Facebook, Instagram and Whatsapp owner Meta has confirmed plans to lay off 11,000 staff in the first round of large-scale redundancies in the tech giant’s 18-year history.
The decision, which will see the departure of 13% of Meta’s workforce, was first revealed in a staff meeting with CEO Mark Zuckerberg and hundreds of Meta Executives, the Wall Street Journal reported.
In a letter to employees, the Facebook co-founder took responsibility for the restructuring of the company, citing overstaffing as a response to an e-commerce boom he believed “would continue even after the pandemic ended."
Meta’s revenue has dropped by an estimated $700 billion this year, with its stock plummeting by an excruciating 73% over the last two quarters, making it the S&P 500’s worst performer in 2022.
Mr Zuckerberg attributed these losses to the macroeconomic downturn and “ad signal loss,” which refers to Apple’s introduction of new data-privacy regulations which impede Meta’s ability to track user data without permission and in turn profit from targeted ad campaigns.
But experts believe that the billionaire’s hyper fixation with the Metaverse paired with stiff competition from apps like Tiktok are key contributors to the tech giant’s need to downsize at such a dramatic scale.
Meta's Insistence on the Metaverse
While Meta’s restructuring has caused significant reductions to staff across Facebook, Messenger, Instagram and Whatsapp, its Metaverse Reality Labs division is set to be barely affected despite reported losses of over $3.6 billion in the third quarter of 2022.
In his letter to employees, Mr Zuckerberg says he has “shifted more of our resources onto a small number of growth areas” citing Meta’s AI discovery engine and long-time vision for the Metaverse.
Investors have long been wary of the tech giant’s pivot into the digital realms of the Metaverse, which, has become a central focus of its business model since the launch of Reality Labs in 2020.
A few weeks prior to Zuckerberg’s redundancy announcement, the company released an enhanced version of Meta Horizon Workroom in another major push to integrate the enterprise into the Metaverse.
But the use of the Metaverse within the enterprise space has remained stagnant since its introduction in 2021. This has largely been due to quality gaps and lacklustre features that, according to a report by The Verge, even Meta employees haven’t been making use of in the workplace.
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Although it can take years for strategic projects like the Metaverse to become profitable – as was the came for IBM and Microsoft when they began selling software instead of hardware – Meta’s plunge into the Metaverse has so far proven almost entirely fruitless.
Angelo Zino, senior analyst at CFRA Research, told investors in a research note to “remain on the sidelines” of the Metaverse “as it will take many years before progress on the metaverse can be truly monetised.
As of November 2022, the number of active users on Meta’s Horizon Worlds platform is reported to be as low as 200,000, 300,000 lower than the company’s projections.
A turbulent new era for tech companies
While Meta’s mass layoffs on Wednesday will likely be the most notable among high tech firms, it is not the only giant to announce cost-cutting programmes amidst a fall in revenue.
Just last week, Twitter cut around 50 per cent of its workforce shortly after Elon Musk’s acquisition of the social media platform.
Musk blamed “revenue challenges” citing losses as high as $4M a day to Twitter’s revenue this year.
Regarding Twitter’s reduction in force, unfortunately there is no choice when the company is losing over $4M/day.
Everyone exited was offered 3 months of severance, which is 50% more than legally required.
— Elon Musk (@elonmusk) November 4, 2022
Stripe, Lyft and Coinbase also announced large-scale reductions in their workforce following drops in revenue in the past quarter.
Like Zuckerberg, Stripe CEO Patrick Collision blamed the pandemic, writing that he had been“much too optimistic about the internet economy’s near-term growth in an email to employees.
Speaking to Insider, Dan , associate professor at the Columbia Business school, said that “what's happening now is something of a correction as the tech world recalibrates to a time when people aren't stuck at home, glued to their devices.”
As economic-forecasts look bleak, tech firms around the world must adjust their business strategies to survive in a post-covid environment, a process that often starts with cuts to the workforce.
While some are better equipped for this than others, analysts suggest that in Meta’s case it is not only a question of trimming down, but a need to refocus on the core of its business.
