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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 after widespread layoffs at Twitter under its new owner, billionaire Elon Musk. There have been numerous job cuts at other tech companies that hired rapidly during the pandemic.
Zuckerberg as well said that he had made the decision to hire aggressively, anticipating 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.
Of particular concern to investors, Meta poured 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.
Spooked investors have sent company shares tumbling more than 71% since the beginning of the year and the stock now trades at levels last seen in 2015.
An economic slowdown and a grim outlook for online advertising — by far Meta’s biggest revenue source — have contributed to Meta’s woes as well. This summer, Meta posted its first quarterly revenue decline in history, followed by another, bigger decline in the fall.
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.
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.
“We’ve cut costs across our business, including scaling back budgets, reducing perks, and shrinking our real estate footprint,” Zuckerberg said. ”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.”
A hiring freeze at the company will be extended through the first quarter of 2023, Zuckerberg said. The company has also slashed its real estate footprint and he said that with so many employees working outside of the office, the company will transition to desk sharing for those that remain.
More cost cuts at Meta will be rolled out in coming months, Zuckerberg said.
Zuckerberg told employees Wednesday that they will receive an email letting them know if they are among those being let go. Access to most company systems will be cut off for people losing their jobs, he said, due to the sensitive nature of that information.
“We’re keeping email addresses active throughout the day so everyone can say farewell,” Zuckerberg said.
Former employees will receive 16 weeks of base pay, plus two additional weeks for every year with the company, Zuckerberg said. Health insurance for those employees and their families will continue for six months.
Shares of Meta Platforms Inc. jumped almost 5% before the opening bell Wednesday.
Meta, the parent company of Facebook and Instagram, reported $27.7 billion in second-quarter revenue, down 4 percent compared to the same quarter a year ago, continuing a trend of ad-supported tech companies feeling the pain of a tougher macroeconomic environment and renewed competition from competitors like TikTok.
However, the company beat Wall Street expectations for revenue. The company had previously forecast revenue of $26 billion–28.5 billion for the quarter, so it met its own guidance.
Going forward, however, things look tough. The company forecast Q4 revenue of $30-32.5 billion, below Wall Street expectations, sending its share price lower after hours.
Meta net income fell by 52 percent to $4.4 billion, while its daily active user base rose by 4 percent to 2.93 billion.
The company is in the midst of a strategic pivot toward the “metaverse,” which it seems to define as being driven by virtual reality and augmented reality. However, its early efforts in the space remain niche, even as it has committed billions of dollars toward investing in the space.
In its Q3 earnings report, the company said it was making “significant changes across the board to operate more efficiently,” including shrinking some teams and keeping others flat, so that it is “investing headcount growth only in our highest priorities.”
Those priorities will include developing its AI discovery engine, its ads and business messaging platforms, and its future investment in the metaverse.
In the near-term, the company expects savings as it “rationalizes” its office footprint.
The AI discovery engine is particularly relevant to Meta’s TikTok competitor Reels, which CEO Mark Zuckerberg says is stealing time spent from the other app. Reels is now a $3 billion annual run rate business, he added.
When the discovery engine is built out, the company will be able to “recommend photos, text, links, communities, short and long form videos, alongside posts from family and friends,” Zuckerberg said, differentiating it from TikTok.
“While we face near term challenges on revenue, the fundamentals are there for a return to stronger revenue growth,” Zuckerberg added in a statement. “We’re approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company.”
Still, on the company’s earnings call, Zuckerberg also projected some optimism, telling analysts that “our product trends look better from what I see than what some of the commentary suggests.”
On Facebook specifically, the number of people using it each day is the highest it has ever been,” he added, noting that it now has nearly 2 billion users, and that WhatsApp’s fastest-growing region is now North America.
Meta’s quarterly report follows similarly disappointing results from Snap and Alphabet, which have also been feeling the pinch of the advertising environment. Snap cut about 20% of its staff last quarter, and saw its losses widen, as it seeks to restructure. It did, however, see double digit user growth.
Alphabet, the owner of YouTube and Google, also missed expectations, with YouTube revenue falling year-over-year for the first time since it was broken out by the company.
This article was originally published on THR.com.