Facebook parent Meta is laying off 11,000 people, about 13% of its workforce, as it contends with faltering revenue and broader tech industry woes, CEO Mark Zuckerberg said in a letter to employees Wednesday.
The job cuts come just a week afterunder its new owner, billionaire Elon Musk. There have been numerous job cuts at other tech companies that hired rapidly during the pandemic.
Zuckerberg said he had made a mistake in previously moving to hire aggressively, expecting rapid growth even after the pandemic ended.
"Unfortunately, this did not play out the way I expected," Zuckerberg said in a prepared statement. "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."
Meta, like other social media companies, enjoyed a financial boost during the pandemic lockdown era because more people stayed home and scrolled on their phones and computers. But as the lockdowns ended and people started going outside again, revenue growth began to falter.
Meta's "train wreck"
An economic slowdown and a grim outlook for online advertising — by far Meta's biggest revenue source — have contributed to Meta's woes. This summer, Meta posted its first quarterly revenue decline in history, followed by another, bigger decline in the fall.
Meta shares have tumbled more than 70% this year, compared with 32% for the tech-heavy Nasdaq Composite index. As of late October, Meta had lost roughly, leading one Wall Street analyst to call it a "train wreck." The company's stock price rose 4% ahead of the start of trade on Wednesday to $100.57.
Some of the pain is company-specific, while some is tied to broader economic and technological forces.
Last week, Twitter laid off about half of its 7,500 employees, part of a chaotic overhaul as Musk took the helm. He tweeted that there was no choice but to cut the jobs "when the company is losing over $4M/day," though did not provide details about the losses.
Other large tech companies, including Amazon, Google owner Alphabet, ride-sharing player Lyft and payments provider Stripe, have either announced layoffs or paused hiring amid concerns about a potential recession next year.
"The Meta reductions are among the largest to date of any company (not just in tech), and we think it portends additional headcount cuts to come across Corporate America," analyst Adam Crisafulli of Vital Knowledge said in a report to investors.
Meta has worried investors by pouring over $10 billion a year into the "metaverse" as it shifts its focus away from social media. Zuckerberg predicts the metaverse, an immersive digital universe, will eventually replace smartphones as the primary way people use technology.
Meta and its advertisers are bracing for a potential recession. There's also the challenge of Apple's privacy tools, which make it more difficult for social media platforms like Facebook, Instagram and Snap to track people without their consent and target ads to them. Competition from TikTok is also an a growing threat as younger people flock to the video sharing app over Instagram, which Meta also owns.
"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," Zuckerberg said in his message to employees.
Meta will offer laid-off workers the equivalent of 16 weeks of their base pay, plus two additional weeks for every year they've been with the company. Meta will also cover the cost of health insurance for them and their families.
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