> They’ll receive severance of 16 weeks of base pay, plus one week for each full year of service, along with other benefits like extended COBRA health insurance benefits and the ability to keep their company laptop.
Getting laid off in December isn't fun (getting laid off any time isn't fun), but I appreciate that our industry has developed a norm of generous severance. Four months+ pay is four months+ more than I got working at a non-profit in education.
If my work isn't paying for, whether due to "macro environment" or something else, it's better if I go do something where I am worth my pay, but not if I'm put in severe financial jeopardy during the switch. Providing several months of severance makes that transition, while still destabilizing and stressful, much, much easier. I wish more workers got this.
Now I'm thinking that next time I'm applying for jobs, one of my questions for them will be about any past layoffs. No company that's been around for a while will be able to say "we've never laid anyone off", but if one says "we let them keep their five-year-old laptop" and another says "we gave them several months severance pay", that will be a factor in my decision.
Most I've ever gotten for severance was 1 week pay (and I've been laid off 3 times). And that's even in tech (video game studio).
My previous company (a large corporation) did 1 week per year you worked there, capped at 4 weeks (one person I know that was laid off was there for 17 years, only got the 4 weeks). They actually used to be more generous but made significant cuts to their severance benefits shortly before layoffs so they could save a bunch of money on it (they also took away 401k match later, reduced PTO days, eliminated bonuses, froze raises, made our health care benefits worse, let tons of people leave without authorizing filling in gaps so many departments became overworked skeleton crews, all sorts of crap to save money).
So at least in that case, it wouldn't have mattered if I asked what their severance policies were while interviewing.
Given everything I've ever heard about working conditions, pay, and benefits in video game studios, it seems more appropriate to think of them as opposite to the mainstream software industry rather than a part of it.
The video game industry seems to uniquely suffer from under-trained, nepotistic, and inept project managers and game directors.
Which inevitably leads to lying, poor communication, and surprise boom/bust layoffs.
In contrast, most other software development industries have figured out how to square the budget-time-people circle, most of the time.
It's a shame Rockstar doesn't do more interviews, as they appear to have a working incremental project development model, that reliably (if slowly) delivers results. My suspicion is they just hire/train professional PMs.
From the people I met at school and worked with since then, the really talented folks who want to make video games _really_ want to make video games. This leads to a fairly natural goal of wanting to set up their own game shops rather than join a large one, where they'll feel they have less impact.
I suspect this leads to a trend where you have disproportionately more mediocre product/vision people at the large gaming companies, because if you have really good product sense in a space with as much passion as video games, and with a relatively low barrier to getting your foot in the door (if you have a small core team of very talented, dedicated people), what on Earth are you doing being a cog in someone else's machine?
> with a relatively low barrier to getting your foot in the door
If you want to work on a AAA level product (or even a AA product nowadays), that's increasingly becoming out of reach with a small team. Some people want to work on games that millions of people will play and enjoy. I know a guy who made and released a few small games on his own (I helped with one of them) and they sold like 1000 copies at most, but he maintains a day job in the industry for the past 12 years and is currently a senior engineer at Epic Games working on AAA titles.
Meanwhile I'm working on a small game in my spare time this past couple of years and I'm worried I might not break 1000 copies with its release either (not the prettiest game and a bit of a niche genre, but I'm on my own in my spare time). But at least I have a fairly well paying day webdev job so I'm not screwed if it doesn't do well.
Whilst I won’t deny that incompetent leadership and planning are involved, I think there are structural reasons for the game industry being uniquely problematic.
Games have massive cost efficiencies from scaling. Studios are incentivised to always make the biggest games they can with their budget. Games team sizes vary strongly with the project period. They can’t handle more than a small team early and can absorb almost any number of people at any skill level before release.
End result is that game development is always boom and bust. Small core teams build a game up slowly, then more and more are added until just before release when a mad scramble for anyone and everyone they can be bought borrowed or stolen to get the game released on time. Then there’s no work except for the core team on the next game.
