I hear this a lot lately, and intuitively it is true of startups and businesses that are pre revenue, but I have trouble seeing how it applies to companies with billions in profit.
Google makes billions in profits by selling ads. Many of the buyers of those ads are affected by interest rates. Therefore, Google is affected by those interest rates.
This is fair, but general economic health applies to every company in the economy, and this large cap tech company segment is both profitable and seemingly laying off employees at a higher rate than the economy as a whole. So that blame seems misplaced.
From a theoretical perspective at this level of scale the number of engineers in particular does not scale with the ebb and flow of the selling of ads to the degree of the layoffs. Many were for divisions that were not related to ads, except for getting funded by them.
Obviously if there is not funding for these other divisions because the ad business dries up there would be large cuts, but these companies are still very very profitable even on lower ad sales. So perhaps they did not have a positive ROI, and that is fine, but a far different reason than waving vaguely at interest rates.
The calculation (for Google and for the advertisers on Google) is not "does this have a positive RoI as compared to zero?" but rather "does this have a more positive RoI than all my other alternatives?"
When the risk-free rate increases, the RoI hurdle for any investment also increases. That's how economic stimulus by lowering interest rates works, by creating incentive to "try things" (by removing the incentive to "park your money").
Advertisers on Google now bid on ads based on an environment where they are more conservative (because they have better alternative investments), where their input costs have increased (labor, raw materials, energy), where some industries (like mortgage refinancing) have been dramatically curtailed directly by the change in rates, and for some companies, buying back their own bonds is more attractive than advertising on Google with a portion of their spend.
Google can look out on the horizon and conclude "OK, we had a really great business when rates were near zero; now we have a pretty damn good business with rates several points higher than that, but it's definitely not as good as it was, so we need to tweak our frugality dial in response."
Because it effects the whole economy (afaik) so from housing to banking to any industry. Interest is a compound factor in a complex modern economy. Even big companies have to factor in the effect of interest, even if they haven’t borrowed anything.
