In one of the year's most extensive layoffs, Meta Platforms Inc. announced today that it would eliminate more than 11,000 positions, or 13% of its workforce, as the Facebook parent company confronts rising costs from its foray into the metaverse amid a sluggish advertising market.
The first considerable layoffs in Meta's 18-year history come from thousands of employment losses at other significant internet firms, including Twitter, owned by Elon Musk, and Microsoft Corp.
In response to decades-high inflation and swiftly rising interest rates, the pandemic-driven boom that raised the value of tech businesses has collapsed this year.
CEO Mark Zuckerberg wrote in a note to staff, "Not only has online commerce returned to historical trends, but the financial slump, greater competition, and advertisements signal loss have led our revenue to be considerably lower than I'd expected."
I acknowledge that I made a mistake and accept responsibility.
Additionally, the business intends to reduce discretionary spending and keep its employment ban until the first quarter. However, neither the impacted areas nor the anticipated cost savings from the transfers were mentioned.
It anticipates expenses of up to $100 billion in 2023, up from up to $100 billion in the past, with more significant resources concentrated on fields like artificial intelligence, advertisements, commercial platforms, and the metaverse.
One shareholder recently referred to Zuckerberg's large and experimental wagers on his shared virtual world project, the metaverse, as "super-sized and terrifying," and Wall Street has been losing patience with them.
Due to worries about the spending binge, more than two-thirds of Meta's market value has been lost so far this year. However, before the bell on Wednesday, its shares increased 4.5% to $100.80.
The market is exhaling a sigh of relief that Meta's management, or Zuckerberg in particular, appears to be heeding some advice, according to Hargreaves Lansdown analyst Sophie Lund-Yates: "You need to take some of the steam out of the expanding expenditure bill."
While pursuing something as ambitious and flimsy as the metaverse, she continued, "it does not exactly tally that you're going to try and boost efficiency simultaneously."
According to the business, the severance payout from Meta will include all remaining paid time off, 16 weeks of base salary, plus two additional weeks for each year of service.
According to Meta, impacted employees will also receive their shares that were supposed to vest on November 15 and six months of healthcare coverage.
The cost of the layoffs was not made public by the firm. Still, it was stated that it was covered by its previously communicated estimate of between $85 billion and $87 billion in expenses for 2022.
Meta employed 87,314 employees as of the end of September.