The obvious solution is to have many games running in one studio to even out the team sizes and absorb the crunch, but that implies either studio sizes beyond anything we see currently (and no increase in per project scope) or much smaller scope for games.
I’ve seen models like they work, and be much less painful to work with for everyone involved, but it did require different market conditions to justify the alternative model, I’m not sure the entire industry could switch.
That’s not to say fixing the problem is impossible, just that the bad incentives will always be there to push back against improvements..
Rockstar is notorious for crunch, or overworking and poor conditions, especially near the end of a project life. There are a lot of horror stories about games like red dead redemption 2, you'll find an overwhelming amount of articles about this if you Google it.
But it still seems to be a mixed bag of experiences (with the expected "certain locations have shit management" and "QA always gets shit on"). And at least they shipped a finished product, that was arguably improved by crunch.
In contrast, there are a ton of games that don't measurably improve/ship and people are asked to crunch to cover management screw-ups.
I'm baselining at things like Star Citizen and Beyond Good and Evil 2, of the "How are these people even allowed to call themselves professional managers/directors?" level.
If you're making a universal claim like that, you are just being contrarian. My last job was at a Series C startup that you've probably never heard of, and when they had to lay off 2/3rds of their employees in late 2020 due to the pandemic, they gave a couple months of severance (don't remember the exact amount, I wasn't laid off) + extended COBRA coverage.
Still is a series C startup that almost certainly is trying to keep its brand intact up rehire after the uncertainty dissipated.
I think you're being unrealistic as to what the industry as a whole is like. 1 week per year is not uncommon. I've been doing this 26 years and have had many dozens of friends laid off during this period, back in 2009, and back during dot com.
On a reread, you'll note that I didn't make any claims about what layoffs are like in the industry as a whole: I implied that pay/benefits/conditions tend to be pretty bad in gaming and pretty good in the rest of tech, and I noted that you're wrong to make a universal statement about only high-profile companies giving severance.
I don't doubt your experience, and I don't have a survey of industry standards. But I will also say that experiences 14 or 25 years ago are not a reliable guide to HR choices in the 2023 tech industry.
I agree they are bad in the game industry, but conveniently ignored was the second part of their post about the non-gaming company... 1 week per year is common, but most common seems to be 2 weeks w/ 1 week per year on top and capped after a number of years.
I didn't say only high profile companies gave severance. I'm saying 3+ months is rare and it seems normal because it is a marketing tool used like this.
Also to restate, my experience translates to what is currently happening in tandem with the last two periods. I know someone who was recently let go getting 4 weeks after 16 years.
Not sure I made it clear that the second one wasn't a non-gaming company, but yeah it wasn't (it was webdev). I was laid off from three gaming companies, and haven't yet from any non-gaming companies, even though I've been through more layoff rounds with non-gaming companies now.
But my friends have been laid off, and I've yet to hear of any of them getting more than 1 week per year worked. But I don't have any friends that work for big tech (I live in the Midwest, a lot easier to not know anyone in big tech here). A lot of insurance, health, and financial companies around here, not too many Facebook or Apple or Netflix offices.
There is a point in the company size (in some metric) vs. job responsibility curve where you can successfully make contract changes, within reason. One thing you should absolutely consider is pushing for a specific severance clause.
This serves two purposes, an indication of their seriousness about your position, and some peace of mind (e.g. have 6/12 months or whatever in your pocket).
That being said, there are scenarios where you won't see a penny of it.
Also, depending on your jurisdiction and job tenure, you may have a very viable claim for more severance. Nobody is likely to offer you more than statutory (or whatever is in your contract) without asking, but it may be worth paying a lawyer hour or so to find out properly.
I'd sign up to unionize, but I wouldn't organize a union myself (I'm not organized enough for that). Haven't even heard a whiff of desires to unionize at any company I've ever worked for.
> I appreciate that our industry has developed a norm of generous severance
What if you had unions or proper labor laws that actually guaranteed this? As an European it's weird to see you having to rely on the "kindness" of the company to not get fcked over.
It is possible in an era of remote work to outsource any American software job to a lower paid, better skilled worker in a low cost of labour country.
