In a surprising move, Meta Platforms Inc. has announced that it will be laying off over 11,000 employees, which accounts for approximately 13% of its workforce. This marks the first time in the company’s 18-year history that mass layoffs have occurred. The decision comes as Meta, the parent company of Facebook, grapples with mounting costs stemming from its ventures in the metaverse, along with a sluggish advertising market.

This recent wave of job cuts follows similar actions taken by other prominent tech giants like Twitter and Microsoft. The tech industry, which experienced rapid growth and high valuations during the pandemic, has been hit hard by soaring inflation and rapidly rising interest rates, leading to a significant downturn.

Meta’s CEO, Mark Zuckerberg, acknowledged the challenges the company is facing and attributed the decline in revenue to a combination of macroeconomic factors, increased competition, and advertising losses. In a message to employees, Zuckerberg accepted responsibility for misjudging the situation, admitting, “I got this wrong, and I take responsibility for that.” Alongside the layoffs, Meta also plans to reduce discretionary spending and extend its hiring freeze through the first quarter.

While specific regions affected by the layoffs and estimated cost savings were not disclosed, Meta has adjusted its 2023 expenses to be up to $100 billion, compared to the previous projection of up to $100 billion. The company will now shift its focus to areas such as artificial intelligence, ads, business platforms, and the metaverse.

Zuckerberg’s ambitious investment in the metaverse has faced skepticism from Wall Street, with some shareholders describing it as “super-sized and terrifying.” Concerns surrounding Meta’s spending spree have led to a decline of over two-thirds in the company’s market value this year. However, the news of the layoffs prompted a 4.5% increase in shares, reaching $100.80, before the market opened on Wednesday.

Sophie Lund-Yates, an analyst at Hargreaves Lansdown, noted that the market appears relieved by Meta’s efforts to control expenses. However, she expressed doubts about the feasibility of increasing efficiency while pursuing a project as ambitious and uncertain as the metaverse.

As part of the severance package, impacted employees will receive 16 weeks of base pay, along with an additional two weeks for each year of service. They will also be provided with any remaining paid time off and healthcare coverage for six months. The exact cost associated with the layoffs has not been disclosed, but it is included in Meta’s previously announced 2022 expense outlook of $85 billion to $87 billion. As of the end of September, Meta had a total of 87,314 employees.

Useful links:
1. Bloomberg: Meta Platforms to Cut Over 11,000 People, 13% of Its Workforce
2. Reuters: Meta to lay off more than 11,000 employees in cost-cutting move