In an unprecedented move, one of the world’s largest tech companies cut 13% of its workforce. Meta, Facebook’s parent company, has announced that 11,000 employees worldwide have been asked to leave. Meta CEO Mark Zuckerberg said in a blog post that these were “some of the most difficult changes we’ve made in Meta’s history.” Zuckerberg detailed the reasons why the company is laying off a large number of employees, and here are the eight main ones:
Increase investment in e-commerce
At the start of the pandemic, “the world went online rapidly, and the surge in e-commerce led to a massive increase in revenue,” Zuckerberg said. Meta and Zuckerberg believe this would be a “permanent” acceleration. “I decided to significantly increase our investment. Unfortunately, it didn’t work out as I expected,” and the company ended up losing revenue.
The Meta CEO mentioned that the macroeconomic slump has resulted in revenue “well below” his expectations. Meta’s quarterly results didn’t paint a healthy picture, and the forecast for the next quarter wasn’t too optimistic.
TikTok, Apple, etc.
The Meta CEO also said that other reasons for the lost revenue were “increased competition” and “missing advertising signals” — meaning Apple’s App Tracking Transparency really hit Meta hard. The company had earlier said it had lost $10 billion since Apple acquired App Tracking Transparency, a feature that allows users to choose not to allow apps to track them. TikTok’s dominance in social media over the past few years is likely to intensify competition.
Rising costs and expenses
In the last quarter’s results, Meta revealed that its costs and expenses rose 19% year over year. In the third quarter, Meta’s expenses were $22.1 billion — so cost-cutting apparently resulted in employees losing their jobs.
Sales and revenue decline
Meta revealed that overall sales fell 4% in the third quarter and operating income fell 46% to $5.66 billion.
Need to improve ‘capital efficiency’
Zuckerberg said in his blog post that Meta has decided to improve capital efficiency. In other words, more company resources will go into “a handful of high-priority growth areas.” The company has shrunk its real estate footprint and reduced perks, but not enough. “But those measures alone don’t keep our spending in line with our revenue growth, so I also made the tough decision to let people go,” Zuckerberg said.
Reality Labs expected to suffer
While Zuckerberg remains optimistic about the Metaverse, the division responsible for it — Reality Labs — has been losing money. “We do expect a substantial year-over-year increase in Reality Labs’ operating loss in 2023,” Zuckerberg said on the company’s earnings call last month.
Metaverse loses billions of dollars
Reality Labs was revealed to lose nearly $9.4 billion in 2022, but Zuckerberg and the company still have ambitious plans. “We are leading the way in developing the technologies that define the future of social connectivity and the next computing platform,” he said in a blog post informing employees of the layoffs.