Companies choose not to do this. Maybe they want people they can meet, maybe investors don't like it, maybe the paperwork scares then. I don't know the reason but every American programmer who has a job has it because thier employer chose not to hire a better cheaper foreigner with less rights.
Looking at it this way we can say that the American job market and salary expectations are not related to international salaries. And it follows that the same can be true in Europe.
My personal theory is, the world runs on dollars. America prints dollars. The closer you are to the fountain the more water you get, so Americans get more dollars.
Are you personally willing to work for 1/2 or 1/3 the pay you receive, so that if you ever get laid off you have a slightly better severance package?
I am not.
I would rather get paid what the most I can/am able to negotiate, and live in a country with so many opportunities, that if I did ever get laid off, I could move to another opportunity with equally attractive pay and benefits easily.
Giving up a huge chunk of your earnings potential in order to have your severance package, should you ever need it, be slightly better doesn't seem like a good tradeoff to me.
> Are you personally willing to work for 1/2 or 1/3 the pay you receive, so that if you ever get laid off you have a slightly better severance package?
That's a false dilemma. It's not like you would have to give up half your salary for this.
> and live in a country with so many opportunities
That's only because you're a SE. The rest of your country doesn't have those opportunities. I think rather most of them would have preferred the social security net of most European countries instead of working for less than minimum wage begging for tips, being laid of on a moments notice.
I mean, how's SV with all the homeless, robberies etc.? Is that kind of society worth the slightly larger pay? Isn't it nice if your neighbors also have it good?
How’s Paris with all the homeless, robberies, riots, trash, etc? Is it worth having a populace that is perpetually angry because they’re so reliant on the government? Can you tell us what ended up happening to the retirement age in France?
To answer your question, yes, I want to live in a society where I can pursue an extremely high quality of life for myself and my family. My neighbors have it pretty damn good from what I can tell.
the comment I was responding to was claiming that severance works better/is more generous in the EU - and presumably France based on the username - and almost across the board salaries in France are 1/2 to 1/3 what they are in the USA for many professions...so yeah, you would need to give up 1/2 to 1/3 your salary for a fair comparison.
I don't even live anywhere near SV, I used a $110K average for the USA in my example, if we were talking SV that would probably be closer to $400K, so 10X what a programmer in France might make. I really don't think anyone in SV would be willing to work as a programmer for what an average programmer in SV makes so that they were guaranteed a better payout if they got fired.
The cost of living is ~30% lower in Paris compared to a major US city like Los Angeles. If you factor in what people pay here for healthcare premiums you've accounted for most of the difference in salary. That's before we even get into things like childcare, education, or transportation. If you really want to do an apples-apples comparison for income you should also take into account the difference in expenditures.
Also, how many SWEs in SV make $400k? Do you think they're a representative sample of white collar workers for that city?
> and almost across the board salaries in France are 1/2 to 1/3 what they are in the USA for many professions...
Healthcare costs could help to make up for that for many employees. The average American spent ~$13,000 in health care expenses in 2022, but a full time employee making minimum wage only gets ~$15,000 a year. Even if someone earns twice the minimum wage, healthcare costs will eat a huge percentage of what they'd earn.
Obviously software in the US is an exception, although here too wages and benefits are being slashed at every opportunity. The tech industry is hard at work suppressing wages and hiring from a global pool of talent (and waiting for AI to replace employees) so jobs in software might not stay so nice for very long, except for a select few with the most rare skills.
My comment? I've never been to France. My point is that you can't compare these two things. It's not like having a fair severance packet immediately means you would need to halve your salary just because you compare with a country with a different salary level.
You're disregarding taxation and cost of living. Your numbers on their own mean nothing.
Oh, and USA is one the countries with most inequality, which plays in favor of a minority at the expense of the vast majority. Different story in France, for instance, where solidarity between rich and poor is higher through taxes, although not perfect.
Compare the cost of living in Berlin to even rust belt US cities and it's really not favorable to the US. If you want to include "healthcare premiums" in the calculation as a tax then the US pays more taxes per capita than most of the EU member states like France or Germany.
