Facebook’s parent company Meta has announced that 11,000 employees will be laid off, 13 per cent of its global workforce.
The mass layoffs are the first in Meta’s 18-year history and follow similar cuts from other US tech giants, including Microsoft, Salesforce and Twitter.
“Today I’m sharing some of the most difficult changes we’ve made in Meta’s history,” Meta CEO Mark Zuckerberg announced.
“I’ve decided to reduce the size of our team by about 13 per cent and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.”
The pandemic-led boom that boosted tech companies and their valuations has turned into a bust this year in the face of decades-high inflation and rapidly rising interest rates.
Mr Zuckerberg attributed the redundancies to the “outsized revenue growth” experienced at the beginning of the Covid pandemic.
“Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments,” he wrote in a blog post. “Unfortunately, this did not play out the way I expected.”
An economic slowdown and a grim outlook for online advertising — by far Meta’s biggest revenue source — have contributed to Meta’s woes. This summer, Meta posted its first quarterly revenue decline in history, followed by another, bigger decline in the fall.
Some of the pain is company-specific, while some is tied to broader economic and technological forces. Meta has worried investors by pouring over $10bn a year into the metaverse as it shifts its focus away from social media. Mr Zuckerberg predicts the metaverse, an immersive digital universe, will eventually replace smartphones as the primary way people use technology.
Wall Street has been losing patience over Zuckerberg’s enormous and experimental bets on his metaverse project, a shared virtual world, with one shareholder recently calling the investments “super-sized and terrifying”.
Concerns over the spending spree have wiped off more than two-thirds of Meta’s market value so far this year. But its shares rose 4.5 per cent to $100.80 before the bell on Wednesday.
“The market is breathing a sigh of relief that Meta’s management or Zuckerberg specifically seems to be heeding some advice, which is you need to take some of the steam out of the growing expenditure bill,” Hargreaves Lansdown analyst Sophie Lund-Yates said.
She, however, added that “it does not quite tally that you’re going to try and increase efficiency at the same time as chasing something as ambitious and as tenuous as the metaverse”.
Meta and its advertisers are bracing for a potential recession. There’s also the challenge of Apple’s privacy tools, which make it more difficult 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 younger people flock to the video sharing app over Instagram, which Meta also owns.
As part of their severance package, workers in the US will receive 16 weeks of base pay plus two extra weeks for every year of service, while those outside the US will receive “similar” compensation.
Impacted employees will also receive their shares that were set to vest on 15 November and healthcare coverage for six months.
Meta did not specify the impacted regions or the expected cost savings of the moves, nor did it disclose the exact charge for the layoffs, but said the figure was included in its previously announced 2022 expense outlook of between $85bn and $87bn.
Additional reporting from agencies