Mark Zuckerberg’s Meta is cutting 11,000 jobs, more than one in eight staff, after a disastrous collapse in revenue has left the company behind Facebook overstaffed and “inefficient”, the chief executive said in a note to staff.
However, Zuckerberg indicated he planned to continue backing the company’s controversial multibillion-dollar bet on virtual reality, saying the metaverse project was a “high-priority growth area”.
The first round of redundancies in the company’s history comes after its workforce peaked this year at 87,314.
In the note on Wednesday, Zuckerberg said Meta had overinvested at the start of Covid, banking that the increase in online activity would continue and accelerate even after the coronavirus pandemic ended.
“Unfortunately, this did not play out the way I expected,” he said. “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.”
The reference to “signal loss” is thought to relate to Zuckerberg’s long-running dispute with Apple, which in 2021 limited the amount of data, or “signals”, Facebook could gather about the behaviour of iPhone users. That loss, Zuckerberg has regularly said, made it harder for small businesses to use Facebook adverts to profitably acquire new customers.
The company is offering US employees severance pay starting at 16 weeks, Zuckerberg’s note said, as well as six months of healthcare support. Those on immigrant visas would receive help from “dedicated immigration specialists” but Zuckerberg acknowledged that the cuts were “especially difficult if you’re here on a visa”.
Despite widespread criticism of Zuckerberg for the scale of his investment on the company’s virtual reality project, which has resulted in more than $10bn (£8.7bn) being spent on research and development each quarter, he insisted in the note that the pivot remained a “high-priority growth area”, alongside the company’s TikTok-style “AI discovery engine” and its ads and business platforms.
Instead, Zuckerberg explicitly pointed a finger at Apple’s privacy changes, saying the loss of data was one of the factors depressing Meta’s revenue.
Meta’s share price peaked in September 2021 at $379, shortly after the Apple system rolled out to all iPhone users. However, in the following months there was one bruising revelation after another, from quarterly earnings reports that demonstrated the immediate harm of the change, to a damaging set of leaks from the whistleblower Frances Haugen, and the company’s largest global outage in years.
Even its October 2021 rebranding, from Facebook to Meta, could not stop the downward trend, and the company experienced its largest stock price drop in January this year, plummeting more than a third in less than four weeks. It now sits at under $100, its lowest level since early 2016.
Meta has struggled as investors resisted Zuckerberg’s expensive dive into creating an immersive AI metaverse just as digital advertising – the company’s main engine of revenue – slowed.
“Mark Zuckerberg’s ‘mea culpa’ statement is unlikely to do the trick of reassuring investors, instead they may be further rattled by his admission he overestimated the company’s prospects,” said investment analyst Susannah Streeter at Hargreaves Lansdown.
Streeter noted that the focus for Meta will be to claw back revenue – a “monumental task” – with younger users “dancing to the Pied Piper tunes of TikTok, or setting up groups and channels on Discord and Telegram”.
“At the same time Meta funds are being poured down into the dark plumbing of the metaverse, and it’s highly unclear when revenues will emerge from this expensive venture.”
The scale of the redundancies is massive but is proportionally far lower than the chaotic dismissals at Twitter, where Elon Musk led a company-wide effort to cut 50% of the workforce in a matter of weeks. Musk’s aggressive job losses were almost immediately hit with accusations of breaches of employment law, for insufficient notice and a failure to ensure that the axe was wielded equitably.
“The Twitter scandal has lowered the bar so far that now it will be easy for Meta and other employers to make their redundancy processes look sophisticated and humane,” said Charlie Thomson, an employment law expert at Stewarts.
“Many of these organisations will offer exit packages to redundant employees in exchange for a settlement of potential claims, which can make alleged flaws in the consultation process somewhat academic. But there is still reputational cost to handling job cuts in a cack-handed manner. And if an employer annoys their staff enough, they might prefer suing over settlement.”
The same day as the redundancies were confirmed, the UK’s competition regulator, the Competition and Markets Authority, also began the formal process of forcing Meta to divest itself of animated gif search engine Giphy, which it had acquired in May 2020. The order requires Meta to work with the CMA to either sell or spin off Giphy as quickly as is practicable.