There are frequent layoffs in the industry. Is the Internet bubble about to burst?

2016 is coming to an end. When the first day of December came, the circle of friends was flooded with words like "It's the last month of 2016, please treat it well" and "It's the last month of 2016, my wish is..." However, the technology circle did not seem to hear such wishes. Instead, it ushered in a "layoff storm."

On December 6, LeEco, which was at the center of controversy, also encountered a crisis in the stock market. Its LeTV.com stock price fell sharply by nearly 8% in a short period of time. It was said that Jia Yueting's 64.81% pledged shares once fell below the liquidation line. Therefore, the company immediately suspended trading on the 7th to deal with the stock price fluctuations. That same evening, LeEco.com issued an announcement: The company is investigating the abnormal decline and liquidation rumors, and is also planning major matters, which are expected to involve industrial resource integration, and will continue to suspend trading.

In response to the rumors of pledge liquidation, Jia Yueting himself strongly fought back on Weibo: "Haha, yesterday's incident was one of a series of events. The planning was perfect and the black hands were shameless enough, but will LeEco people be defeated? The answer is: the more we are hacked, the tougher we are. See you on the battlefield." It is worth mentioning that the stock of Coolpad Group, which is related to LeEco, also fell by nearly 12.5% ​​on the 7th. Some industry experts believe that this series of events is related to LeEco Sports' confirmation of a 10% layoff.

LeEco is not the only company rumored to be laying off employees in the tech industry. Didi, which just merged with Uber, is also burning money like LeEco. When the news of Didi's layoffs first came out, it fell into a vicious cycle of "layoff rumors, denials", leaving the public confused. As the saying goes, there is no smoke without fire, and there are more than just these two companies that have rumors of layoffs or actions of layoffs. So, what is the reason for these tech companies to repeatedly spread news of layoffs?

Some people believe that the Internet industry will experience a capital winter every eight years. The Internet bubble in 2000 was particularly frightening, followed by the capital winter in 2008. According to the numbers, 2016 is another capital winter after 2008. The Book of Songs says: "Be wise in the morning to protect yourself", which is what we often say. Layoffs at the end of the year seem to illustrate this way of self-protection for enterprises. However, can layoffs really prevent the recurrence of the Internet bubble?

Capital winter, economic downturn spreads to the Internet

Throughout 2016, there have been layoffs in many technology companies. Previously, a media outlet listed a set of shocking figures: a search on Baidu for news related to "layoffs" yielded 263,000 articles, a full 38 pages, of which 30 pages were about 2016. Now, another search on Baidu for news related to layoffs has increased to 281,000 articles, and the capital winter seems to have deepened.

First, in the e-commerce industry, after the merger of Meituan and Dianping, there were media reports that Meituan would launch the PIP plan (employee development and improvement plan) and lay off more than 10,000 employees nationwide. Meituan has clarified that the news is pure rumor. Since July, Bitauto has carried out a large-scale layoff in batches, including direct-operated businesses: broker business, Q&A business, Yipai, Huimaiche and other departments are all within the scope of layoffs, with more than 1,000 people laid off. Later, Ele.me Youcai, Jiuyi 160, Aixianfeng, and Fenxiang Xiaoke also laid off employees one after another.

The second is traditional enterprises. Daqing Oilfield under China National Petroleum Corporation (CNPC) discussed temporarily laying off 50,000 people, which is equivalent to 20% of all employees. Microsoft will cut a total of 4,700 jobs worldwide by the end of fiscal year 2017. After the transaction between Foxconn and Sharp was completed, Foxconn closed part of Sharp's overseas business and laid off 7,000 people. At the same time, traditional industries also laid off Shougang Group, Nippon Paint Men's Wear, Macy's, Cisco and American cosmetics direct sales giant Avon.

Finally, the Internet industry could not escape the situation of layoffs. Following Samsung's turbulent times in the technology circle, LeTV has ushered in a cold winter for its capital chain. In early November, LeTV TV was exposed to owe nearly 900 million yuan, and then it was disclosed that LeTV's mobile phone supply chain owed billions of yuan. The Faraday Future car factory, a joint venture with LeTV, was also temporarily closed not long ago. LeTV's "super car factory" project with a 20 billion investment in Zhejiang had not yet started construction until the emergency suspension on the 7th.

Although LeEco has publicly stated that there are no problems with its TV supply chain, and that it is trying to solve the problems with its mobile phones, and that the Faraday Future factory will begin operations in early 2017, and the car factory project will also start construction at the end of the year, and that Jia Yueting even called on his classmates from the Cheung Kong Graduate School of Business to raise funds, the 600 million yuan raised does not seem to be enough to fill the huge hole of LeEco's capital shortage. Some people even pointed out that the solutions to these problems seem to be paving the way for LeEco's layoffs.

Although LeEco has denied the rumors of layoffs and claimed that it would implement a last-in-first-out system, isn't this a disguised form of layoffs? Layoffs are not shameful. From the perspective of supporters, if LeEco does not consider layoffs to relieve pressure when facing so many problems, it will be more worrying. After all, under the guise of strategic transformation and business adjustments, the most direct and effective measure to overcome the capital chain crisis and save money to survive the winter is to lay off employees and streamline.

Of course, in addition to LeEco, Didi is also rumored to have laid off employees. Since Didi merged with Uber, rumors of layoffs have never stopped, but Didi has been in a state of refuting the rumors.

