Meta, which is owned by Facebook, is letting go of 11,000 people, or about 13% of its staff, because of falling sales and problems in the tech industry as a whole, CEO Mark Zuckerberg said in a letter to staff on Wednesday.
The job cuts come just a week after Twitter’s new owner, billionaire Elon Musk, fired a lot of people. At other tech companies that hired quickly during the pandemic, there have been a lot of job cuts.
Zuckerberg said he made a mistake when he hired people quickly before the pandemic ended because he thought the company would grow quickly even after the pandemic was over.
“Unfortunately, this didn’t turn out the way I thought it would,” Zuckerberg said in a prepared statement. “Not only has online shopping gone back to how it was before, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I expected. I made a mistake here, and I own up to that.
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During the pandemic lockdown, more people stayed home and scrolled on their phones and computers, which helped Meta and other social media companies make more money. But when the lockdowns were over and people could go outside again, sales started to slow down.
Meta’s “Train Wreck”
A slowing economy and bad news about online advertising, which is by far Meta’s biggest source of income, have both hurt the company. This summer was the first time in Meta’s history that quarterly sales went down, and another, bigger drop happened in the fall.
Mark Zuckerberg apologizes as #Meta announces 11,000 jobs cut. Says ‘I got this wrong.’ Job cuts represent ~13% of Meta’s employees BUT that’s just about 1/3rd of the jobs Zuck has created since the pandemic. https://t.co/Kothv8LLMg pic.twitter.com/AeGwgnOJcO
— Holger Zschaepitz (@Schuldensuehner) November 9, 2022
Meta stock is down more than 70% this year, while the tech-heavy Nasdaq Composite index is down 32%. As of the end of October, Meta’s market value had dropped by about $700 billion. One Wall Street analyst called this a “train wreck.” Before Wednesday’s trading began, the price of the company’s stock went up by 4%, to $100.57.
Some of the pain is specific to the company, and some are caused by forces in the economy and technology as a whole.
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Last week, about half of Twitter’s 7,500 employees were fired as part of a chaotic reorganization that started when Musk took over as CEO. He said in a tweet that the jobs had to be cut because “the company is losing over $4M a day.” He did not say what the company was losing, though.
Concerns about a possible recession next year have led other large tech companies, like Amazon, the company that owns Google (Alphabet), the ride-sharing company Lyft, and the payments company Stripe, to either lay off workers or stop hiring.
In a report to investors, Vital Knowledge analyst Adam Crisafulli said, “The Meta reductions are some of the biggest we’ve seen so far at any company, not just in tech. We think this is a sign of more layoffs to come in Corporate America.
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As Meta shifts its focus away from social media, it is putting more than $10 billion a year into the “metaverse.” This has worried investors. Zuckerberg thinks that smartphones will eventually be replaced by the metaverse, which is an immersive digital universe.
Meta and its advertisers are getting ready for a possible downturn in the economy. There’s also the problem that Apple’s privacy tools make it harder for Facebook, Instagram, and Snap to track people without their permission and show them ads that are relevant to them. TikTok is also becoming a bigger threat as more and more young people use it instead of Instagram, which Meta also owns.
We’re making all of these changes for two main reasons: our revenue forecast is lower than what we thought it would be at the beginning of the year, and we want to make sure that Family of Apps and Reality Labs are working as well as they can.
Meta will give workers who are let go the equivalent of 16 weeks of their base pay plus two extra weeks for every year they worked there. Meta will also pay for their and their families health insurance.
