Meta is laying off more than 11,000 staff, approximately 13% of its global headcount. CEO Mark Zuckerberg (pictured) said in a letter to employees that it is also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending its hiring freeze through the first quarter of next year.
While it is making reductions in every organisation across both Family of Apps and Reality Labs, recruiting will be "disproportionately affected" since it is planning to hiring fewer individuals next year. Meta is also restructuring its business teams more substantially. Meta's spokesperson declined to comment on what this means for the teams in Asia Pacific.
Impacted employees will receive an email soon informing them of what this layoff means to them. Subsequently, Zuckerberg said every affected employee will have the opportunity to speak with someone to get their questions answered and join information sessions. A few days ago, The Wall Street Journal reported that "many thousands of employees" are expected to be affected by the job cuts. At the end of September, Meta had more than 87,000 employees globally.
Zuckerberg also took accountability for these decisions and for how the company got to this situation. "I know this is tough for everyone, and I’m especially sorry to those impacted," he said. He explained that when everyone moved online during COVID-19 and eCommerce surged, many including himself predicted this would be a permanent acceleration that would continue even after the pandemic ended. Unfortunately, this did not play out the way he expected.
"Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected. I got this wrong, and I take responsibility for that," he said.
In this new environment, Zuckerberg said the company needs to become more capital efficient. As such, it has shifted more of its resources onto a smaller number of high priority growth areas - its AI discovery engine, its ads and business platforms, and its long-term vision for the mteaverse.
The tech giant has also cut costs across the business, including scaling back budgets, reducing perks, and shrinking our real estate footprint. Meta is also restructuring teams to increase its efficiency. However, Zuckerberg said these measures alone won't bring its expenses in line with its revenue growth, hence he has also made the hard decision to let employees go.
Access to most Meta systems has been removed for the affected employees given the amount of access to sensitive information. That said, the company is keeping email addresses active throughout the day so everyone can bid farewell. To tide them through this period, US employees will receive severance pay, PTO, health insurance, career services, and immigration support. Zuckerberg said support will be similar outside the US, and Meta will follow up soon with separate processes that take into account local employment laws.
"I view layoffs as a last resort, so we decided to rein in other sources of cost before letting teammates go. Overall, this will add up to a meaningful cultural shift in how we operate," he said. For example, Meta is transitioning to desk sharing for individuals who already spend most of their time outside the office as part of its efforts to shrink real estate footprint. It is also thoroughly reviewing its infrastructure spending and focusing on becoming even more efficient with its capacity.
While it is extending its hiring freeze through the first quarter of next year, this is done with a small number of exceptions. Zuckerberg said he is going to watch its business performance, operational efficiency, and other macroeconomic factors to determine whether and how much it should resume hiring at that point. "Our revenue outlook is lower than we expected at the beginning of this year, and we want to make sure we’re operating efficiently across both Family of Apps and Reality Labs," Meta's chief said.
Meta's shares reportedly jumped more than 7% in midday trading yesterday, the Financial Times said. This year hasn't been a smooth one for Meta as well as other big tech firms. Late last month, Meta's revenue dipped 4% to US$27.71 billion while its net income for Q3 2022 slid 52% to US$4.4 billion. Investors wiped over US$89 billion from Meta's market capitalisation following the decline in revenue. Meanwhile, investors also seem to be unconvinced by Zuckerberg's bet on the metaverse.
"Meta is amidst an identity crisis. The company has one foot in a risky long-term metaverse bet and another foot failing to compete with TikTok," Forrester's VP, research director Mike Proulx said. According to him, neither bodes well for Meta in the short-term and more severe cost-cutting measures were inevitable as the company attempts to regroup heading into a bleak 2023. "Expect more headwinds for Meta as Gen Z continues to exit Facebook and favour TikTok over Reels, and CMOs consolidate their slashed media budgets towards safe and sure bets," he added.
Meanwhile, Forrester's VP, principal analyst J.P Gownder said it wouldn't be surprising to see more layoffs in the next few months, particularly among firms whose fiscal year ends on 31 December. "They want to set up finances for success in 2023. Widespread economic concerns -- some prompted by rising interest rates, others by the war in Ukraine, high fuel costs, and supply chain issues -- are prompting these moves in anticipation of lower demand," he added.
Separately, Twitter also made cuts to its workforce recently, culling 3,700 positions including the Asia Pacific communications team, following Elon Musk's US$44 billion acquisition of the company.
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