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Unlucky for some: Meta chops 13% of global workforce
Zuck admits biz recruited too hard during pandemic and decline in advertising forced his hand
Meta is making more than of 11,000 employees redundant following the dramatic decline in profits and the subsequent share price dive at the end of last month.
In a post made public this morning after being shared with the workforce, company chief Mark Zuckerberg said the layoffs were the "most difficult change we’ve made in Meta's history."
I've decided to reduce the size of our team by about 13 percent 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 social media corporation – home to Facebook, Instagram, and WhatsApp – last month reported revenue of $27.7 billion, down 4 percent year-on-year, but profit plunged 52 percent to $4.4 billion.
Weaker advertising demand was blamed, "impacted by the uncertain and volatile macroeconomic landscape," said CFO David Wehner in late October.
Meta is suffering at the hands of Apple's privacy focused tweaks to its operating system, with Meta estimating earlier this year that the iOS privacy change will cost it $10 billion.
Although it was barely mentioned in the missive, there is also the issue of Meta's metaverse division, which its latest quarterly earnings report revealed has lost $9.4 billion this year already.
The jobs cuts are perhaps partly a consequence of the hiring spree that Meta and others in the industry embarked upon during the pandemic. Meta, for example, employed more than 58,000 in 2019 but the headcount had increased to 87,000 by calendar Q3 this year.
The buck for the job cuts stops with Zuck, he said in his blog post this morning – who else he thought it might have stopped with isn't clear.
So how did Meta get here?
"At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. 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. 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," he said.
Meta needs to spend less cash, or become more "capital efficient", as the CEO put it. More resources are being shifted to a "smaller number of high priority growth areas", including the AI discovery engine, ads and biz platforms, and "our long term vision for the metaverse."
It was this obsession with the metaverse and shareholder group's lack of patience with it that has contributed to the 70 percent plus reduction in Meta's share price since 2015.
Zuckerberg continued: "We've cut costs across our business, including scaling back budgets, reducing perks, and shrinking our real estate footprint. We're restructuring teams to increase our efficiency. But these measures alone won't bring our expenses in line with our revenue growth, so I've also made the hard decision to let people go."
As severance, US employees will receive 16 weeks base pay plus two additional weeks for every year of service, with no cap. This seems generous to us, certainly compared to some of the older world tech organizations out there. Health insurance for the next six months will be covered as well, and Meta has promised to provide visa support for immigrant staffers.
Elsewhere in the world, Zuck said the company will take into account local employment laws.
"We made the decision to remove access to most Meta systems for people leaving today given the amount of access to sensitive information. But we're keeping email addresses active throughout the day so everyone can say farewell," said the CEO.
Unsurprisingly, given the scale of the layoffs, Meta is "planning to hire fewer people next year."
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"We're also restructuring our business teams more substantially. This is not a reflection of the great work these groups have done, but what we need going forward."
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Zuckerberg said the layoffs were a "last resort" and it had pulled in other types of spending ahead of today. "For example, as we shrink our real estate footprint, we're transitioning to desk sharing for people who already spend most of their time outside the office. We'll roll out more cost-cutting changes like this in the coming months."
Infrastructure spending is also being reviewed – the company said recently it wants to sweat its servers for longer – and it will look to heighten efficiency as it builds an AI infrastructure.
"Fundamentally, we're making all these changes for two reasons: our revenue outlook is lower than we expected at the beginning of this year, and we want to make sure we're operating efficiently across both Family of Apps and Reality Labs." ®