Annie Palmer, Jonathan Vanian, Jennifer Elias, Jordan Novet, Lora Kolodny, Ashley Capoot and Sofia Pitt contributed to this report.

Google is delaying a portion of employee bonus checks

Google CEO Sundar Pichai speaks at a panel at the CEO Summit of the Americas hosted by the U.S. Chamber of Commerce on June 09, 2022 in Los Angeles, California.

Anna Moneymaker | Getty Images

Google executives are deferring a portion of employees’ year-end bonus checks, according to documents viewed by CNBC, as the company moves toward permanently pushing back payouts.

In past years, employees received their full bonuses in January. However, Google will pay qualifying full-time employees 80% of their bonus checks this month and the remaining 20% in March or April, the documents say. Payments in April would be in the second quarter, potentially allowing Alphabet to spread out its costs.

Google described the January payout as an “advance” in correspondence to employees. Leadership said it will be a one-time change due to “transition” of its employee evaluation system and the altered timing for future bonuses.

“After 2023, full bonuses will be paid in March,” the company said in the memo.

Following publication of this story, a Google spokesperson told CNBC in an email, “This one-time 80% bonus advance was extensively communicated to employees in May 2022 and in subsequent communications since, as part of the transition to our new performance management timeline.”

The delayed payment comes as Google CEO Sundar Pichai seeks to reel in costs while still avoiding mass layoffs. Unlike large tech peers Meta, Microsoft and Amazon, Google parent Alphabet has thus far skirted significant job cuts and focused instead on eliminating lagging products and groups. Last week, Alphabet’s Verily health sciences unit said it will cut headcount by 15%, accounting for about 240 lost jobs, and the company also reduced staff in its robotics unit Intrinsic.

In the latter part of 2022, Alphabet canceled the next generation of its Google Pixelbook laptop, slashed funding to its Area 120 in-house incubator and said it would be shuttering its digital gaming service Stadia. Pichai said in September he wants to make the company 20% more efficient.

Meanwhile, Google has been overhauling its performance ratings system. The company recently released new details, showing a larger number of employees will more easily fall into lower-rated categories, CNBC reported last month. Employees said they feared it could be used as a way to reduce headcount without conducting layoffs.

Internal Google employee memes take on company’s bonus check deferrals.

Staffers also expressed concerns with the latest changes to bonus payments. Some told CNBC they weren’t aware of the partial deferment, and they received little help internally as they searched for answers.

One graphic on Memegen, an employee meme generator, showed a split screen of Prince Harry and Meghan Markle, with a quote from Markle that’s edited to say, “Harry is Adjusting great to Google” next to an image of a disturbed Prince Harry with the text “Where the hell did 20% of my bonus go?” 

Sources also described a meme with the text reading “Got my BONU,” referring to the realization that they didn’t receive their whole bonus as expected.

Alphabet is scheduled to report fourth-quarter earnings on Feb. 2. Analysts expect revenue growth of less than 2% from a year earlier, according to Refinitiv, while earnings per share is expected to drop to $1.18 from $1.53. The stock has dropped 31% in the past year.

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Apple had slower headcount growth than tech peers, no layoffs yet

An employee cleans a window at Apple Inc.’s new Canton Road store in the Tsim Sha Tsui district of Hong Kong, China.

Xaume Olleros | Bloomberg | Getty Images

Many of the biggest technology companies are laying off staff as fears of a recession rises. But the job cuts come after a few years of rapid expansion.

On Wednesday, Microsoft announced it will eliminate 10,000 employees, reducing its workforce by 5%, and Amazon began conducting layoffs that will eventually slash 18,000 jobs.

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Microsoft and Amazon are joining tech industry peers including Alphabet and Meta which have also cut staff in recent months.

While each company is slightly different, most companies going through layoffs are blaming macroeconomic conditions and the possibility of a future recession as the reason for their belt-tightening.

But an underappreciated factor is how rapidly tech companies ramped up hiring over the last two years.

In 2020, widespread Covid lockdowns made internet applications more important to people, supercharging business for many tech companies. As sales and profit continued to rise in 2021, they continued to add huge numbers of employees in the hopes that the success they were seeing would become a new baseline. It didn’t work out that way. Growth is slowing, and companies are now having to readjust.

Apple is a major exception: It did not appreciably increase its rate of hiring over the last two years, and also has not announced any layoffs.

A review of SEC filings shows how rapidly the other biggest tech companies grew during the pandemic.

Microsoft had 221,000 full time employees at the end of June 2022, the most recent official figure that’s available. That was a 40,000 employee jump from the same time in 2021, a 22% percent increase in staff. The year before that, Microsoft added 18,000 employees, an 11% increase.

