Meta Platforms Inc. CEO Mark Zuckerberg said the company would cut more than 11,000 jobs in the first major round of layoffs in the social media giant’s history.
The cuts, equal to around 13% of the workforce, were disclosed in a statement on Wednesday. The company will also extend its hiring freeze until the first quarter.
“I want to take responsibility for these decisions and how we got here,” Zuckerberg said in the statement. “I know this is difficult for everyone, and I’m especially sorry for those affected.”
The company said that while reductions will occur across the business, its recruiting team will be disproportionately affected and its sales teams will be restructured “more substantially”. Meta will also reduce its real estate footprint, revise its infrastructure spending and transition some employees to office sharing with further cost reduction announcements expected in the coming months.
Meta, whose stock has plunged 71% this year, is taking steps to cut costs after several quarters of disappointing profits and falling revenue. The retrenchment, the company’s most drastic since Facebook was founded in 2004, reflects a sharp downturn in the digital advertising market, a faltering economy on the brink of recession and Zuckerberg’s multi-billion dollar investment in a virtual reality speculative push called the metaverse.
The shares rose 3.5% in premarket trading on Wednesday before markets opened in New York.
Zuckerberg said in the statement that he expected the surge in e-commerce and web traffic since the start of the Covid-19 lockdowns would be part of a permanent acceleration. “But the macroeconomic slowdown, increased competition and loss of advertising signal caused our revenue to decline from forecast. I was wrong.
Zuckerberg had warned employees in late September that Meta intended to drastically cut expenses and restructure teams to adapt to a changing market. The Menlo Park, Calif.-based company, which also owns Instagram and WhatsApp, implemented a hiring freeze, and the CEO said at the time that Meta expected the workforce to be smaller in 2023 than it is this year.
“It’s obviously a different mode than what we’re used to operating in,” Zuckerberg said during a question-and-answer session with employees in September. “For the first 18 years of the business, we basically grew rapidly every year, and then more recently our revenue was flat or slightly down for the first time, so you have to adapt.”
Zuckerberg has asked investors for patience as he pours billions into his vision for the next great computing platform after mobile phones: the Metaverse, a collection of digital worlds accessible via virtual and augmented reality devices. This effort requires intensive investments in equipment and research that may not bear fruit in many years.
Meanwhile, the growth of flagship social network Facebook is stagnating. The company is working to speed it up and continues to add users to the Instagram photo-sharing app, experimenting with a more interest-based algorithm and short videos called Reels.
The strategy shifts more eyeballs to Reels, where the Meta ad business isn’t as established, costing potential revenue until the ads start succeeding. Now Zuckerberg must pull off his major corporate transitions with fewer staff.
Meta’s cuts follow those of many other big tech companies. Enterprise software maker Salesforce Inc. said on Tuesday it had cut hundreds of workers from sales teams, while Apple Inc., Amazon.com Inc. and Alphabet Inc. all slowed or suspended the hiring.
Snap Inc., parent company of rival app Snapchat, is also scaling back, saying in August it would cut 20% of its workforce.
Twitter Inc. last week cut about 50% of its workforce following its sale to billionaire Elon Musk. These layoffs were chaotic, with many employees finding out they had lost their jobs when they were suddenly cut off from Slack or email. Musk said these measures were necessary to stem losses on the social network. Later, he asked some laid-off workers to come back.
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