Meta, the parent company of Facebook, Instagram, and WhatsApp, has confirmed a massive round of layoffs, amounting to 13% of its workforce.
“I want to accept responsibility for these decisions and how we arrived here,” CEO and cofounder Mark Zuckerberg said in a statement. “I know this is difficult for everyone, and I’m especially sorry for those who have been affected.”
The announcement comes as companies across the technological spectrum have announced massive layoffs in recent months, with Twitter laying off roughly half of its 7,500 workforce following Elon Musk’s arrival at the helm, and Stripe last week revealing plans to cut its headcount by 14%. Salesforce confirmed yesterday that it had laid off “hundreds” of employees.
The layoffs at Meta were widely rumored and expected, but we now know the full extent of the company’s plans and what this means for those affected.
Meta’s current global headcount is approximately 87,000, implying that 11,000 people will be leaving the company. According to Zuckerberg, each employee based in the United States will receive 16 weeks of severance pay, plus two weeks for each year of service. For example, someone who has worked at Meta for four years will be paid for six months.
In addition, Meta stated that employees will be paid for any unused time off and will receive stock-based compensation that will vest through November 15. In addition, employees and their families will be provided with six months of health insurance.
Outside of the United States, Zuckerberg stated that support packages would be “similar,” but tailored to each market.
Meta’s path to where it is today is one that many companies have taken over the last year, though the tech titan’s effects are amplified somewhat by its size.
After becoming one of the few companies in history to have a trillion-dollar market cap — right in the middle of the pandemic — the company sought a new direction in the form of the metaverse, rebranding from Facebook to Meta. While it would be unfair to blame this pivot for Meta’s current predicament, the company has been pouring money into a project that is nowhere near ready for prime time, with critics claiming that it was losing focus on its core business in pursuit of something else.
Meta’s market cap has plummeted in the last year to around $250 billion, a level last seen in 2015, when the company was on a major rise. Back in June, the company reported its first-ever quarterly decline before confirming it was freezing hiring plans as part of broader cost-cutting measures, with the revenue decline continuing into the following quarter as well.
What’s notable is that Zuckerberg barely mentions the metaverse at all in his open letter, other than to say that it’s a “long-term vision” that remains one of Facebook’s “high priority growth areas.”
Certainly, there is little indication that the Meta ship, under Zuckerberg’s stewardship, will change course anytime soon. He did say that layoffs will affect employees at the “Family of Apps” (Facebook, Instagram, and WhatsApp) as well as Reality Labs, the VR and AR unit pushing the company’s metaverse mission, but it’s unclear which divisions will be hardest hit: “Some teams will be affected more than others,” Zuckerberg said.
In a separate SEC filing accompanying today’s announcement, Meta stated that it expects Reality Labs’ operating losses in 2023 to “grow significantly year over year” — perhaps a sign that Meta is pushing hard on the metaverse despite a capex plan for 2023 that remains in the $34-$37 billion range.
The Great Reset
In reality, a number of factors have contributed to Meta’s decline. Apple’s App Tracking Transparency (ATT) framework, which was introduced last year, has had the expected impact on Meta’s advertising revenue, with Apple’s own ad business benefiting as a result. Furthermore, the rise of relative newcomers like TikTok has influenced where advertisers choose to spend their money.
The elephant in the room, however, is the impact of the so-called Great Reset, a phenomenon we’ve seen in countless other places where companies that went in too deep on the back of a pandemic-driven surge in revenues were jolted back down to Earth when the boom faded. And this is also where Mark Zuckerberg claims Meta went wrong.
“At the time of Covid’s inception, the world was rapidly moving online, and the surge of ecommerce led to outsized revenue growth,” Zuckerberg wrote. “Many people predicted that this would be a permanent acceleration that would last long after the pandemic was over.” I felt the same way, so I decided to significantly increase our investments. Unfortunately, this did not turn out as I had hoped. Not only has online commerce returned to previous trends, but the macroeconomic downturn, increased competition, and ad signal loss have resulted in much lower revenue than I had anticipated. I made a mistake, and I accept responsibility.”
Aside from layoffs, Meta stated that it is reviewing its infrastructure spending to optimize capacity efficiency, as well as looking to “shrink its real estate footprint,” which will entail more desk-sharing for those who only visit the office on occasion. Furthermore, the company’s current hiring freeze will be extended until early 2023, with only a “small number of exceptions.”
“I’m going to keep an eye on our business performance, operational efficiency, and other macroeconomic factors to see if and how much we should resume hiring at that point,” Zuckerberg wrote. “This will allow us to control our cost structure in the event of a prolonged economic downturn.” It will also put us on track to achieve a more efficient cost structure than we recently outlined to investors.”