During a historic month in the tech and crypto worlds, Meta laid off 11,000 employees. Here’s how the company will try to re-gain its footing.
Meta has been treading in murky territory for a few months, and the tech giant’s future became even more unclear when CEO Mark Zuckerberg announced mass layoffs.
Meta cut more than 11,000 jobs on Nov. 9, accounting for roughly 13% of its workforce in the first mass layoff event of the social media company’s history. Facebook, Instagram, and WhatsApp’s parent company also said it would extend its hiring freeze through the first quarter of 2023 while also looking to cut discretionary spending. Zuckerberg took responsibility for the company’s current climate, stating Meta’s hiring surge during the pandemic didn’t level out. Before the layoffs, the tech giant’s workforce included more than 87,000 professionals, 27,000 of which joined in 2020 and 2021. Meta welcomed more than 15,300 employees earlier this year before halting its hiring spree.
“I want to take accountability for these decisions and for how we got here,” Zuckerberg said in an official statement. “I know this is tough for everyone, and I’m especially sorry to those impacted.”
So, what led Meta down this road and what’s next for the once-promising tech company? Let’s break it down.
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What’s Happening?
Meta brought in $28.8 billion in revenue in Q2 this year, but the company also reported its first-ever revenue drop. While the drop amounted to only 1% overall, net income was down 36% to $6.7 billion. Meta’s Reality Labs cost it $2.8 billion that quarter alone. The trend continued in Q3 when the unit pushing Meta’s metaverse ambitions lost another $3.7 billion.
The pandemic drove up online shopping, prompting Zuckerberg to continue hiring with the hopes of permanent acceleration and growth. But that was not the case, and once consumers returned to their pre-pandemic shopping habits, Meta felt a downturn.
Meta didn’t share specifics about which teams the layoffs would impact, but we can assume e-commerce was in the mix. Some impacted employees, including a communications manager who was out on maternity leave when she got the notice, are sharing their layoff stories.
Here are some details on Meta’s severance package for US-based employees that parted ways with the company:
- 16 weeks of base pay plus two additional weeks for every year of service, with no cap.
- Remaining PTO time paid out.
- Access to three months of career support and job leads.
- Health insurance coverage for the employees and their families for the next six months.
Meta said it’s still working on creating similar severance deals for international employees.
“I view layoffs as a last resort, so we decided to rein in other sources of cost before letting teammates go,” Zuckerberg said in a statement. “Overall, this will add up to a meaningful cultural shift in how we operate.”
One of those other sources includes shrinking Meta’s real estate footprint and transitioning to a flex-desk office model. The hiring freeze, halting recruitment efforts, and restructuring of business teams all fall under Zuckerberg’s plans to help Meta rebound.
Failed Metaverse and Tech Plans
Zuckerberg has bet it all on the metaverse, augmented reality, artificial intelligence, and virtual reality this past year, yet Reality Labs hasn’t been able to deliver. The business unit under Meta’s umbrella produces VR and AR hardware and software, including the Meta Quest VR headset and Horizon Worlds. Meta also lost some top executives charged with building these products, including former Meta Horizon vice president Vivek Sharma. After over a decade, Margaret Stewart, Meta’s top product design executive, also left the company last month.
To make matters worse, Meta revealed that the Quest Pro, the next generation of its VR headset, will cost $1,499. That’s five times the price of a Quest 2. This is a shocking price point coming from the struggling tech giant. Meta announced the Quest Pro and other metaverse and tech updates at its Connect event in October. The event came a year after the company rebranded as Meta to highlight its focus on the metaverse.
Unfortunately, Meta won’t see a return on Reality Labs for quite some time, as the tech giant is already prepared to take on more financial losses at the hands of its metaverse and tech division. Meta will continue to lose big bucks primarily to produce its VR headsets.
Both the Meta Quest 2 and Meta Quest Pro headsets are now available for purchase. The Quest Pro has only been on shelves for a month, so it’ll be interesting to see how many VR enthusiasts actually purchase it despite the cost.
“We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year,” Zuckerberg said in Meta’s Q3 earning call. “Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.”
Despite Zuckerberg’s most ambitious project not showing significant gains, he is still bullish on what Reality Labs can bring.
“I’m currently in the middle of a thorough review of our infrastructure spending. As we build our AI infrastructure, we’re focused on becoming even more efficient with our capacity,” he said in a statement. “Our infrastructure will continue to be an important advantage for Meta, and I believe we can achieve this while spending less.”
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Looking Ahead
Despite its current state, don’t write off Meta just yet. Zuckerberg has been building the tech giant for nearly two decades, and he’s hunkering down to have a relatively quiet 2023. Meta’s CEO said in the company’s Q3 earnings call that he expects to end 2023 with the same-sized team as today, or slightly smaller.
“In 2023, we’re going to focus our investments on a small number of high-priority growth areas. So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year,” Zuckerberg said on the call.
Zuckerberg has emphasized since setting his focus on the metaverse is that Meta’s plans in the industry are long-term. That comes with short-term failures. Above all, the tech giant is focused on building technologies that will help define the future of social connection and maybe even how people virtually work.
“I believe we are deeply underestimated as a company today. Billions of people use our services to connect, and our communities keep growing. Our core business is among the most profitable ever built with huge potential ahead,” Zuckerberg concluded in his layoff statement. “We do historically important work. I’m confident that if we work efficiently, we’ll come out of this downturn stronger and more resilient than ever.”
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