It has been announced for a few days, but now it’s official — the wave of layoffs at tech companies is also reaching the social media group, Meta Platforms. It’s the biggest layoff in the tech industry this year, as the company struggles with rising costs and a weak ad market.
CEO Mark Zuckerberg announced that about 13% of the workforce would have to leave. This means that more than 11,000 employees will lose their jobs. In addition, Meta intends to take numerous measures to become leaner and more efficient. This includes a hiring freeze until the first quarter of 2023.
Meta Platforms has already sunk $9.4 billion in the metaverse this year. It’s not easy for Meta these days. The company recently suffered severe losses in the advertising business. In addition, there have been high expenses for the metaverse from the past year. Meta’s stock market value has since fallen back to 2015 levels. Peaking at more than $1 trillion in August 2021, the company has lost 75% of its value and is now at just $240 billion.
“At the onset of Covid, the world quickly moved online, and the wave of e-commerce led to above-average sales growth. Many people predicted that this would be a permanent acceleration that would last even after the pandemic passed. I was also convinced of this and decided to increase our investments significantly. Unfortunately, that didn’t turn out the way I expected. Not only has e-commerce returned to previous trends, but the macroeconomic downturn, increased competition and loss of ad signals have resulted in our earnings being much lower than I anticipated,” admits Zuckerberg.
Now, to increase its capital efficiency, Meta says it has shifted more of its resources to a smaller number of high-priority growth areas. That includes the AI discovery engine, the ad and business platforms, and the metaverse. Meta is now cutting costs by cutting budgets, reducing perks, and downsizing the property portfolio. Because that is not enough, the great wave of layoffs is now taking place.
Zuckerberg said the entire workforce would receive emails informing each individual what this layoff means for them. This measure is reminiscent of the recent mass layoffs on Twitter. At Meta, all laid-off employees should have the opportunity to speak to someone to get answers and attend information events.
Zuckerberg promises support for those who are laid off
Among other things, Meta promises layoffs in the US a severance payment of 16 weeks of base salary plus two additional weeks for each year of service, with no cap. Meta will also cover the health insurance costs for employees and their families for six months. Outside of the US, support is said to be similar.
The enormous expense of shifting to the metaverse is becoming increasingly problematic for the organisation. Now a very large part of the workforce has to bear these costs. Because the hype surrounding the metaverse has been significantly reduced this year, Meta is currently facing an uncertain future.