Facebook owner Meta cuts 11,000 jobs - 13% of workforce
PALO ALTO -- 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 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 $700 billion in market value, leading one Wall Street analyst to call it a "train wreck."
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 a growing threat as younger people flock to the video-sharing app over Instagram, which Meta also owns.
In the movie, "The Social Network," there's a scene where Facebook's founders are at odds over whether there should be advertising on the website.
"You don't want to ruin it with ads, because ads aren't cool," they are advised. "It's like you're throwing the greatest party on campus and somebody's saying it's gotta be over by 11:00."
But, on Wednesday at the headquarters of Meta, Facebook's parent company, it sounded like, if the party isn't over, it's certainly not what it used to be. San Jose State tech industry expert Ahmed Banafa said the problem was that the company began a massive recruitment effort during the public's online buying binge during the pandemic, hiring more than 30,000 new workers.
"So, they start hiring, hiring," he said, "anticipating that demand would stay the same after Covid, because people got used to a new style of life. But that's not the case."
Unexpectedly, a lot of the public's buying habits reverted to normal. And then the economy started going south. The advertising that once seemed so uncool began drying up and Meta lost billions of dollars in revenue.
"There's inflation, so households probably are scaling back their consumption of things," said SJSU economics professor, Matthew Holian. "And so, when the overall economy slows down, these (social media) companies are affected, because they make revenue through advertising and other means."
Lots of other tech companies are shedding workers as well, including Twitter, Netflix, Microsoft and Lyft. Professor Banafa says tens of thousands of jobs have quietly been trimmed as of October, and he expects more to follow.
"Once you start to see the big companies lay off workers in these kinds of numbers, then everybody's going to start to worry about it," he said.
Zuckerberg is still betting big on what he calls the "Metaverse," a kind of virtual world of work and play. But there will be a lot fewer people in the rest of the company. And while that is certainly tough news for those laid off Wednesday, Peter Leroe-Munoz, with the Silicon Valley Leadership Group, said this probably doesn't spell the end for them--or the Bay Area's tech economy.
"The silver lining is that Silicon Valley's job market is very tight at the moment, with low unemployment," he said. "So, displaced workers will be in demand for many new roles and positions."
In September, Meta reported that it had more than 87,000 employees worldwide. Now, it and other tech companies, that once thought the party would never end, are turning down the music and sending people home.