In a note about Microsoft layoffs, Wedbush analyst Dan Ives said that the tech sector had to spend money during the pandemic to keep up with elevated demand.

“Redmond needed to aggressively hire along with the rest of the tech sector and spend money like 1980’s Rock Stars to keep pace with eye-popping demand,” Ives wrote in a Wednesday note.

Amazon is more complicated than Microsoft because it has a huge hourly workforce for its warehouses, as well as the corporate office employees seen in most tech companies.

Still, Amazon grew voraciously in 2021, adding 310,000 jobs. That followed an even bigger expansion in 2020, when it grew over 38% and added half a million employees.

Overall, Amazon reported 1.6 million employees as of the end of December 2021, of which about 300,000 have corporate jobs.

An Amazon executive said that its Covid-era expansion was one reason for cutbacks on Wednesday in a memo to employees.

“During Covid, our first priority was scaling to meet the needs of our customers while ensuring the safety of our employees. I’m incredibly proud of this team’s work during this period,” Amazon retail chief Doug Herrington said in a memo obtained by CNBC. “Although other companies might have balked at the short-term economics, we prioritized investing for customers and employees during these unprecedented times.”

Meta (formerly Facebook) has increased headcount by thousands of employees each year since going public in 2012, according to SEC filings.

In 2020, Meta added over 13,000 employees, a 30% increase, and the biggest year of hiring in the company’s history. In 2021, it added another 13,000 workers. By total worker numbers, it was the two biggest years of expansion in Facebook’s short history.

Alphabet, formerly Google, has not cut as many positions as other large-cap companies, but in recent weeks, it has cut 240 positions at Verily, its health sciences division, and laid off 40 at Intrinsic, a robotics division.

But while Alphabet’s recent cuts are much smaller than some other companies, its growth was similarly massive.

In 2021, Alphabet added over 21,000 employees, or a 15% increase during the year to a total of 156,500 workers. In 2020, it added over 16,000 employees, or a nearly 14% increase.

That growth predates the pandemic, however, as Alphabet has increased headcount at least 10% every year since 2013, and added over 20% new employees in 2018 and 2019 as well.

Apple grew much more slowly during the pandemic. In fact, Apple’s hiring over the past few years has followed the same general trend since 2016.

As of September 2022, Apple had 164,000 employees, which includes both corporate employees as well as retail staff for its stores. But that was only a rise of 6.5% from the same period in 2021, amounting to real growth of 10,000 employees. Apple also hired judiciously in 2020, adding less than 7,000 employees in the year before September 2021.

Correction: A previous version of this story misspelled Doug Herrington’s name.

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We welcome Cisco CEO’s upbeat view on the economy

Chuck Robbins, CEO & Chairman of Cisco, speaking on Squawk Box at the WEF in Davos, Switzerland on Jan. 18th, 2023.

Adam Galica | CNBC

The chief executive of Club holding Cisco Systems (CSCO) on Wednesday continued to strike a confident note on the economy, while indicating that the company’s enterprise customers haven’t notably pulled back on spending for its network routers and cloud offerings. Those are welcomed comments from the head of a company long seen as an economic bellwether, given the breadth of its customer base.

Mobile game spending drops 5% as inflation causes market to cool

The Candy Crush Saga logo displayed on a phone screen.

Jakub Porzycki | NurPhoto via Getty Images

Spending on mobile games declined last year as consumers got more frugal with their purchasing decisions in response to rising inflation, according to a report from app analytics firm Data.ai.

Mobile game spending fell 5% globally in 2022, to $110 billion, Data.ai, which was formerly known as App Annie, said in its “State of Mobile” report Wednesday. The report also looks at the broader state of sectors like mobile ads, retail and social media apps.

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Nevertheless, first-time installs of mobile titles rose 8% to a record 90 billion, with so-called “hypercasual” titles leading the gains.

“We are seeing this major theme emerge of people being more price sensitive and financially more conservative,” Lexi Sydow, head of insights at Data.ai, told CNBC, adding that the “biggest hit” to spending on apps was in gaming.

Faced with economic headwinds such as higher prices and borrowing costs, people are cutting back on discretionary purchases. Gaming especially has come under pressure.

Global sales of games and services, including console and PC games, were expected to contract 1.2% year-on-year to $188 billion in 2022, according to a July research note from market data firm Ampere Analysis.

In recent years, growth in mobile gaming has been the dominant story in the games industry, with major publishers making big bets on mobile game developers.

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Early last year, Take-Two bought mobile gaming firm Zynga for $12.7 billion. In 2016, the maker of Candy Crush Saga, King, was purchased by Activision Blizzard for $5.9 billion. U.S. tech giant Microsoft, meanwhile, is banking on continued growth in mobile gaming with its proposed $69 billion takeover of Activision Blizzard.

