Meta Lays Off Over 11,000 Employees
As widely expected, Meta has laid off over 11,000 of its employees, representing 13% of its 87,000-plus strong workforce.
The massive layoffs mark a turning point in Meta’s growth trajectory. This is the first time that Meta, previously known as Facebook, is laying off staff. The company has seen almost two decades of uninterrupted and unprecedented growth, powered by its social media business. Along with the job cuts, the company is also scaling down other areas of its operations. These include scaling back its budgets, shrinking its real estate footprint, and reducing perks. This is according to a Mark Zuckerberg email sent out to employees.
In the email, Zuckerberg writes that the massive layoffs will also add to a cultural shift in how the company operates and that the company is taking additional steps to become “leaner and more efficient” by slashing its discretionary spending and extending the company’s hiring freeze through to Q1.
The layoffs have come at a time when Meta is going through tough times. Investors have been spooked by plunging share prices and by the company’s massive investments in the metaverse that is costing it over ten billion dollars annually and netting less than $2 billion in revenues.
Meta’s costs and expenses rose 19% year-over-year to $22.1 billion in the third quarter. In the same quarter, Meta’s overall sales dropped 4% to $27.71 billion. Its operating income also dropped 46% from the previous financial year and hit $5.66 billion.
Meta is not the only major tech company implementing tough cost-cutting measures. Snap and Microsoft have been resizing and even Apple has put a freeze on its hiring. However, Meta has been hit hard due to the company’s massive investments in its loss-making metaverse business which is also happening at a time when its core advertising business is facing huge pressures from several quarters including tough competition from TikTok and Apple, Apple privacy policies and the tough global economic climate which has negatively impacted ad spend.
Zuckerberg writes that Meta’s revenues have been impacted by the macroeconomic downturn, increased competition, and ads signal loss. He admits to getting it wrong and apologizes to Meta staff.
Zuckerberg says Meta will institute cutbacks in every organization but the most impacted will be recruiting as the company is planning to hire fewer people next year. Zuckerberg says that Meta’s hiring freeze will be extended through to Q1 though “with a few exceptions.”
Meta employees affected by the layoffs will get 16 weeks of pay along with two additional weeks for each year of their service to the company. The company will also cover the employees’ health insurance for six months.
Part of Meta’s financial woes is due to its huge bet in the metaverse. In 2022 so far, the company has spent $9.4 on metaverse-related projects. Meta is anticipating that its losses in this market segment will continue growing significantly year-over-year.
In its third-quarter earnings call, Zuckerberg said that Meta will be focusing its investments “on a small number of high-priority growth areas” in 2023. Back then, he stated that some of Meta’s teams would “grow meaningfully” while others would stay flat or “shrink over the next year (2023).” He gave a hint of the layoffs during the Q3 earnings call with investors when he stated that the company would either stay the same size or shrink to “even a slightly smaller organization” than it was as of September this year.