Facebook owner Meta Platforms has announced the first major round of layoffs in the company’s history—around 11,000 employees.
- It’s no secret that Meta has been struggling, but the announcement of layoffs cements the belief that investment in the metaverse isn’t working the way company leaders hoped.
- Meta’s ad revenue has been down, and Meta CEO Mark Zuckerberg admitted that he had made some incorrect calculations while predicting the market.
- Zuckerberg announced that the layoffs would be company wide—though some teams would have more layoffs than others.
- Employees who are part of the layoffs will receive a generous severance package that includes 16 weeks of pay plus two additional weeks for every year of employment and continued health insurance for six months.
- The company will also offer support in finding new employment and assist employees who are in the U.S. on a work visa.
- Meta’s hiring freeze will also continue into the next quarter and the company will continue to cut excessive spending.
- The company’s expensive focus on building the metaverse has been met with skepticism from investors—it seems that skepticism is taking effect.
- Meta’s stock has fallen more than 70% this year.
Why it’s news
In his announcement, Zuckerberg took full responsibility for Meta’s downturn. During pandemic lockdowns, e-commerce and web traffic were up—a trend Zuckerberg says he expected to continue.
However, ad revenue and user activity on Facebook dropped this year rather than accelerated. Apple announced changes to ad structures earlier this year that gave Apple a percentage of Facebook’s ad revenue.
“But the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than expected. I got this wrong,” Zuckerberg says in a company statement.
Zuckerberg also announced a shift in the company’s focus as it attempts to right itself.
“In this new environment, we need to become more capital efficient. We’ve shifted more of our resources onto a smaller number of high priority growth areas—like our AI discovery engine, our ads and business platforms, and our long-term vision for the metaverse,” he says.
Backing up a bit
Meta has been losing ad revenue and active users this year as it faces more competition from other social-media companies than ever before.
Rather than focusing on bolstering its current platforms, Zuckerberg has turned his focus to Reality Labs and the metaverse.
Reality Labs is responsible for making technology like the metaverse. The creative branch of the company is also working on technology like augmented reality and neural interfaces.
In the quarter beginning in July, Reality Labs total losses reached $3.67 billion, an increase from $2.63 billion the previous year. Overall revenue was cut almost in half.
Meta isn’t the only tech company to watch during the economic downturn. Apple, Amazon, Alphabet, and other tech companies have all announced hiring freezes or plans to cut back their workforce.