“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 per cent and let more than 11,000 of our talented employees go”.
With these words, Mark Zuckerberg, founder, and CEO of Meta laid off 11,000 employees, or about 13 % of its global workforce in one of the worst layoffs ever in the history of the tech industry.
A first in 18 years for Meta, these broad job cuts seemed inevitable as the Facebook parent is battling a weak advertising market and soaring costs. These layoffs by Meta follow other major layoffs this year by tech companies like Microsoft Corp and Twitter.
So what exactly is transpiring at Meta? Did Zukerberg create such a situation? Or is it all part of the wider tech industry downturn?
Meta has its issues on various fronts. The downswing in the global economy has greatly affected its main income source – Advertising. Moreover, Apple has made it much harder for social media companies to track their user behaviour across various apps. Therefore, social media companies cannot build proper user profiles for advertisers. Plus, Meta faces stiff competition from the Chinese rival TikTok. And, investors seemed to be alarmed by Mark Zukerberg’s plans for the metaverse.
In its letter to the employees on Wednesday, Zukerberg also acknowledged the surge in online and e-Commerce activity during the pandemic. Meta invested accordingly in job hires and other areas. But the world came back to normal post the pandemic and a host of other issues compounded their misjudgement.
Zuckerberg wrote, “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.”
Can Metaverse rescue Zukerberg?
The future of the metaverse seems very bleak. The share price of Meta is down almost 70%. This reflects the advertising loss and investor scepticism on the metaverse. Many investors are of the view that the billions of dollars invested in the metaverse – a platform to merge the digital and physical worlds via augmented and virtual reality – will never generate the same kind of returns as traditional social media.
However, Meta remains profitable. Its net income was approximately $ 39 billion in 2021. But it remains to be seen what kind of meaningful additions the metaverse will make to Meta’s fortunes soon.
Can Meta bounce back?
The easiest answer to this is to keep watch on the global economy. Demand for online purchases, mobile handsets, and advertising revenues all depends on prevailing economic factors. An upswing in the global economy can certainly reverse the fortunes of Meta and other global tech companies that are now facing a downturn.