Facebook parent Meta is laying off 11,000 people, about 13 percent of its global workforce, as it tries to curb runaway costs in the face of slowing demand for its core product, CEO Mark Zuckerberg in a letter to employees.
Zuckerberg has hired aggressively in recent years, doubling the size of the company’s workforce from what it was before the COVID-19 pandemic.
Most of that hiring has gone toward building the metaverse, an online augmented reality universe that Zuckerberg says is the future of the company and society.
The company has spent tens of billions of dollars trying to build its metaverse unit, known as Reality Labs, on the assumption that revenue would follow. But that hasn’t happened and, even worse, the company’s core business has started to decline at the same time.
“They are hemorrhaging money because of their big bet on the metaverse,” said Daniel Tsai, professor of technology and business at Metropolitan University of Toronto.
Meta and its advertisers are preparing for a possible recession. There’s also the challenge of Apple’s privacy tools, which make it harder for social media platforms like Facebook, Instagram and Snap to track people without their consent and target ads to them.
The company posted its first quarterly loss in its history as a public company last summer and then followed that up with another loss this fall.
“Unfortunately, this did not work out as I had hoped,” Zuckerberg said in a prepared statement. “Not only has online commerce returned to previous trends, but the macroeconomic downturn, increased competition and loss of ad signal have made our revenue much lower than I expected. M’ I made a mistake and I take responsibility for it.”
The Canadian impact is not yet known
Meta has an extensive presence in Canada, both at its Canadian headquarters in Toronto and through satellite offices across the country, with remote workers. But it was not immediately clear how many Canadian employees have been laid off.
CBC News reached out to company representatives, who said they had no Canadian details to add.
Earlier this year, Meta announced it had ambitious plans to hire up to 2,500 more people in Canada. The company was tight-lipped Wednesday about whether any of those hires have been affected by Wednesday’s news.
“Our expansion into Canada was always a long-term plan over several years. We remain committed to Canada and look forward to many years of innovation in Toronto,” the company said.
LOOK | Facebook is now Meta, but the same issues remain:
Facebook rebrands and reveals plan to focus on the metaverse
In an effort to attract younger users and distance itself from the recent controversy, Facebook announced its new corporate name, Meta Platforms, and plans to create a virtual reality network known as the metaverse.
The company’s shares have fallen
Meta, like other social media companies, enjoyed a financial boost during the pandemic lockdown as more people stayed home and turned to their phones and computers. But as lockdowns ended and people started going out again, income growth began to falter.
Meta is just the latest big tech company to announce layoffs, but its business has suffered more than most. Meta’s stock price is now trading where it was in 2016.
Although the company is barely a year into its metaverse push, Metropolitan University of Toronto’s Tsai is already using the word “bust” to describe the company.
“There’s no demonstration that it’s going to work,” he said in an interview. And the slowdown in the company’s core business, the social media platform, is eating away at the runway it thought it had to launch the metaverse, he said.
“What we’re going to see next quarter is if Facebook is still struggling, you’re going to have more layoffs and more cuts.”
Last week, Twitter laid off about half of its 7,500 employees as part of a chaotic overhaul as new owner Elon Musk took the helm. He said he had no choice but to cut headcount in half “when the company is losing more than $4 million a day.”
In Canada earlier this year, Shopify laid off about 10% of its staff, while fintech startup Wealthsimple laid off about 13% of its workers.
“Completely Blind” Outlaw
Meta needs to cut costs to stay nimble in today’s economic environment, and layoffs are a quick way to do that. But that doesn’t make things any easier for those who lost their jobs.
Engineering manager Eric Triebe was one of them. “I knew the layoffs were coming in the last couple of days. We knew it was obviously a possibility,” the Seattle resident told CBC News on Wednesday. “But overall I didn’t expect it.”
While Triebe said he understands that “businesses grow a little too fast sometimes and you have to make cuts based on your profitability,” he said the way the news broke, via email, “blindsided him completely,” he said.
“It’s a very difficult thing to do on this scale, but I think there could be a lot more care,” he said. “It feels really poorly done.”
TikTok competition
Competition from TikTok is also a growing threat as younger people flock to the video-sharing app over Instagram, which also owns Meta.
“We have reduced the costs of our business, including reducing budgets, reducing benefits and reducing our real estate footprint,” Zuckerberg said.
“We are restructuring teams to increase our efficiency. But these measures alone will not align our expenses with our revenue growth, so I have also made the difficult decision to let people go.”
The former employees will receive 16 weeks of base pay, plus an additional two weeks for each year with the company, Zuckerberg said. Health insurance for these employees and their families will be maintained for six months.