That growth has been challenged lately by a number of macroeconomic headwinds, however, including a rise in the cost of living and higher interest rates.

In 2020, Microsoft and Sony launched their respective next-generation gaming consoles, giving mobile more competition.

Last year also saw a return to in-person activities and a normalization of travel rules from the height of the Covid-19 pandemic in 2020, when much of the world was hunkering down at home.

Non-gaming apps proved more resilient in 2022, according to Data.ai’s research, with the value of purchases in such apps rising 6% year-over-year to $58 billion. The growth was driven mainly by subscriptions and in-app purchases in streaming platforms, dating apps and short-form video services like TikTok.

Downloads of non-gaming apps grew 13% from the previous year, to 165 billion.

That did little to offset the slump in mobile game spending, however, with spending across app stores slipping 2% to $167 billion. The figures include installs on third-party Android marketplaces in China, where Google’s official Play app store is banned.

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The market faces further headwinds in 2023, with recently introduced privacy measures from Apple expected to place greater strain on app makers.

Apple launched its App Tracking Transparency feature, which gives users a prompt asking whether they wish to be targeted by advertisers, in 2021.

Data.ai expects global app spend on games specifically to drop a further 3% to $107 billion this year as a result of decreased disposable income and changes to privacy.

Google plans to adopt privacy curbs similar to Apple’s that would limit tracking across Android apps.

“With limitations on your targeting capabilities from an advertiser standpoint, it becomes harder to attract the big whales who spend the most in games,” Sydow explained.

The changes spell trouble for Meta, owner of the Facebook and Instagram social media platforms. Meta Chief Financial Officer David Wehner warned previously that Apple’s ATT could decrease its 2022 sales by $10 billion. The company made most of its $117.9 billion revenue in 2021 from advertising sales.

Meta faces tense competition from rival firm TikTok. The Chinese-owned short video app last year reached $6 billion in overall lifetime spending and is only the second non-game app to achieve that milestone after Tinder, according to Data.ai.

Sydow said the effects of Apple’s privacy measures hadn’t yet appeared in the 2022 numbers — with total spend dropping across both iOS and Google Play — but was likely to have a much greater impact this year.

Despite the overall spending slowdown in 2022, there was still “more demand for mobile service than ever before,” Sydow added. First-time app downloads grew 11% to 255 billion, Data.ai said, while hours spent in apps climbed 9% to a record 4.1 trillion.

Coinbase to slash 20% of workforce in second major round of job cuts

Brian Armstrong, co-founder and chief executive officer of Coinbase Inc.

David Paul Morris | Bloomberg | Getty Images

Coinbase is cutting about a fifth of its workforce as it looks to preserve cash during the crypto market downturn.

The exchange plans to cut 950 jobs, according to a blog post published Tuesday morning. Coinbase, which had roughly 4,700 employees as of the end of September, already slashed 18% of its workforce in June citing a need to manage costs and growing “too quickly” during the bull market.

“With perfect hindsight, looking back, we should have done more,” CEO Brian Armstrong told CNBC in a phone interview. “The best you can do is react quickly once information becomes available, and that’s what we’re doing in this case.”

Coinbase said the move would result in new expenses of between $149 million and $163 million for the first quarter. The layoffs, along with other restructuring measures, will bring Coinbase’s operating expenses down by 25% for the quarter ending in March, according to a new regulatory filing. The crypto company also said it expects adjusted EBITDA losses for the full year to be within a prior $500 million “guardrail” set last year.

After looking at various stress tests for Coinbase’s annual revenue, Armstrong said, “it became clear that we would need to reduce expenses to increase our chances of doing well in every scenario” and there was “no way” to do so without reducing head count. The company will also be shutting down several projects with a “lower probability of success.”

Cryptocurrency markets have been rocked in recent months following the collapse of one of the industry’s biggest players, FTX. Armstrong pointed to that fallout, and increasing pressure on the sector thanks to “unscrupulous actors in the industry” referring to FTX and its founder, Sam Bankman-Fried. 

“The FTX collapse and the resulting contagion has created a black eye for the industry,” he said, adding there’s likely more “shoes to drop.”

“We may not have seen the last of it — there will be increased scrutiny on various companies in the space to make sure that they’re following the rules,” Armstrong said. “Long term that’s a good thing. But short term, there’s still a lot of market fear.” 

Cryptocurrencies have suffered alongside technology stocks as investors flee riskier assets amid a broader economic downturn. Bitcoin is down 58% in the past year, while Coinbase shares are off by more than 83%.

