Meta is laying people off for the first time in its history
Facebook parent Meta is cutting staff for the first time in its history, according to multiple media reports.
CEO Mark Zuckerberg told employees Thursday that the 18-year-old company would freeze hiring and reduce budgets for most teams, with Meta expecting to end the year with fewer employees, Bloomberg reported. As part of the shift, Meta will no longer automatically replace employees who leave, will pause internal transfers and will "manage out" low performers, according to the news service. The company also said its budget next year would be "very tight," the Wall Street Journal reported.
Spokespeople for Meta declined to comment, but pointed to comments Zuckerberg made to investors in July.
"Our plan is to steadily reduce headcount growth over the next year," he told investors in the company's earnings call, adding, "Many teams are going to shrink so we can shift energy to other areas."
Zuckerberg also noted that Meta would delay some projects until next year and said it planned to "get more done with fewer resources."
Mid-life crisis
A number of major tech companies have laid off workers this year, including Netflix, Snap, Twilio, Taboola and Twitter, but Meta is by far the largest to do so. In recent years, the company had dramatically boosted headcount as it doubled down on content moderation. It had roughly 83,000 workers at the end of June.
The news highlights the challenges facing a company that's gone from startup to juggernaut in a little over a decade. Amid an economic slowdown that is hitting tech and advertising particularly hard, Facebook is also trying to overhaul its business model.
Long dominant in the online advertising industry, which it helped create, it has more recently refashioned itself as software company, with the goal of owning the digital infrastructure on which people work, play and interact in the future. It's a lofty objective, and an expensive one, with Zuckerberg estimating the ongoing shift to cost $10 billion a year for the foreseeable future.
Meta's stock has plunged this year in the face of a series of headwinds typical of maturing companies seeking to remain on the cutting edge: fewer users, falling revenue and dramatically higher spending to build out its corner of the emerging Metaverse, which Zuckerberg believes is set to be the next stage in the evolution of the internet.
"The Street is concerned that there's no specific message out there, no real way this company is going to generate revenue from the metaverse," Angelo Zino, an analyst at CFRA who covers social media companies, recently told CBS MoneyWatch.
Meanwhile, Facebook's traditional revenue stream — extremely lucrative advertising sold against hyper-specific user data — is wavering. Advertisers are spending less this year in the face of a wobbly economy, and traditional social media advertisers are facing increased competition from other offerings.
"Netflix, HBO Max, Disney+, TikTok…. There are new avenues that are available to advertisers," Zino said. In the social media space, Meta is no longer dominant among the all-important youth demographic, which is flocking to TikTok, and Meta's ability to target ads hasn't recovered from Apple's iOS changes last year, which made it hard to track users.
The departure in June of Sheryl Sandberg, the company's respected chief operating officer and chief architect of its ad-targeting system, served to underscore the shifting ground for Meta.
To be sure, other technology companies have also fared poorly this year. But Meta's share price is down 60%, more than double the decline in the tech-heavy Nasdaq Composite index. The decline has been steep enough to lower Zuckerberg's net worth by $74 billion.
Meta is still a dominant digital company with piles of money at its disposal. In its last quarter — the one so bad it sent investors running — the company pulled in $28 billion in revenue and boasted a 29% profit margin.
"They have a financial position I think most companies would be envious of," Zino said.
The problem for Wall Street is that Meta is no longer a promising growth startup, while its core business model remains unclear. Until the company has a more persuasive story to share, investors will look elsewhere.
"Over 40% of the global economy utilizes one of their four major platforms, and there are plenty of ways they can monetize it over time. You're going to see better days," said Zino. "They're just going through a lot right now, and it's a matter of them having to weather the storm — and in many cases, weather many storms that are taking place at the same time."