Not sure how you are measuring "inequality", but even in a backwater like Hungary you don't have adults rationing insulin made for pets.
Most metrics disagree with you. The US is on average cheaper to live in compared to the average revenue. That can be seen in average household debt too, as those are pretty high in Europe.
> What if you had unions or proper labor laws that actually guaranteed this?
Then hiring would be much more expensive, much less new companies would be able to start up, and as a result, salaries in tech would be 2-3 times lower, like in Europe.
What would you choose, a 2-3 times higher salary or a guarantee of things that you would often get anyway?
> What would you choose, a 2-3 times higher salary or a guarantee of things that you would often get anyway?
If it meant a guarantee for all workers, allowing people to not become desperate enough to become porch pirates, or break into cars to steal stuff, or point a gun to my head because I have more stuff than them, or any other social malaise fanned by the lack of safety nets, I'd take the guarantee 10 out of 10 times.
This reminds me of Louis CK's line "you can achieve great things when you don't give a shit about people".
Is the cost worth it? Do I want fair conditions and a good work balance, or do I want to brag about something that made my employer's shareholders really proud? Is the pay worth it if I can't miss a day of work to tend to more important matters?
I run a website for immigrants in Germany. I have to spend a lot of words explaining that it's okay to take sick days, that you won't lose your insurance if you lose your job, and other things that Europeans take for granted.
> you can achieve great things when you don't give a shit about people
I think this is a completely wrong take from the armchair philosophers.
You actually can't do great things when you treat people like shit. The people who actually do great things strike the right balance between applying pressure and requiring excellence and treating people well. The results of purely treating people like slaves is mediocre.
Even the pyramids were built by well paid craftsmen, not slaves as is commonly believed.
Maybe it's not meant to be taken literally. I read it as, "You can achieve great things when you loosen your system of ethics and are okay with a net increase in human suffering."
It's also a balance between having new companies that can start up with lower overheard and fewer jobs concentrated among larger companies that can afford it.
The only companies that treat their employees poorly are those that have people lined up to work for them. The employees must think the tradeoff is worth it.
Employees should be able to choose a company with stability and lower pay or higher pay and less stability. The other option is to take the high pay job and pay for additional private insurance to cover what your employer will not. The people who want stability shouldn't force it on the people who are comfortable without it.
And 6 weeks off, unlimited sick days, and a generous notice period. Health insurance and unemployment insurance are a given. There's no explaining how much more relaxed work culture is in Germany.
Is life better in every respect? No. But there's a lot more to life than earning potential.
Europe isn't good at building massive tech companies. But its hard to say Europe is not a leader in scientific and technological innovation.
Just in tech, Europe developed ARM chips, ASML lithography machines, and DeepMind's AI breakthroughs. These underpin a few trillion dollars of global economic activity.
It's a mixed bag. Only sheer scale allowed Apple to pour in a huge amount of money into their M chips, probably the most important consumer-facing innovation on desktops in the past 5 years.
The US has higher salaries than Europe, way higher, so calling it slave labor is rich. Wish people would understand that just because Europe does something doesn’t make it the right way to do things. As far as reality shows, the US system is the most innovative and the European one is definitely not.
Wrong. Median disposable income is higher on average across all occupations. Software engineer income is significantly higher. The top 10% in the US is not even fathomable in Europe.
Ok, two things: first, America’s lock on innovation is already waning, so it would be dangerous to think we’ll continue to compete globally solely by out innovating other regions.
Secondly, I strongly doubt shitty labor laws have been the secret formula behind the success.
There's much more surrounding the USA's innovation engine than treating employees like shit. Perhaps would be good to look at what's working and what's not instead of just assuming that better protection for workers, which are the ones directly and literally creating the value, would cause a catastrophe.
Or please direct me to some literature supporting your opinion.
Edit: Page 19 here [0] would directly question your assumption.
Yeah this might work for larger tech companies, but when I was working for a Series A startup and got laid off I got 2 weeks. Same thing happened to a friend as well.
