In a shocking announcement on November 9, Mark Zuckerberg, Chief Executive Officer of Meta Platforms Inc., announced the cutting of 11,000 jobs. This is considered the first major round of layoffs in the social media giant’s history of 18 years, as it equals to13% of the total workforce at Meta. A red-eyed Mark Zuckerberg released the statement on Wednesday, mentioning extending the company’s hiring freeze through its first quarter.
The statement, sent to the company’s employees and posted on the company website, read ‘’Unfortunately, this did not play out the way I 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.’’
Hence, a crumbling advertising market, faltering revenue, and broader tech industry woes are some of the reasons attributed to the vast retrenchment announced by the tech giant. Online advertising is by far the most significant revenue source for Meta. According to Bloomberg, an economy wobbling on the brink of recession and Zuckerberg’s multibillion-dollar investment in a speculative virtual-reality push called the metaverse are also a part of the reason. This pricey investment by Zuckerberg will bear fruit only after a decade, he admits.
In the face of soaring costs and rapidly rising interest rates, Zuckerberg admitted that his increased investments in e-commerce and web traffic were a ‘big mistake in planning’ as he anticipated it to be a permanent acceleration. Remember, many tech giants, including Meta, had enjoyed a significant financial boost during the covid-19 Pandemic when people were stuck at home due to lockdowns. Revenue growth started to falter when life became normal, and people started to move out of their homes.
The future seems grim for Meta as the economic slowdown is adding to the woes of the tech giant. Once worth more than $1 trillion, Meta is now valued at $256, which means it experienced a plunge of 70% of its value this year. Meta had posted its first quarterly revenue decline in history, followed by another more considerable decline in the fall. This has led to the company narrowing its vast expenditure in 2023.
The company now expects 2023 expenses of $94 billion to $100 billion, compared with $96 billion to $101 billion projected previously. The firm is also planning to reduce its office space and lower discretionary spending. Meanwhile, growth at the flagship Facebook social network is also stagnating. The employees sacked by Meta will receive 16 weeks of base pay and healthcare coverage as a part of their Severance package.
Meta is not the first tech giant to perform such a dramatic layoff. Last week, Twitter laid off about 7,500 employees as a part of a chaotic overhaul. As Elon Musk took the helm, he tweeted ‘’ when the company is losing over $4M/day,” he had no choice but to cut down on jobs. Many employees found out they had lost their jobs after being suddenly cut off from email. Many technology companies, including Salesforce Inc., Apple Inc., Amazon Inc., and Snapchat Inc., have either paused hiring or eliminated a percentage of their workforce amid concerns about a potential recession next year.