Meta Platform to lay off 13% of its workforce
In what could send a chill down the spines of the tech sector job seekers, Meta Platform plans to lay off nearly 13% of its workforce of 87,314 people. This is the first time since its inception in 2004 that Mark Zuckerberg would be undertaking such a large scale retrenchment of the workforce. Otherwise, Meta Platform (Facebook) has typically been on a hiring spree in the job markets across the world. As per the reports, that has been confirmed by Meta, the company plans to lay off 11,000 employees representing about 13% of its total workforce. The communication from Mark Zuckerberg has already gone out.
In a sense, the lay-offs have been rather business agnostic. People have been laid off across departments and regions. Some of the most impacted departments are the likes of the recruiting and business teams, where the lay-offs have been the deepest. However, the lay-offs have largely spared employees like engineers working on projects related to the metaverse as well as technical experts working on the immersive online world. These are the company in general and Mark Zuckerberg in particular is betting very big on. In a letter to the laid-off employees, Zuckerberg accepted responsibility for the decision.
In a way, this looks like the season of big people cuts. Just a week back, Twitter had laid of scores of employees across its offices as part of the revamped strategy after Elon Musk assumed control of Twitter. However, the cuts at Meta are nearly thrice the size of Twitter. The decision to lay off 13% of its employees came in for a lot of criticism as in the last few years, Meta had spent lavishly accumulating users. It had paid top dollars for acquiring big brands like Instagram and WhatsApp. Its financial performance had also been enviable despite inquiries into its data privacy practices and its toxic content.
Despite touching peak valuations of $1 trillion, Meta has struggled in this year, especially in managing to sustain its growth and profitability. It has sunk billions of dollars into its immersive world project (Metaverse). However, some of its traditional revenue engines like digital advertising have taken a sharp hit on account of tough competition. For instance, the younger audience is increasingly gravitating towards names like Tik Tok for their social media presence needs. Facebook is not the only choice now and the series of private allegations have only helped to tarnish the aura. It recently reported sharp drop in profits.
According to Zuckerberg, the growth at Facebook and later at Metaverse came too quickly and things started unravelling when the surge in online revenues could not keep pace with the rise in costs. The slowdown has put a lot of pressure on the revenues and the only choice for companies like Metaverse is to look at cutting costs. Clearly, they are not giving up on their Metaverse and Immersive Experience projects, so the cuts will happen in other segments that are not directly related to these specific projects of Metaverse. The crux of the problem was that the revenue surge did not turn out to be structural as envisaged.
The reduction in Meta’s work force is not just about Facebook or Metaverse but about Silicon Valley at a larger level. This is an attempt to rein in some of the exuberance post the pandemic that did not last long enough or was curtailed by the extreme hawkishness of the Fed and the consequent fears of a recession. Meta is not only cutting down on employees but also on other operating costs and real estate costs. Going ahead, Meta will focus on a much smaller set of high priority areas and that would include the 3 pillars of artificial intelligence, advertising and the metaverse. Severance packages have been rather generous.
However, experts at Harvard believe that the problem was in bad estimation and wrong timing. By rapidly hiring across all departments during the pandemic, Meta had actually set up the company to need reductions in staff. It is just that it happened pretty soon. At one point, Meta had offered free laundry, free dry cleaning and free dinner offerings to its employees. All these have been trimmed well in advance. Economic downturns are never the best of times and people on the street are learning it the hard way. Meta, Twitter and Snap may just be indicative of a much larger trend in Corporate America. After all, when it pinches the bottom line, it is the manpower that takes the big hit.
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