It's not going well for Big Tech

After years of steady growth, in 2024 the technology sector has definitively shown signs of crisis. In particular, for Big Tech companies, things seem to be worsening, and their business models are no longer as solid as they once were. For example, the decline in demand from advertisers has exposed the weaknesses of a system primarily based on the collection and monetization of user data. Revenues, especially advertising revenues, which form the backbone of Big Tech's business, are decreasing significantly. This has forced many companies to drastically rethink their strategies – leading to layoffs after years of significant workforce expansion. Additionally, increased competition from more agile and innovative new companies has eroded Big Tech's market share, all while investors have begun demanding greater economic stability.

This scenario has necessitated policies focused on cost reduction and greater attention to financial sustainability. The crisis in the sector has pushed some companies to change their business models, altering the long-standing relationships established with users – progressively worsening the user experience of their services. This phenomenon has been termed “enshittification”, meaning “going to sh**”: a term describing the decisions that lead a successful company to become progressively less pleasant and usable for its users, eventually leading to its decline. An example of “enshittification” is what happened to Twitter. Since its 2022 acquisition by Elon Musk and rebranding to X, the company has undergone indiscriminate staff cuts and the removal of content moderation systems. This, in turn, has led to the increased spread of posts promoting hate, conspiracy theories, supremacist or transphobic ideologies, as well as fake news and political propaganda. The result is that many individuals and organizations have begun to leave the platform, accelerating the decline in advertising investments.

When Did the Big Tech Crisis Begin?

During the pandemic, due to restrictions, the role of technology became much more central, and the sector benefited greatly. The stock index known as Nasdaq, which best represents the performance of IT and technology stocks in the United States, grew by over 80% between 2020 and 2021. During the pandemic, Big Tech was essentially the best sector to invest in, and the common perception was that this growth would never slow down. The opposite happened: in the stock market, these companies were heavily overvalued and subsequently began to disappoint investor expectations. Additionally, last year, the European Commission further complicated life for Big Tech, identifying six major companies to be subjected to stringent competition rules: Alphabet (the group owning Google), Amazon, Apple, Microsoft, Meta, and the Chinese ByteDance, owner of TikTok. The measure includes a series of laws designed to limit the monopolies of the largest technology companies, which as such, enjoy a position of strength that can stifle the entry of new players into the sector. Among other things, these designated companies will not be allowed to favor their services at the expense of competitors, which will have significant impacts on their revenues. Furthermore, companies that fail to comply with the measures could face hefty fines – between 10% and 20% of their annual turnover.

To face what could be a very tough phase, involving significant structural changes, the Big Tech sector will be forced to adapt and revise its reference models. According to some analysts, however, this might be a good thing. Many large companies have long lost sight of their real sources of revenue – namely, advertising for social networks and consumer services for software companies. As the Wall Street Journal wrote a few years ago, it is time for technology to become “boring” again. Meredith Whittaker, a technology expert and president of Signal, a messaging app with a strong focus on user privacy, wrote in the U.S. edition of Wired: “In 2025 Big Tech’s end will be the beginning of a new and vibrant ecosystem [...], that is actually innovative and built for benefit, not just profit.”