After a week in which Twitter layoffs have taken over the news, everything seems to indicate that this week the spotlights will point to what has been its greatest antagonist: Facebook. The Wall Street Journal reports that its parent company, Meta, plans to lay off thousands of employees throughout this week, specifically pointing to Wednesday as a possible date on which these will become official. A movement that had never happened in its 18-year history.
The company currently has 87,000 employees. The Wall Street Journal it does not indicate what percentage could be affected, but it does speak of “thousands of layoffs.” It is also not known at this time which teams or product areas would be most affected by this Meta decision.
The complicated situation of Meta
The specific reasons behind this supposed decision are, for the moment, unknown, since Meta has not commented on the matter. Nevertheless, it is possible to identify various factors that currently affect the company and, therefore, may have influenced the making of this decision.
- The global economic situation. High inflation, high interest rates set by the FED and the ECB –among others– to combat rising prices, the slowdown in the main world economies… The outlook is both uncertain and adverse. And Meta, like many other companies, is not immune to it.
- The pressure of TikTok and Apple. Meta has to face, on the one hand, an emerging social network like TikTok -which threatens the hegemony of Instagram- and, in turn, has been quite affected by the restrictions imposed by Apple in mid-2021, when it launched App Tracking Transparency. This feature allows you to block various tracking techniques on any Apple device. Meta, like many other companies, used these methods to collect more information from their users so that they could show them personalized ads more accurately (and therefore earn more money from them).
- A sharp drop in the stock market. Meta has lost almost 75% of its market value since the beginning of the year. It is not the only great technology whose share has fallen throughout 2022, but it is the one that has sunk the most. For reference: Microsoft has lost around 30% in the same period, Apple 20%, Alphabet 40% and Amazon 45%.
- The focus, now in the metaverse. It is no secret that Mark Zuckerberg has his focus on the metaverse, a project that could be the future of the company. However, the path indicated by Zuckerberg raises doubts for many people.
- Is the metaverse the next great revolution in the technology industry? According to Mark Zuckerberg, yes. But the reality is that there is still no general consensus on whether or not in ten years we will be using AR / VR headsets to enter a virtual universe in which we can work, socialize, etc.
- Developing the metaverse is a huge stress test. Meta plans to allocate millions of dollars to a project that will take years to bear fruit – if it finally does bear fruit. Consequently, you will noticeably reduce your profits. On Wall Street, these types of situations are not always viewed favorably. Whether it will ultimately be a successful bet or not is yet to be determined. What is a fact is that, for Meta, this is a major stress test.
Optimizing the company internally would allow alleviate the situation and better prepare Meta to face both the transformation derived from the metaverse –which requires a great economic effort– and the global economic situation. Staff reduction is one of the main tools in this optimization process. The challenge, yes, lies in doing it without sacrificing the future of the company.
Mass layoffs are not a surprise
The leadership leadership of Meta has hinted over the last few weeks and months that various internal changes were comingso the news of the layoffs, in reality, is not a major surprise.
Chris Cox, Meta’s chief product officer, warned in June about the arrival of a difficult time. “We need to run smoothly in a slower growing environment, where teams shouldn’t expect large flows of new engineers and budgets,” he said in an internal document released by The Verge.
Mark Zuckerberg, on the other hand, acknowledged in an internal Q&A that “there are probably a number of people in the company who shouldn’t be here,” froze new hires and even warned of a possible downsizing in the near future. A caveat that, according to The Wall Street Journalwould become real this week.