In an unprecedented move, one of the world’s largest technology companies has laid off 13% of its workforce. Meta, Facebook’s parent company, said 11,000 workers worldwide have asked to leave. In a blog post, Meta CEO Mark Zuckerberg said these were “some of the most difficult changes we’ve ever made in Meta’s history.” Zuckerberg spoke in detail about why the company fired part of its employees, and here are the eight main reasons:
Investments in e-commerce have increased
Zuckerberg said that when the pandemic started, “the world went online quickly and the rise of e-commerce increased the growth of income.” Both Meta and Zuckerberg thought it was still “advancing”. “I decided to increase our investment. But, this was not what I expected,” and the company ended up losing money.
The CEO of Meta mentioned that the macroeconomic downturn caused the revenues to be “smaller” than he expected. Meta’s quarterly results didn’t look too good and the forecast for the next quarter isn’t great either.
TikTok, Apple and others
Meta’s CEO added that other reasons for the loss of revenue were “increased competition” and “loss of ad tags” – suggesting that Apple’s App Tracking Transparency had hit Meta hard. The company previously said that since Apple acquired the Tracking Feature — a feature that gives users the option not to let apps track them — it has lost $10 billion. The more intense the competition can be for the owner of TikTok in social media in the past years.
Rising costs and expenses
In its most recent quarterly results, Meta reported a year-over-year increase in cost and expenses of 19%. In the third quarter, Meta’s expenses were $22.1 billion – due to cost reductions and job losses.
Decline in sales and revenue
In the third quarter, Meta reported that total sales fell 4% and operating income fell 46% to $5.66 billion.
The need for more “decoration”
In his blog post, Zuckerberg said that Meta has decided to improve the decoration. In other words, the company will invest more resources in “a number of high growth areas.” The company has reduced its footprint and reduced costs but not enough. “But these actions alone will not match our expenses to the increase in income, so I have decided to let people go,” said Zuckerberg.
Reality Labs is expected to die
While Zuckerberg remains bullish on the metaverse, the division he owns — Reality Labs — has been losing money. “We expect that Reality Labs’ operating losses in 2023 will increase year over year,” Zuckerberg said last month during the company’s earnings call.
Metaverse lost billions of dollars
It was revealed that Reality Labs lost about $9.4 billion in 2022 but Zuckerberg and the company have ambitious plans for it. “We are leading the way in developing the technology to define the future of social networking and the next computing platform,” he said in a press release introducing employees to the cancellation.