What if? I mean, we need better labor laws right now just to be able to form unions (if folks wanted to) and about half the country (or more) thinks things like regulation or unions are Evil Communist Socialism(TM).
That is to say, you're not wrong but if the hope is that people are going to be like "by golly, I've never thought of that, I'll just run right out and join a union" um... no.
Yeah, I probably overstated this here. I think it's more common than in most industries, but I don't have stats to determine what the actual "norm" in tech is, or how it compares to elsewhere.
The economy is soul-sucking. Which, I suppose it's mostly been that way, we're just more open now.
My friends who have worked with NGOs and nonprofits have all complained that they actually have the worst work-life balance; imagine your middle manager doing normal stereotypical office gaslighting about working longer, harder, not getting commensurate pay etc., but instead it's also tinged with morality and "do it because our mission is so important"
Yeah, my sister works at a nonprofit foundation and it sounds like an absolute disaster in terms of awful culture and management :/
I would naively expect non-profits to have more humanizing cultures internally but it's just objectively not the case. If anything it's the opposite, using the mission as cover for absolute cultural rot. And some of the best cultures seem to be at trading firms like Jane Street and TGS which also pay better than the alternatives. Go figure.
I did some pro-bono development work for a nonprofit some time ago. I don't think I have encountered such unpleasant or entitled clients anywhere, whether as an employee or freelancer.
Yeah my company had a small RIF recently but it feels so much better for everyone when the severance is generous and the treatment is humane. Laying off people sucks, but knowing they'll have several months of continued income and health insurance makes it suck less.
A small startup I worked at shut down and they told us on ~Nov 15th that our pay and benefits would all be ending Dec 1st -- what an absolute nightmare for anyone with bills or a family.
> our industry has developed a norm of generous severance.
I’ve been through this twice in the last two years and let me tell you, this is not the norm. Most companies would pay you only two weeks if it wasn’t for the WARN act.
Most companies are paying 2/3 months based on the local laws. For smaller layoffs where the WARN doesn’t apply, they’re barely providing a month of severance. And yes these are the same tech companies.
> if one says "we let them keep their five-year-old laptop" and another says "we gave them several months severance pay", that will be a factor in my decision.
This is a great idea in theory, but do remember that organizations are made up of people, and the decision makers in the past may not be the same decision makers in the future.
Most tech companies don't. Some do. From my limited observations, such packages don't seem more common in the tech sector than any other professional sector. Just a subjective observation, I have zero data to support that.
I'm not against more guarantees about severance, but even with the best guarantee you might not have enough money to endure a post-layoff hardship. The best option, that works quite well in most situations, is to have savings to endure at least 6 months of expenses with no income.
Just wondering as someone who sells handmade things on etsy, Ive noticed my sales dipping the last 6 months. is there any websites you recommend to buy/sell handmade things?
There's no other handmade marketplace with nearly the same buyer reach. I've been on GoImagine, MakerPlace, etc for months and they literally generate zero sales against Etsy's hundreds in the same time.
I've given up on trying to find such goods on the web, to be honest. Instead, I've gone back to the old-fashioned method of hitting up craft fairs and the like in person.
It's generally more fragmented now, but specifically for handmade goods there's https://goimagine.com/ (5% transaction fee non-inclusive of payment processing + monthly subscription of $2.50-$10 for sellers, application required)
I guess it depends on what you're looking for. I've seen some of what you're talking about, but most of the type of stuff I'm looking for still has a good handmade selection.
This is my problem as well. I try to use context clues from pictures and reviews but often I can only find out once the product is delivered and in my hands.
My city had a lot of Etsy marketplace events and I'll pretty much only buy online from people who I've seen in person at one of those events. Even then, some tables are a little... suspect. I also follow a bunch I like on Instagram and see regular updates of what they're doing which gives a lot more trust. Kinda sad it takes all that these days. Side note about the market places: After the last one I went to, one of the creators posted about how they sold around $900 but the table cost $500. Looking back at how some tables were being passed over by everyone, or selling low-value items, it's brutal. I really wonder how many broke even. It must be a sea of crushed dreams out there.
