Why Meta has fired 11,000 Employees| Is Recession Coming?

Facebook or Meta fires 11000 people | is recession coming

Facebook parent Meta is laying off 11,000 people – about 13% of its workforce – CEO Mark Zuckerberg told employees in a letter Wednesday. The mass layoffs are the first in Meta’s 18-year history, and come soon after job cuts at Elon Musk-owned Twitter, and Microsoft Corp.

Along with the pink slips, Meta has implemented other cost-cutting measures as it grapples with soaring costs and dipping ad revenues. The company plans to cut discretionary spending and extend its hiring freeze through the first quarter. But it has not specified the impacted regions or the expected cost savings from the moves.

Before the firings came, Meta had been giving signals of cost cuts, By shrinking its real estate footprint and withdrawing some of the perks to its employees, such as free laundry and dry cleaning services and dinners they were allowed to take home to families.

Why these Cost Cuts:

Broadly for two reasons – falling revenue and because it is pouring money into the Metaverse project. During the Covid-19 pandemic, tech firms had seen a boom as people stayed indoors and spent more time online and on their devices. This boom has not sustained post pandemic. Also, platforms like TikTok are posing a stiff competition to Facebook.

As Zuckerberg said in his letter, “At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration… I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected. 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.”

Also, Meta’s investors have been unhappy with the funds going to metaverse. As Meta allocated over $10 billion a year into the metaverse, investors sent its shares tumbling more than 71% since the beginning of the year, AP reported. The New York Times reported that, “In its earnings report last month, Meta disclosed that Reality Labs, the part of the company working on the metaverse, had $3.67 billion in operating losses. Reality Labs also experienced its lowest revenue since the final quarter of 2020. The company expects the operating losses for Reality Labs to increase next year.”

All of this was worsened by the economic slowdown in the US. This summer, Meta posted its first quarterly revenue decline in history, followed by another, bigger decline in the fall.

Is it due to Economic Slowdown:

The once seemingly unstoppable Meta being forced to go for mass layoffs for the first time ever is a marquee marker of troubles in the economy. Ad revenue has been plummeting for digital platforms across the globe as the first signs of a global recessions start showing.

Meta is worse off after Apple introduced App Tracking Transparency in the iOS, allowing users to refuse permission to developers to create a unique ID that tracks them and serves ads based on their behaviour. This will make ads on Meta and other platforms less efficient. Meta claims this will cost it at least $10 billion this year.

Sodhi Gautam

Sodhi Gautam

One thought on “Why Meta has fired 11,000 Employees| Is Recession Coming?

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