Meta announced mass layoffs yesterday, with the company cutting 11,000 jobs. This equates to 13% of its workforce.

Meta announced mass layoffs yesterday, with the company cutting 11,000 jobs. This equates to 13% of its workforce. Founder and CEO Mark Zuckerbeg posted a message to employees, writing:

“Today I’m sharing some of the most difficult changes we’ve made in Meta’s history. I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1. I want to take accountability for these decisions and for how we got here. I know this is tough for everyone, and I’m especially sorry to those impacted. At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected. 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.

In this new environment, we need to become more capital efficient. We’ve shifted more of our resources onto a smaller number of high priority growth areas — like our AI discovery engine, our ads and business platforms, and our long-term vision for the metaverse. We’ve cut costs across our business, including scaling back budgets, reducing perks, and shrinking our real estate footprint. We’re restructuring teams to increase our efficiency. But these measures alone won’t bring our expenses in line with our revenue growth, so I’ve also made the hard decision to let people go.”

The cuts are across various divisions including Reality Labs, the Metaverse project division, Family Apps, and recruiting which will be disproportionately affected as Meta is intending to hire less people in the coming year. Zuckerberg said the layoffs were a last resort and thanked the “talented and passionate” teammates who have all helped make Meta a success. The Meta Q3 earnings report showed the company had 87,314 employees as of September, a 28% growth year-over-year. But in April, the company had imposed a broad hiring freeze and employees were advised to work with “increased intensity” should they wish to keep their jobs. This was an early sign of what has now happened with the layoffs.

Meta’s stock is at 101.95 (+0.47%) as of this morning. Meta was a rebrand from Zuckerberg’s Facebook, announced in 2021. Since the rebrand, its shed 70% of its market value, as the move towards the Metaverse was risky and unclear to not just investors and shareholders, but the wider public. The Metaverse intended to create a digital word where users connect via virtual and augmented reality devices. Zuckerbeg has doubled down on his commitment to his Metaverse vision, despite Meta’s shared dropping 24% in October after reporting disappointing Q3 earnings. The Reality Labs division is expected to continue losing more money next year. It has so far reported losses of $9bn, including $4bn in Q3. The division had lost $10bn in 2021.

Trends in Tech

Meta is not the only tech company where employees are facing layoffs. Snap announced it was laying off 20% of employees after a surge in hiring during the peak of the pandemic. In September the company laid off 1,200 people. Apple and Amazon are in hiring freezes, and Intel and Microsoft layoffs are reportedly upcoming. 

Elon Musk, Twitter’s new owner, had cut the staff in half over the last week, an estimated 3,700 employees at its California based HQ. He also fired 90% of its staff in India, 70% of which were in the engineering and product teams. Positions were also slashed in marketing, public policy and corporate communications. Twitter’s staff in India was formerly around 200 people, and now there are just a dozen. Twitter is now facing a class action lawsuit from former employees who say they were not given enough notice that they had lost their jobs, under US federal law. The employees say they only found out they were fired when they were locked out of their work accounts. In a company-wide memo, staff were informed that they would receive an email to their personal accounts if they were being fired, but many had already tweeted they’d been fired before those emails arrived as they were no longer able to use their work laptops or accounts. A lawsuit was filed in the US federal court in San Francisco seeking orders for Twitter to comply with the federal Worker Adjustment and Retraining Notification Act, which requires 60 days’ notice for mass sackings at large employers. The lawsuit cites a similar situation with Musk’s other company Tesla, where the company sought to obtain full release from its obligations under the Warn Act by offering severance of one or two weeks’ pay instead. The filing stated:

"Plaintiffs here are reasonably concerned that, absent court intervention, Twitter will engage in similar behaviour and seek releases from laid-off employees without informing them of their rights or the pendency of this case.”

Musk has launched Twitter blue, a subscription option of $8 a month for those who want to have a verified mark on their profile and access limited features. Yesterday, there were two options for those with verified status; a user could click on the “official” mark on a profile and see whether they are official because they are a legitimate public figure or whether they have just paid for Twitter Blue. 

Musk wants Twitter’s new subscription service to account for half of its revenue to make up for the slump and reduction in advertising that is affecting all tech companies. Advertising currently accounts for 90% of Twitter’s revenue, and is also a big source of revenue for Facebook and Snap. Musk, who has previously tweeted that he “hates advertising”, has pledged looser content moderation policies. He claimed that “Twitter has had a massive drop in revenue, due to activist groups pressuring advertisers, even though nothing has changed with content moderation and we did everything we could to appease the activists. Extremely messed up! They’re trying to destroy free speech in America.” But since Musk has taken over Twitter, there has been a surge in hate speech and offensive content, leading companies to pull or pause their advertising from Twitter. General Mills, Mondelez, General Motors, Stellantis, Audi, United Airlines and Pfizer have all suspended advertising or have expressed intention to do so whilst they await developments in Musk’s leadership of the platform. Musk has also announced to employees today - in his first email to Twitter’s remaining staff - that remote work is no longer allowed and they are expected to be in the office for 40 hours a week. 

(Sources: Bloomberg, Business Insider, Meta, Fortune, Twitter, Investor Place, The Guardian)