The CEO of Meta, the brand that owns Facebook, Instagram and WhatsApp, Mark Zuckerberg, announced this past Wednesday, the 9th, the dismissal of more than 11,000 professionals from its company. This number currently represents 13% of its total employees. This is the biggest mass layoff in the history of the company, which was founded in 2004.
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“The macroeconomic downturn and increased competition have caused our revenue to be much lower than I expected,” Zuckerberg wrote in a letter to his employees. “I made a mistake and I take responsibility,” he concluded.
By the end of September, Zuckerberg's company had just over 87,000 employees. This is already the second announcement about mass layoffs that is happening in companies focused on the technology market just this month of November.
Earlier this month, Twitter also laid off approximately half of its staff, i.e. around 7.5oo employees. This after Elon Musk, CEO of Tesla, bought the network.
Mass layoffs: Meta profits halved
According to Reuters, shares in Zuckerberg's company have lost more than two-thirds of their original value. Other measures will be taken in order to try to contain this situation, such as the extension of the contract freeze and more spending cuts until the end of the first quarter of next year.
The company's profit declined sharply in the third quarter. To be exact, half of the profits declined, so they closed down more than 52% compared to the same period in 2021.
The Meta is currently valued at US$4.4 billion.
Despite the layoff announcement, stock numbers continued to rise. About 8.17% around 1:45 pm last Wednesday, 9. On the São Paulo Stock Exchange, shares were registering R$ 19.06.
Other company expenses
Meta invested heavily in the metaverse, soon these expenses began to worry the company's investors.
To date, revenue for Reality Labs, the metaverse unit, has lost approximately $9.44 billion, up from $10 billion last year. The company expects further losses in 2023. The fruits of these investments should only be reaped a decade from now.
Zuckerberg and the shareholders defended the measures in the metaverse: “Look, I know that a lot of people may disagree with this investment, but from what I can tell, I understand that this (the metaverse) is going to be a very important thing and I think it would be a mistake not to focus on any of these areas”, he said in a conference with the shareholders.
Zuckerberg's full letter to Meta contributors
“Today I'm sharing some of the toughest changes we've made in Meta's history. I decided to reduce our team size by about 13% and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficiently, cutting discretionary spending and extending our hiring freeze to the first quarter. I want to take responsibility for those decisions and explain how we got here. I know it's hard for everyone and I'm sorry for those impacted.
How did we get here?
At the onset of Covid-19, the world quickly moved online and the e-commerce wave led to higher revenue growth. Many people predicted that this would be a permanent acceleration that would continue even after the pandemic ended. Me too. So I made the decision to significantly increase our investments. Unfortunately it didn't turn out as I had hoped. Not only has online commerce returned to previous trends, but the macroeconomic crisis, the increase in competition and the loss of ad revenue has caused our revenue to be much lower than I expected. I made a mistake and I take responsibility for that.
In this new environment, we need to become more capital efficient. We've shifted more resources to fewer high-priority growth areas — like our AI discovery engine, our ads and business platforms, and our long-term vision for the metaverse. We reduced costs in our business, including resizing budgets, reducing perks and reducing our real estate expenses. We are restructuring teams to increase our efficiency, but these measures alone will not put our expenses in line with our revenue growth, so I also made the difficult decision to let people go.
How is this going to work?
There is no good way to make a resignation, but we hope to get all the relevant information to you as soon as possible and then do what we can to support you through this.
Everyone will receive an email shortly letting them know what this resignation means. Thereafter, each affected employee will have the opportunity to speak with someone to have their questions answered and to participate in information sessions.
Some of the US details include:
Indemnity: we will pay 16 weeks of base salary plus two additional weeks for each year of service, with no cap.
Pension contributions: we will pay all remaining time.
Dress contract: all those impacted will receive until November 15, 2022.
Health insurance: we will cover the cost of health care for people and their families for six months.
Career services: we'll provide three months of professional support with an external vendor, including early access to unreleased job leads.
Collaborators who came from other countries: I know this is especially difficult if you are here on a visa. There is a notice period before termination and some grace periods, which means everyone will have time to make plans and work on their immigration status. We have dedicated immigration experts to help guide you based on what you and your family need.
Outside the USA: support will be similar, and we will soon follow up with separate processes that take into account local employment laws.
We made the decision to remove access to Meta's systems for people leaving today given the amount of access to confidential information, but we are keeping active email addresses throughout the day so everyone can tell goodbye.
While we are making reductions across all organizations across both Apps Family Labs and Reality, some teams will be impacted more than others. Recruiting will be disproportionately impacted as we plan to hire fewer people in the coming year. We are also restructuring our business teams more substantially. This is not a reflection of the great work these groups have been doing, but rather what we need going forward. Leaders from each group will take time to discuss what this means for their teams over the next few days.
The teammates who will leave are talented and passionate and have made a major impact on our company and community. Each one of you helped make Meta a success, and I'm grateful for that. I'm sure you'll continue to do a great job elsewhere.
What other changes are we making?
I see layoffs as a last resort, so we decided to rein in other sources of cost before letting teammates go. Overall, this will add up to a significant cultural shift in the way we operate. For example, as we shrink our real estate spending, we are transitioning to sharing desks for people who already spend most of their time away from the office. We'll roll out more cost-cutting changes like this in the coming months.
We are also extending our hiring freeze into the first quarter with a small number of exceptions. I will look at our business performance, operational efficiency and other macroeconomic factors to determine if and when we should resume hiring at that point. This will give us the ability to control our cost structure in the event of an ongoing economic downturn. It will also put us on a path to achieving a more efficient cost structure than we've outlined for investors recently.
I'm in the middle of a complete review of infrastructure spending. As we build our AI infrastructure, we are focused on becoming even more efficient with our capabilities. Our infrastructure will continue to be a key asset for Meta, and I believe we can achieve this for less money.
Fundamentally, we're making all these changes for two reasons: our revenue outlook is lower than we expected in the earlier this year, and we want to make sure that we are operating efficiently in both the Application Family Lab and the Reality.
How are we going to move forward?
This is a sad moment. There's no getting around it. To those who are leaving, I want to thank you again for everything you've put into this place. We wouldn't be where we are today without your hard work, and I'm grateful for your contributions.
For those of you who are still here, I know this is a difficult time for you as well. Not only are we saying goodbye to people we've worked closely with, but many also feel uncertainty about the future. I want you to know that we are making these decisions to ensure our future is strong.
I believe we are deeply underrated as a company today. Billions of people use our services to connect, and our communities continue to grow. Our core business is among the most profitable ever built with huge potential ahead. And we're leading technology development to define the future of social connection and the next computing platform. We do historically important work. I am confident that if we work efficiently, we will come out of this crisis stronger and more resilient than ever.
We will share more about how we will operate as a streamlined organization to achieve our priorities in the coming weeks. For now, I will say again how grateful I am to those who are leaving for all they have done to move our mission forward.
Mark.”