End of a growth era

Coinbase joins a chorus of other tech companies cutting jobs after going on a hiring binge during the Covid pandemic. Last week, Amazon said it would cut 18,000 jobs, more than the online retailer initially estimated last year, while Salesforce reduced its head count by more than 7,000, or 10%. Elon Musk slashed about half of Twitter’s workforce after taking the helm as CEO last year, and Meta cut more than 11,000 jobs, or 13%. Crypto companies Genesis, Gemini and Kraken have also reduced their workforces. 

“Every company in Silicon Valley felt like we were just focused on growth, growth, growth, and people were almost using their headcount number as a symbol of how much progress they were making,” Armstrong said. “The focus now is on operational efficiency — it’s a healthy thing for the ecosystem and the industry to focus more on those things.”

Early last year, Coinbase had said it planned to add 2,000 jobs across product, engineering and design. Armstrong said he’s now trying to shift the culture at Coinbase to “get back to its start-up roots” of smaller teams that can move quickly. 

Coinbase went public in April 2021 and has seen its share price plummet since. The stock is trading below $40 after surging to $341 on its public debut. Coinbase debt that’s maturing in 2031 continues to trade at roughly 50 cents on the dollar. The company still had cash and equivalents of roughly $5 billion as of the end of September. 

Coinbase said it would email affected employees on their personal accounts, and revoke access to company systems. Armstrong acknowledged the latter “feels sudden and harsh” but “it’s the only prudent choice given our responsibility to protect customer information.”

Despite the industry’s domino effect of bankruptcies and a marked drop in trading volume, Armstrong was steadfast in arguing that the industry isn’t going away. He said the demise of FTX would ultimately benefit Coinbase, as their largest competitor is now wiped out. Regulatory clarity may also emerge, and Armstrong said it “validates” the company’s decision of building and going public in the U.S. The CEO likened the current environment to the dot-com boom and bust.

“If you look at the internet era, the best companies got even stronger by having rigorous cost management,” he said. “That’s what’s going to happen here.”

House GOP to investigate Big Tech’s communications with Biden admin

U.S. House Minority Leader Kevin McCarthy (R-CA) (R) talks to Rep. Jim Jordan (R-OH) as Representatives cast their votes for Speaker of the House on the first day of the 118th Congress in the House Chamber of the U.S. Capitol Building on January 03, 2023 in Washington, DC.

Win Mcnamee | Getty Images

House Republicans are planning to launch a new subcommittee this week that will investigate communications between Big Tech companies and the Biden administration, a source familiar with the matter confirmed to CNBC.

The anticipated launch of the Select Subcommittee on the Weaponization of the Federal Government, reported earlier on Monday by Axios, represents one of the many nods newly elected Speaker Kevin McCarthy, R-Calif., gave to the conservative faction of the GOP caucus in his long fight to win the gavel. The Wall Street Journal’s opinion section previously reported plans for the panel.

House Judiciary Chair Jim Jordan, R-Ohio, who supported McCarthy in his bid for the speakership, is expected to lead the new subcommittee. The panel will investigate communications between the tech companies and the executive branch and search for signs of pressure leading to conservative censorship online.

Jordan hinted at these plans last month in a series of letters to the CEOs of Apple, Amazon, Alphabet, Meta and Microsoft demanding information on what he called “the nature and extent of your companies’ collusion with the Biden Administration.” Jordan told the companies they should preserve any existing or future records related to his request for communications with the executive branch about “moderation, deletion, suppression, restricting or reduced circulation of content.”

Facebook parent Meta and Microsoft previously declined to comment on Jordan’s letters. The three other companies did not respond to previous requests for comment.

The decision to create the panel comes after Twitter owner Elon Musk’s release of the “Twitter Files” — reporting from a select group of journalists he allowed access to internal files after he took over the company — renewed fervor around the platform’s past content moderation decisions under its previous ownership.

The most scrutinized of those choices was Twitter’s decision to block links to a New York Post article ahead of the 2020 election claiming to find “smoking gun” emails related to then-Democratic presidential nominee Joe Biden and his son Hunter. At the time, Twitter said it believed the story violated its hacked materials policy. Twitter later reversed the decision and its then-CEO said the actions the platform took were “wrong,” changing its policies to prevent a recurrence.

The new subcommittee is also expected to look into other areas of potential influence and politicization in the government, including in the intelligence community and public health agencies.

The White House did not immediately respond to a request for comment. But in response to a Politico article last month describing negotiations to create the subcommittee, White House spokesperson Ian Sams wrote on Twitter, “House Republicans continue to make clear that they’re focused on pointless political stunts to get themselves booked on Tucker Carlson, instead of working with @POTUS or congressional Dems to take on the issues Americans care about like tackling inflation and lowering costs.”

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Why content moderation costs billions and is so tricky for Facebook, Twitter, YouTube and others