In a rare move, one of the world’s biggest tech companies has laid off 13 percent of its staff. Facebook’s parent company Meta has announced that 11,000 employees worldwide have been asked to leave. In a blog post, Meta CEO Mark Zuckerberg said these were “some of the most difficult changes we’ve made in Meta’s history.” Zuckerberg detailed why the company laid off a portion of its employees and listed eight main reasons:
Increased investment in e-commerce
Zuckerberg said that at the beginning of the pandemic, “the world moved rapidly online and the rise of e-commerce led to a huge increase in revenue.” Metta and Zuckerberg thought it would be a “permanent” acceleration. “I decided to significantly increase my investment. Unfortunately, it didn’t go as I expected,” and the company lost revenue.
A recession in the economy
Meta’s CEO noted that revenue was “much lower” than he expected due to the macroeconomic downturn. Meta’s quarterly results did not paint a healthy picture and the forecast for the next quarter is also not very optimistic.
TikTok, Apple and more
Meta’s CEO also said other reasons for the revenue decline were “increased competition” and “loss of advertising signal” — meaning that Apple’s app-tracking transparency really hurt Meta. The company previously said that since Apple got app tracking transparency — a feature that gives users the option not to allow apps to be tracked — it has lost $10 billion. TikTok’s dominance of social media over the past few years may have increased competition.
Increase in costs and expenses
In its last quarter results, Meta revealed that its costs and expenses increased by 19% year-on-year. In the third quarter, Meta’s expenses were $22.1 billion — so the obvious cut in spending resulted in employee layoffs.
Decline in sales and revenue
During the third quarter, Meta revealed that overall sales fell 4% and its operating income fell 46% to $5.66 billion.
Need to be more “invested”.
In his blog post, Zuckerberg said Meta has decided to invest more. In other words, more of the company’s resources will go into “a smaller number of high-priority growth areas.” The company had shrunk its real estate footprint, cut incentives but not enough. “But these measures alone will not bring our expenses in line with our revenue growth, so I’ve also made the tough decision to let people go,” Zuckerberg said.
Realty Labs is expected to suffer.
Although Zuckerberg is optimistic about Metaverse, the division responsible for it – Reality Labs – is bleeding money. “We expect Reality Labs’ operating losses to increase significantly year over year in 2023,” Zuckerberg said during the company’s earnings call last month.
Metaverse lost billions of dollars.
It was revealed that Reality Labs lost about $9.4 billion in 2022, but Zuckerberg and company still have ambitious plans for it. “We are at the forefront of developing the technology to define the future of social networking and the next computing platform,” he said in a blog post informing employees of the layoffs.