The rumors about Didi's layoffs may not be groundless. Although Didi's situation is not as difficult as LeTV's current situation, it is not easy because of the promulgation of the new policy. Some experts even believe that if the new policy is strictly implemented, Didi will suffer a devastating blow. As the most successful Internet innovation model in recent years, Didi is successful in online car-hailing, and it also won the final victory in the first half of the competition with Uber. But the situation took a sharp turn for the worse afterwards. In the second half of online car-hailing, the biggest difficulty Didi faced was not the capital winter, but the relevant regulatory policies. This is regrettable.

The capital winter has spread deeply. In the Internet industry, in addition to rumors of layoffs at LeTV and Didi, Lenovo has also laid off nearly 1,000 people; 58.com has laid off 30% of its employees, including operations, business, R&D, design, etc.; and Internet companies such as JD.com, Qihoo 360, Alibaba, and Baofeng have all laid off employees. Although most of these companies have responded that the layoffs are rumors and are not true, the news of layoffs is still like a cold wind that blows from time to time.

The Internet has become a difficult driver of the new economy

One leaf falling can herald the coming of autumn. The layoffs show that the technology industry is suffering from the erosion of the capital winter, and it can also be seen from the side that this is a measure taken by enterprises to solve the crisis of capital chain. The real economy is on a downward trend, and many traditional enterprises have died on the road of transformation. The Internet, which was once defined as a new driver in the economic downturn, seems to have encountered difficulties according to the current situation.

In the context of the national economy seeking transformation, Internet+ emerged, giving everyone new hope for economic development. Related favorable policies emerged one after another, promoting and supporting the development of innovative enterprises and the tertiary industry, leading to the explosion of domestic Internet entrepreneurship. The most representative example is the "blowout" growth of entrepreneurship in Zhongguancun. According to data, more than 6,000 new companies were established in Zhongguancun in 2013, and more than 9,000 new companies were established in the first half of 2014.

With the outbreak of the nationwide entrepreneurial boom and the crazy influx of capital, today's Internet is like the Great Leap Forward during the Cultural Revolution, when "yields of 10,000 catties per mu" were produced. The Internet has also seen exaggerated valuations such as "the fat pig is as big as an elephant, but its nose is short. If the whole company kills one, it will be enough to eat for half a year." Every company dares to call itself a unicorn in the industry. For example, after the National Day holiday, the ranking of active companies in various fields competed with each other, and almost every company claimed that it had won the first place in a certain field.

In addition to the shortage of funds, the crushing of giants is also an important reason why the Internet is unable to serve as an economic driver. In the early stages of the industry downturn, small and medium-sized enterprises will immediately feel the threat, and this is the time for giants to have a good time. As small and medium-sized enterprises are struggling to operate, cheap and high-quality assets will appear in the market, and these assets will be taken over by giants, making them even stronger.

As the giants become more powerful, the only thing that will happen to small and medium-sized enterprises is bankruptcy. The macroeconomic environment further deteriorates. When it reaches a critical point in a certain industry, the entire industry ecosystem will be directly destroyed. If an effective solution cannot be found, even industry giants are likely to fall. Until the end, the survivors among the giants regroup and slowly gather the remaining high-quality assets, welcome a new upward cycle again, and start a new round of the so-called "first half".

In short, the phenomena of "yielding 10,000 catties per mu", burning money, and giants crushing the Internet have led to the virtual economy being out of control just like the real economy. Of course, strategic transformation and business adjustments may also be part of the reason. Judging from the current situation, layoffs in the Internet industry have become a trend at the end of the year. At the end of this year, the Internet technology circle is bound to be in a state of panic.

The Internet is in the most vulnerable period of transformation and upgrading

When it comes to the capital winter in the Internet industry, it is definitely "avoided like a snake or scorpion, and everyone looks askance", but what is coming will eventually come. 2016 is coming to an end. Looking back at this time last year, the Internet was a busy season, with companies hiring people with high salaries, burning money, and providing good subsidies. However, this year, the Internet circle is silent, and a storm of layoffs has swept the Internet. This reminds people of the scene of the Internet bubble in 2000.

When talking about the Internet bubble in 2000, many Internet people are still terrified. Since 1998, the valuation of technology companies has been about 40% higher than the general market. In early 2000, the technology bubble had reached its peak, with valuations exceeding 165%. However, the most popular start-up technology company at the time was only valued at around US$6 billion. After the capital frenzy, the cold winter came silently, and most Internet technology companies suffered a devastating blow.

In addition to the Internet bubble in 2000, the global financial crisis in 2008 also led to a new round of Internet bubble. Today, the capital winter has made the Internet feel the chill. So far, both the technology field and traditional enterprises are at the key nodes of transformation and upgrading to varying degrees, and this is undoubtedly the most vulnerable time.

In fact, the year-end layoff storm is essentially a complication caused by the continued economic downturn, inflated valuations, corporate transformation, and market shrinkage. There is a saying that goes, "When you are sick, we will kill you." This description of the current Internet winter seems to be more appropriate.

The capital winter seems to continue to deepen, and Internet practitioners are at a loss. However, after the winter, there will surely be a spring when everything recovers. After the erosion of the winter, a group of new giants will be born when the "spring" comes.

But the question is, how long will this cold winter last? Perhaps no one can give an answer.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.