In an unprecedented move, one of the world’s largest technology companies has laid off 13% of its employees. Meta, the parent company of Facebook, has announced that 11,000 employees worldwide have been asked to leave. In a blog post, Meta CEO Mark Zuckerberg said these were “some of the toughest changes we’ve made in Meta history.” Zuckerberg spoke in detail about why the company is firing a large part of its employees and these are the eight main reasons:
Increase investments in e-commerce
Zuckerberg said that at the start of the pandemic, “the world moved quickly online and the e-commerce boom led to significant revenue growth.” Meta and Zuckerberg thought it would be “permanent” acceleration. “I made the decision to significantly increase our investment. Unfortunately, it didn’t happen the way I expected,” and it ended up losing revenue for the company.
downturn in the economy
The CEO of Meta stated that the overall economic downturn caused revenue to be “significantly lower” than he had expected. The quarterly Meta results didn’t paint a good picture and the outlook for the next quarter isn’t optimistic either.
TikTok, Apple and more
The Meta CEO also said other causes of revenue loss were “increased competition” and “loss of advertising signal” – which means Apple’s app tracking transparency has already dealt a severe blow to Meta. The company previously said that since Apple acquired app tracking transparency — a feature that gives users the option not to let apps track them — it has suffered a $10 billion loss. The increased competition can be very good with the dominance of TikTok on social media in the past few years.
High costs and expenses
In its recent quarterly results, Meta revealed that its cost and expenses were up 19% year over year. In the third quarter, Meta’s expenses were $22.1 billion — so obviously the cost cuts resulted in employees losing their jobs.
Decline in sales and income
During the third quarter, Meta revealed that total sales fell 4% and its operating income fell 46% to $5.66 billion.
The need to increase “capital efficiency”
Zuckerberg said on his blog that Meta has decided to become more capital efficient. In other words, more company resources will be allocated to “fewer high priority growth areas.” The company trimmed its real estate footprint, slashing liens but it wasn’t enough. “But these actions alone won’t keep our expenses in line with our revenue growth, so I’ve also made the tough decision to let people go,” Zuckerberg said.
Reality Labs expected to incur losses
Although Zuckerberg remains optimistic about the metaverse, the division responsible for it – Reality Labs – has been bleeding money. “We expect Reality Labs’ operating losses in 2023 to grow significantly year over year,” Zuckerberg said last month during the company’s earnings call.
Metaverse lost billions of dollars
It was revealed that Reality Labs lost nearly $9.4 billion in 2022 but Zuckerberg and the company still have ambitious plans for that. “We are leading the development of technology to define the future of social connectivity and the next computing platform,” he said in a blog post informing employees of layoffs.