Facebook parent Meta is laying off 11,000 people, about 13 per cent of its global workforce, as it tries to rein in runaway costs in the face of slowing demand for its core product, CEO Mark Zuckerberg said in a letter to employees on Wednesday.
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 into building the metaverse — an online augmented reality universe that Zuckerberg says is the future of the company and of society.
The company has spent tens of billions of dollars trying to build up its metaverse unit, known as Reality Labs, on the assumption that revenues would follow. But that hasn’t happened, and worse still, the company’s core business has started to slow at the same time.
“They’re hemorrhaging money because of their big bet on the metaverse,” said Daniel Tsai, a lecturer on technology and business at Toronto Metropolitan University.
Meta and its advertisers are bracing for a potential recession. There’s also the challenge of Apple’s privacy tools, which make it more difficult for social media platforms such as 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 this past summer and then followed it up with another loss this fall.
“Unfortunately, this did not play out the way I expected,” Zuckerberg said in a prepared statement. “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.”
Canadian impact 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’s not immediately clear how many Canadian employees have been laid off.
CBC News reached out to representatives of the company, 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. On Wednesday, the company was evasive about whether any of those hires have been impacted by Wednesday’s news.
“Our expansion in Canada was always a long-term one planned over a number of years. We remain committed to Canada and look forward to many years of innovation ahead in Toronto,” the company said.
With a bid to bring in younger users and distance itself from recent controversy, Facebook announced its new corporate name, Meta Platforms, and plans to create a virtual reality network known as a metaverse.
Company’s stock has slumped
Meta, like other social media companies, enjoyed a financial boost during the pandemic lockdown era because more people stayed home and scrolled on their phones and computers. But as the lockdowns ended and people started going outside again, revenue growth began to falter.
Meta is just the latest large technology company to announce layoffs, but its business has suffered more than most. Meta’s share price is now trading where it was in 2016.
Although the company is barely a year into its metaverse push, Tsai is already using the word “bust” to describe the venture.
“There’s no demonstration it is going to work,” he said in an interview. And he says the slowdown in the company’s core business, the social media platform, is gobbling up the runway it thought it had to get the metaverse off the ground.
“What we’re going to see in the following quarter is if Facebook is still struggling, you’re going to have more layoffs and more cuts to come.”
Last week, Twitter laid off about half of its 7,500 employees, part of a chaotic overhaul as new owner Elon Musk took the helm. He said he had no choice but to cut the head count in half “when the company is losing over $4M/day.”
In Canada earlier this year, Shopify laid off about 10 per cent of its staff, while fintech startup Wealthsimple laid off about 13 per cent of its workers.
Competition from TikTok
Competition from TikTok is also a growing threat as younger people flock to the video-sharing app instead of Instagram, which Meta also owns.
“We’ve cut costs across our business, including scaling back budgets, reducing perks and shrinking our real estate footprint,” Zuckerberg said.
“We’re restructuring teams to increase our efficiency. But these measures alone won’t bring our expenses in line with our revenue growth, so I’ve also made the hard decision to let people go.”
Former employees will receive 16 weeks of base pay, plus two additional weeks for every year with the company, Zuckerberg said. Health insurance for those employees and their families will continue for six months.