In a "the vendor is selling the same rings/earrings fixtures as another vendor I've seen before" way. Specifically, I've seen amber jewelry imported from Poland sold by multiple vendors.
If the appeal to shopping on Etsy is (like it is for me) that you're buying handmade goods from the individuals who make them (and paying a premium to do so), then yes -- it matters a ton.
Some are but many are still legit sellers. We’ve sold on there and were handmade items. Their algorithm is very unpredictable so it was hard to rely on Etsy as a source of revenue
You'd have to work really hard to vet, and then continue to re-vet, your sellers in order to keep the crap out. There's just too much potential for profit in abusing the system, managing to sell your $1.50 sweatshop knit hats for $40.
You'd want to start off with carefully-selected invites to specific sellers, and then maybe do a referral-based system to bring on additional sellers. Video calls and photo ID for verification. Reporting systems if buyers get mass-produced junk.
Sounds like it would take quite a bit of human effort and care so I can't imagine it getting funded :)
Counterpoint: Etsy still has a lot of products that are just different than what you get when you search on Amazon or AliExpress or Walmart.
Example: search for toilet paper holders. You'll find stuff like a railroad spike, animal sculptures, pipes with valves...they are far more creative, weird, and eclectic than a typical Amazon search.
Hot take: Etsy's customer doesn't actually want something handmade, what they want is something that's thinking "outside the box" of normal home goods. They want a marketplace of unique ideas.
"If you want something truly made by an individual artist one-by-one you are going to eventually have a hard time affording whatever that item is."
Yes! Especially an artist in a rich country. You're paying for the artist's time, and in rich countries that's very expensive.
On Etsy I found some great wood art from a Chinese artist, priced at a few hundred dollars.
I do like Etsy for household knick-knacks like napkin holders or nightlights or photo frames. I can go on Amazon and get some random made-in-China junk, or go on Etsy and with a little digging find something a bit more interesting at, say, $50. That's probably ten times what some Amazon dreck would cost but I can splurge on a napkin holder or photo frame.
I wouldn't mind an assembly-line hand-painted painting. I like the texture of hand-painted things instead of a print.
> It's amazing how the "macro environment" is responsible for all the layoffs, but never responsible for any of the growth.
Does anyone really question that growth over the past 10 years, particularly in the 2020-2021 COVID money printing era, wasn't due to the macro environment?
Given how cheap/free money was for so long, it made total sense to hire and focus on growth and cornering markets without being concerned about margins or long-term profitability. Now that money isn't cheap, companies are concerned about those things and are making changes to their businesses. This is all intentional.
> Does anyone really question that growth over the past 10 years
You're right. People pretty much know that external circumstances are responsible for a large part of the growth of companies.
I think the parent commenter was highlighting that execs routinely claim responsibility for growth(and collect outsized rewards) while attributing a majority of problems to external factors out of their control(also while escaping consequences by redirecting them to rank and file). It's a sweet gig if you can get it!
> Does anyone really question that growth over the past 10 years
How many people have increased their salaries significantly over that time? Do you think they put it down to their own achievement or do you think they believed that they were merely riding an economic wave?
You won't find that in the reporting, but it's begun materially impacting Etsy, and other large marketplaces like Amazon and Wayfair.
If you do a couple Google searches during the US evening hours for the kinds of products people often buy on Etsy, you may notice Temu shopping ads in all the top slots, outranking and outspending every US marketplace including Amazon and Etsy which would typically hold those first-page above-the-fold spots in the past.
Late this summer, the places Etsy sellers congregate to chat started getting widespread reports of sales dropping off a cliff, to levels not seen in years, for new and veteran sellers alike. The plummet in Etsy traffic coincided with Temu beginning to replace Etsy in Google Shopping ads at the top of Google searches.
