Sunny days are over for Mark Zukerberg! Meta suffers the backlash of a series of bad decisions and has to lay off 11,000 employees. A first for the company which does not abandon its obsession with the metaverse…
“Today, I’m sharing with you some of the toughest changes we’ve made in Meta’s history.” This is how Mark Zuckerberg begins his message for all employees of Meta, the group behind Facebook, WhatsApp, Messenger and Instagram. The company is preparing to carry out a massive layoff, the result of the dramatic fall in its market capitalization since the start of 2022 and the its disastrous financial results. Indeed, it had announced at the end of March a turnover of 27.71 billion dollars, a decline of 4% over one year. As for net profit, it was reduced to $4.40 billion, a decrease of 52% compared to the third quarter of 2021! On the stock market side, Meta’s stock has fallen by more than 70% in 2022, falling from 1,000 billion dollars to less than 350 billion. In short, all the indicators are in the red… Mark Zuckerberg had at the time tried to put things into perspective, declaring that “We are dealing with an unstable macroeconomic environment, increased competition, advertising targeting issues and rising costs for our long-term investments, but I have to say that our products seem to be doing better than some reviews say. claim so.” Since then, the boss of Meta has changed his tune, admitting to having made several mistakes and to being responsible for the situation. This episode marks a turning point in the history of the group, which is heading towards a future full of turbulence…
Layoffs at Meta: the result of bad forecasts
If, at the end of October, Meta had implied studying a possible layoff of 10% of its workforce, it would seem that the situation is worse than expected. This Wednesday, November 9, the show announced the forced departure of 13% of its employees, or 11,000 people worldwide. Those affected will receive a minimum of 16 weeks’ pay as severance pay and their unused vacation pay will be reimbursed. They will also benefit from healthcare costs covered for six months, support for three months to find work and administrative assistance for immigrant workers who will have to renew their visas. Social measures that should help them take the pill…
This is a major first in the history of the Meta group – formerly Facebook – which had more than 87,000 employees at the end of September and has benefited from a gradual increase in its staff since its creation in 2004. The company had notably hired many people – too many – during the pandemic, convinced that its growth would continue. With the successive confinements linked to Covid-19, e-commerce has experienced strong growth and the Internet has taken an even more important place in daily life. Many experts believed that this growth would continue once the situation returned to normal, and Mark Zuckerberg decided to increase his workforce significantly. 27,000 people were hired between 2020 and 2021, and 15,344 others arrived in 2022. And that’s not counting the increase in investments at the same time.
The boss of Meta fished from an overly optimistic view since, once the pandemic passed, the various sectors returned to normal. In addition, the company suffered from “macroeconomic slowdown, intensified competition and loss of advertisements”, which he points to in his statement. In addition, all did not go well on the side of its social networks, which faced fierce competition from TikTok and the obligation on the part of Apple to let its users choose whether or not to accept tracking of their devices – unsurprisingly, many refuse – and have therefore seen their ability to target advertisements reduced – which has, one thing leading to another, scared off investors. Result: the income turned out to be much lower than what had been estimated. Mark Zuckerberg says he wants “take responsibility for those decisions and how we got there“.
The other big problem facing Meta is the development of the metaverse – or metaverse, depending on the version – which, while it is announced as a real revolution, turns out to be a real money pit. The Reality Labs division, which deals with its development, loses more than two billion dollars each quarter, seriously reducing the company’s cash flow. Horizon Worlds fails to seduce Internet users, even company employees do not use it – so much so that they end up having to go there at least once a week. In the end, the digital world is more of a desert, with less than 200,000 monthly active users. In general, they end up not coming after a month because of the presence of many bugs, stability problems and the absence of Internet users with whom to interact. It’s a vicious cycle: Horizon Worlds loses users because it lacks them, which causes it to lose even more, and so on. The fact that access to the metaverse – which is currently available in Canada, the United States, France, Spain and the United Kingdom – is so restricted, since only people with a virtual reality headset in their possession can getting there, certainly doesn’t help. And it is certainly not the company’s new model, the Meta Quest Pro, which is likely to remedy this given its price! To attract more people, the firm has planned to launch a browser-based web version and a smartphone application. However, it had to postpone the new features to be added – which are however highly anticipated – in order to focus on fixing bugs, and canceled several objects intended to popularize the metaverse, such as its first connected glasses for augmented reality.
This obsession with the metaverse and the colossal investments it requires do not convince investors. “As Meta increased spending, you lost investor confidence” believes Brad Gerstner, a major shareholder of the group, in a open letter addressed to the firm. But this one seems really determined to invest in it against all odds. Indeed, Mark Zunkerberg said in his press release that he wanted to focus the group’s efforts on “an fewer high-priority growth areas, such as our AI research, our advertising and commerce platforms, and our long-term vision for the metaverse.”Moreover, he would consider accelerating the investments of Reality Labs, which does not expect to be profitable before at least 2030, in order to favor his long-term vision in which he strongly believes. A bet that promises to be very risky, especially with rising inflation, the energy crisis and global warming which require us to rethink our relationship to consumption more than ever…
Times are going to be tough, but not just for Meta. It’s everyone in tech who seems affected. With its takeover by Elon Musk, Twitter is about to lose 50% of its workforce, if not more. Similarly, Snap, the parent company of Snapchat, said it would cut staff by 20%, or about 1,000 employees. Ditto for enterprise software company Salesforce, which began laying off some of its employees this week. For their part, Amazon has frozen hiring, the online payment company Stripe has cut 14% of its workforce, and Uber’s competitor, Lyft, has shed 13% of its employees. Tech players have really entered a period of crisis: it remains to be seen how it will translate for consumers and users…