In the past couple of weeks, the Internet has been flooded with news of mass layoffs by tech giants Meta, Microsoft and Twitter. In India, it's not just lay-offs by the Indian arms of these global giants that is being debated, the layoffs announced by homegrown edtech companies Byju's and more recently Unaccademy have also created an environment of uncertainty and scepticism.

Edtech company Byju's has been in the midst of severe criticism not because of laying off 2,500 employees, but more because of its announcement of roping international football sensation, Lionel Messi, as its brand ambassador within days of parting with its employees. Won't the mass layoffs by these tech companies have an impact on their long-term brand value? Also, would Byju's association with Messi have a positive rub-off on the brand?

The layoffs certainly don't come as a surprise, but the way the developments are unfolding, an erosion of brand value at least in the short-term is imminent. "The promoters and the management will surely be aware of the immediate damage being done to the brand, but are perhaps pushed to the wall. They don't have a choice in the matter anymore," points out Ashish Mishra, MD, Interbrand India.

Twitter has asked almost 50% of its employees globally to leave, while Meta has decided to part with 11% of its workforce. In fact, all these companies went overboard hiring during the pandemic when digital adoption spiralled, leading to oversized revenue growth. Meta founder, Mark Zuckerburg, in his mail to the employees, has admitted that he himself believed that the growth acceleration would be permanent and significantly increased investments which didn't play out as expected. These tech companies in the past quarters have witnessed significant erosion of market capitalisation and profits. 

Even though Byju's has been far more humane and sensitive about the layoffs (in contrast to Twitter's new owner, Elon Musk's blunt approach), the announcement of an expensive brand ambassador, says Mishra of Interbrand has made the sensitive approach to layoffs look hypocritical. However, Mishra and other brand experts feel that the layoffs, hiring of a brand ambassador (in Byju's case) and brand value need to be looked at through different lenses. "Byju's has been under pressure for its unit economics as it is impacting profitability. There was pressure to cut costs and so they resorted to lay-offs. Hiring a brand ambassador is an investment to grow the business. You grow your revenues by adding more users. Given the popularity of football and the fact that the FIFA World Cup is less than a month away, getting Messi on board is not irrational. The view that the money that they are saving by getting rid of people is what they are giving Messi is a convenient rationale, but that's not true," explains Lloyd Mathias, independent business strategist and angel investor.

Mathias does agree that Byju's timing of the brand ambassador announcement could have been better. According to Aditya Kanthy, CEO, DDB Mudra, brand and business are deeply intertwined, therefore, to create long-term value one has to look at the health of the business too. "Byju's has looked at the people's side, but they have also looked at other elements, including marketing spends," he explains.

Though Raghu Viswanath, MD, Vertebrand, also agrees that layoffs and hiring a brand ambassador are two sides of the coin, he also believes that Byju's strategy has always been a confused one. "From being a niche player, which was looking at enabling students to develop cognitive skills which will help them crack exams, it moved to the K12 education business, they even have offline tutoring. What does the brand stand for? Is it really for developing cognitive skills for higher end education? There is a huge amount of confusion in consumer's minds." The need of the hour for Byju's, according to Vishwanth, is a unique value proposition rather than a brand ambassador. "The Messi association may give Byju's recognition, but education brands are more about reputation and that is what it needs to build."

Advertisers globally have also put advertising on Twitter on hold due to the recent outrage. Mathias believes that they are waiting for the dust to settle down. "Most advertisers look for safe and non-toxic platforms. Moreover, Twitter is not mainstream for most advertisers. I will be concerned if advertisers pull out of Meta or Google as over 75% of digital spends happen on these platforms."

Vishwanath of Vertebrand is more considerate towards Twitter and its new owner, Elon Musk. "He is known to be cranky and an autocrat, yet he is successful. I don't think the Twitter lay-offs are mindless. I am not saying layoffs are right, but Musk seems to have a strategy for Twitter which may be completely different from what Jack Dorsey had. He wants to move the company in a particular direction for which he believes that the old guard may not be the right set of people."

It is obvious that the layoffs were inevitable, but could the tech majors have averted the outrage? "A greater understanding of the key brand levers and their judicious and timely application could have averted the brand value and reputational damages. A well laid out ambition and purpose which clarifies the positive outcomes intended and thought through by Twitter would surely have helped create a backdrop for the tougher decisions and overhaul that’s underway," points out Mishra of Interbrand.

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