Facebook’s parent company Meta is laying off 11,000 people, or about 13% of its workforce, as it grapples with falling revenue and broader issues in the tech industry, CEO Mark Zuckerberg said on Wednesday. in a letter to employees.
The job cuts come just a week after widespread layoffs on Twitter under its new owner, billionaire Elon Musk. There have been numerous job cuts at other tech companies that have been hiring quickly during the pandemic.
Zuckerberg said he made a mistake by hiring aggressively before, expecting rapid growth even after the pandemic subsided.
“Unfortunately, it didn’t go as I expected,” Zuckerberg said in a prepared statement. “Not only has online commerce returned to earlier trends, but the macroeconomic downturn, increased competition and loss of advertising signal has caused our revenue to drop from what I expected. I was wrong and I take responsibility for it.”
Meta, like other social media companies, got a financial boost during the pandemic lockdown era as more people stayed home and scrolled through their phones and computers. But as the shutdowns ended and people started going out again, revenue growth began to falter.
Meta’s “Train Wreck”
An economic downturn and a bleak outlook for online advertising – by far Meta’s biggest source of revenue – have contributed to Meta’s woes. This summer, Meta recorded its first quarterly revenue drop in history, followed by another bigger drop in the fall.
Meta shares have fallen more than 70% this year, compared to 32% for the tech-heavy Nasdaq Composite Index. By the end of October, Meta had lost approximately $700 billion in market value, leading one Wall Street analyst to call it a “train wreck”. The company’s stock price rose 4% before it began trading Wednesday at $100.57.
Some of the pain is company-specific, while others relate to broader economic and technological forces.
Twitter last week laid off about half of its 7,500 employees, part of a chaotic overhaul as Musk took the helm. He tweeted that there was no choice but to cut the jobs “when the company is losing more than $4 million a day”, but did not provide details of the losses.
Other big tech companies, including Amazon, owner of Google Alphabet, ride-sharing player Lyft and payments provider Stripe, have announced layoffs or suspended hiring due to worries about a possible recession next year.
“Meta’s cuts are among the largest to date of any company (not just in tech), and we believe this portends further workforce reductions across Corporate America,” said analyst Adam Vital Knowledge’s Crisafulli in an Investor Report.
Meta has worried investors by pouring more than $10 billion a year into the “metaverse” as it shifts its focus away from social media. Zuckerberg predicts that the Metaverse, an immersive digital universe, will eventually replace smartphones as the primary means of using technology.
Meta and its advertisers are preparing for a possible recession. There’s also the challenge of Apple’s privacy tools, which make it harder for social media platforms like Facebook, Instagram and Snap to track people without their consent and target ads to them. Competition from TikTok is also a growing threat as young people flock to the video-sharing app on Instagram, which Meta also owns.
“Fundamentally, we’re making all of these changes for two reasons: our revenue outlook is lower than we anticipated at the start of this year, and we want to make sure we’re operating efficiently across both the app family and reality labs,” Zuckerberg said in his message to employees.
Meta will offer laid-off workers the equivalent of 16 weeks of their base salary, plus an additional two weeks for each year they have been with the company. Meta will also cover the cost of health insurance for them and their families.
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