Interesting. Maybe my adblocker is getting a lot of that, what I noticed amongst my etsy-using friends was that Etsy itself was being flooded with the same sort of incredibly cheap "artisanal" as what Temu looks to be selling. It wouldn't surprise me if there was substantial overlap in the producers for all of that under the parade of shops that show up on Etsy, Amazon, etc.
Hmm. Based on the Wikipedia article, I can kind of comprehend this. They're making $921,146.95 / employee, yet somehow losing $236,200.71 / employee every year. Don't know where all their money's going, yet something does not look viable.
Apparently, Goodwill impairment, Cost of revenue, then marketing.
If you're like me, and you had no idea what "goodwill impairment" meant, and wondering 'what does this billion dollar expense get Etsy?'
Investopedia: "Goodwill impairment occurs when a company decides to pay more than book value for the acquisition of an asset, and then the value of that asset declines. The difference between the amount that the company paid for the asset and the book value of the asset is known as goodwill."
> Goodwill impairment: Goodwill impairment expense consists of non-cash charges related to the impairment of the goodwill of Depop and Elo7.
This is a level of circular definition that makes the head spin. Depop and Elo7 were Etsy acquisitions. I haven't read the SEC filing in depth, but I assume this means that Etsy is acknowledging they overpaid on both these acquisitions, and that their value is in reality far less than they thought at the time.
I'm not sure what the accounting advantages are here for Etsy, maybe someone else with more knowledge could weigh in?
It's not really a circular definition because "impairment" and "goodwill" are two words with their own meanings in accounting/finance, so "goodwill impairment" including those two words separately in the definition isn't circular.
Goodwill is basically the extra value paid one company pays when buying another company. So if Etsy buys Depop for 1.6B, and of that 1.6B, let's say 600M were actual 'assets' (cash, inventory, whatever (not that Depop had those things when purchased)), then Etsy paid $1B (1.6B - 600M) in "goodwill" for Depop. That "goodwill" is basically the Depop brand, the desire for existing and potential customers to use Depop, etc.
Suppose Etsy wakes up one day and realizes that the $1B worth of Depop brand must be worth less. I don't know how they determine this, as the most realistic way would be if they were somehow shopping around to sell Depop off to another buyer, and all the offers are markedly lower than the $1.6B they paid for the same assets + intangibles. That difference is the impairment, to the goodwill.
Not sure if that made it sound less circular. I'm also not an accountant, but I've tried learning quite a bit about the subject.
It's a way to effectively re-allocate losses into the current quarter/year before they are actually realized. For example, if I bought something for a high price and won't sell it until a year later, those losses won't show up until I sell them. I can use impairment to re-value those assets and "realize" those losses right now.
The way this is generally used in practice is that when a company is having a bad year or quarter and knows they are going to report losses, they will tack on a bunch of impairment so that future quarters and years don't look so bad. Having a bad quarter followed by mediocre quarters is much worse than having a very bad quarter followed by good or okay quarters.
It's not entirely nefarious, though. If a company is operating with good fundamentals and finances, you don't want that constantly being hidden by a bad decision or massive loss that really happened years earlier.
To get picky, it doesn't necessarily mean they "overpaid" it means the asset is now worth less.
You could make an argument that the two concepts are the same thing, but that's not really how business works.
For example you could have paid exactly what the market value was for something, maybe even gotten a "good deal" as of the date the deal closed, and the market could subsequently shift.
Like if they invent a cheap way to convert water to unleaded gasoline tomorrow it doesn't mean you "overpaid" for Exxon three years ago, per se.
"Goodwill" is a bit of an accounting trick: it's the difference between what a company is worth on paper and what the acquirer spent on actually getting it, meant to record the value of all the intangibles the acquirer is getting like existing relationships and prospects of future growth. It's the cost of convincing someone to sell their baby. Unless you're buying something like a gas station with very well understood economics, there's going to be tons of money "spent" on goodwill.
Goodwill impairment means they're (essentially) admitting to making a huge miscalculation on what that company was worth without a change in the tangible assets.
> In this case, Etsy believes that it overpaid by $1 billion for Depop and Elo7. A company normally takes write-downs like this when the results of an acquired business don't live up to the expectations at the time of the acquisition. That's not so good, noting that these two businesses are expected to be long-term growth drivers for the company.
