Meta’s mass employment layoffs make it one of the biggest layoffs this year along with tech giants like Microsoft and Twitter
Meta on Wednesday announced the dropping of 13 percent of its employees, around 11,000 of its workforce, as the parent company of Facebook commits more to its precarious metaverse amidst the economy battling decade-high inflation, and a deteriorating advertising market. The company’s mass redundancies make it one of the biggest layoffs this year along with tech giants like Microsoft and Twitter.
The newly popped-up mass employment sackings will be the first in Meta’s 18-year-old history. The pandemic bolstered a surge in the use of social media and the company hired aggressively to meet the growing demand. The crumbling economy and soaring prices, however, caused many advertisers and investors to pull back on their spending in the face of firing interest rates.
In a message to its employees, Chief Executive Officer Mark Zuckerberg stated that online commerce has returned to its normal pace, but the macroeconomic downturn has increased competition. The loss in the advertisement reduced the revenue of the company much lower than expected and stated, “I got this wrong, and I take responsibility for that.” Meta shares rose around 4% on Wednesday as the company cautioned about the layoffs and its decision to invest more into Metaverse, a risky investment as these investments could take decades to bear fruit.
The American multinational technological company lost 70% of its value this year reaching $256 billion which was worth trillions earlier. The firm expects the expenses for the year 2023 to fall between $94 billion and $100 billion compared to the earlier estimate of $96 billion and $101 billion along with a narrowing of the capital expenditure forecast range for the year 2023. Along with the reduction in employees the company is also in the stage of reducing office space, which will affect the business and recruitment teams.
The firm will also reduce its discretionary spending and extend a hiring freeze in the first quarter of the coming year to bring down expenses. The leftover resources will go toward the Reality Labs unit which is responsible for the company’s metaverse investments. Reality labs have been the costliest investment of Meta as it has spent around 15 billion dollars on the development of AR headsets.
The losses incurred by the company are expected to grow significantly during the year 2023, continuing the trend as the firm lost around $10 billion between the months of January to September of this year. Analysts and investors are looking at the company’s decision to invest more in Metaverse, a risky area during a time when the economy is weak and battling inflation.
The rise in interest rates and the current macro environment create pressures on the ad market, which account for the major revenue earner for the tech giant. Meta will pay 16 weeks of base pay and additional weeks for every year of service including remaining paid time off. The employees who are affected by the layoffs will receive their shares and health coverage for six months.
The company did not disclose the exact charge for the employee reductions but was informed about the figure inclusion in the previously announced expense outlook for 2022 which could fall between $85 billion and $87 billion.