If that were the case, they wouldn't have to declare the goodwill impairment. Goodwill is meant to account for the kind of intangible benefit they'd get from killing off competition.
The issue is, it doesn't matter what it's "meant" to do. It matters how it's technically implemented, and what they can legally claim without the claim running afoul of the IRS (or other tax agencies).
The key is this is how you get a (typically) non-amortizable asset off the balance sheet and expensed on the income statement when all those synergies and economies of scale promised by the (no longer with the company) executive who pushed the deal don't materialize.
“ If the goodwill asset becomes impaired by a decline in the value of the asset below the purchase price, the company would record a goodwill impairment. This is a signal that the value of the asset has fallen below the amount that the company originally paid for it.”
Wow on that Goodwill impairment. If I'm reading correctly, it's from their previous acquisitions of depop and elo7. They paid about $1.9B for both of those, so the "impairment" means they effectively overpaid by $1B.
Wow this looks like some made an absolutely horrible acquisition investment (and quite possibly got promoted and bonused for it), and now as the company realizes that, it has to lay off people that had nothing to do with that decision?
I mean, they did an acquisition when money was cheap, now it all goes to goodwill impairment because they paid pre-interest hiked multiples. That is where the money is going.
From clues in the article I assumed these layoffs were in Marketing and HR. They consolidated HR and marketing leadership under the COO and a VP. Did you see evidence that the layoffs were in engineering?
Cool so summarizing the comments here - they overpaid 1billion dollars in acquisitions (would have been profitable this year otherwise) and are now laying off staff to recoup losses?
For a long time, how much staff you have at a company correlated with success.
The industry seems to be moving in the other direction - how much can you cut and still maintain profit? Interestingly, this seems to have always been (sory of) Apple's model.
I've been noticing something similar in the gaming industry as well. What is the least amount of features in a game that we can ship while still maintaining profit? AND how few people can we milk in DLC with this shell of a game to maintain profitability. (I'm looking at you Activision/Blizzard!)
It use to be build a great game with mass appeal and profit. Now its just how small can we make it and how much DLC can we sell to a small subset of people to equal profit.
I just checked their YOY earnings and Etsy has increased from 100 million to 600 million in revenue over the past 5 years, with 100 million in revenue growth over the past year alone.
Companies need to be shamed for potentially destroying people's lives while simultaneously reaping great rewards for their efforts.
Like, Etsy is based on a well-understood, popular business model - provide a digitasl storefront to sell physical goods. There are no hard or unique problems - their main advantage is name recognition in the indie-maker community.
- They have nearly 3000 employees, which seems like way too many
- Marketing and ads to increase reach and presence
- Acquisitions (h/t to ojbyrne in this thread)
Remember Uber was losing $2 billion a quarter, much of it going to pay for those reasons. Also I'm not sure how stock buybacks are accounted for, but Etsy did $290M in September according to this one chart:
the old joke about Amazon (which was never really true) was they lost pennies on every sale and made it up in volume. Anybody can grow revenue; the trick is to grow it faster than the cost of new revenue, and with a positive margin.
If that representation is a minority then it doesn't matter. You can't solve overspending on staff by just keeping on spending, and that's likely what that representative will always advocate for.
Getting laid off in December isn't fun (getting laid off any time isn't fun), but I appreciate that our industry has developed a norm of generous severance. Four months+ pay is four months+ more than I got working at a non-profit in education.
If my work isn't paying for, whether due to "macro environment" or something else, it's better if I go do something where I am worth my pay, but not if I'm put in severe financial jeopardy during the switch. Providing several months of severance makes that transition, while still destabilizing and stressful, much, much easier. I wish more workers got this.
Now I'm thinking that next time I'm applying for jobs, one of my questions for them will be about any past layoffs. No company that's been around for a while will be able to say "we've never laid anyone off", but if one says "we let them keep their five-year-old laptop" and another says "we gave them several months severance pay", that will be a factor in my decision.