Meta looks like it’s finally caught the layoff bug. Now, the question becomes who within the company feels the ill effects of job cuts.
The Wall Street Journal and New York Times reported Sunday that the Facebook and Instagram parent will trim its 87,300-member workforce sometime this week, the company’s first round of widespread layoffs since its founding nearly two decades ago. Neither news outlet published a precise number of expected job losses, though the Journal said they will total “many thousands of employees.”
By now, the layoffs should come as little surprise.
Meta CEO Mark Zuckerberg has warned in recent months that his company would need to reduce its expenses and headcount, largely citing the global economic doldrums and slowing growth in ad spending. Zuckerberg may have hoped attrition would be enough to navigate the downturn, but headwinds have proved too persistent. In late October, Meta reported third-quarter results that showed revenue slipping 4% year over year and net income plummeting 52% when compared with 2021. (The social media outfit still raked in $27.7 billion in revenue and profits of $4.4 billion.)
Meta’s fourth-quarter outlook didn’t inspire much confidence, either. Company executives forecasted revenue of $30 billion to $32.5 billion, while analysts had been expecting $32.2 billion, according to CNBC. The lackluster projections caused Meta’s stock to tank 24% on the day after it announced earnings. Meta shares ticked up 5% in mid-day trading Monday on news of the cost-cutting, though the company’s stock is still down a staggering 72% year-to-date.
While there’s minimal suspense surrounding Meta’s decision to cast off staffers, intrigue surrounds Zuckerberg’s apportionment of layoffs across departments.
As it stands, plenty of investors want to see Zuckerberg take a hatchet to his Reality Labs division, the unit responsible for the company’s augmented reality, virtual reality, and metaverse plays. Zuckerberg has shoveled gobs of money into Reality Labs, which is on track to blow through $13 billion and generate about $2 billion in revenue this year. Research and development spending grew to 33% of Meta’s third-quarter expenses, up from 20% of last year.
But Zuckerberg’s comments during last month’s earnings call suggest Reality Labs—which only accounts for 18% of the company’s expenses this year through September—remains a sacred cow. Ditto for Meta’s two other main missions right now: beefing up its A.I. capabilities to make Instagram and Facebook more competitive with TikTok, and re-establishing its ad platform dominance after Apple undercut targeted marketing with operating system privacy changes last year.
“The internal indications I’ve seen suggest we're doing leading work and we’re on the right track with these investments, so I think we should keep investing heavily in these areas,” Zuckerberg said.
Investors expecting a dramatic about-face likely will be disappointed. While Meta’s share price freefall surely weighs on employees with stock-based compensation—and thus the company’s ability to attract and retain talent—Zuckerberg isn’t under the typical pressures of a CEO leading a public company. He still owns a slight majority of Meta’s voting shares, giving him unfettered control over the company’s purse strings.
More likely, Zuckerberg will close ranks on the metaverse, ads, and A.I., opting instead to slash spending on ventures that seek to incrementally expand the Facebook and Instagram ecosystems.
Already, Meta officials have shelved several once-promising projects that illustrated the company’s sprawling ambitions.
In August, Meta executives announced they would sunset Facebook’s live video shopping feature, a product that failed to mimic the success of Chinese digital firms pioneering the trend. A few weeks later, Meta leaders said they were pulling the plug on their standalone Facebook Gaming app, which never came close to rivaling Twitch or Apple. Then, in October, Meta dropped the axe on its newsletter subscription platform, Bulletin, an attempt to compete with Substack.
“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 last month.
Meta likely can’t nip and tuck its way to thousands of job cuts. After Zuckerberg’s comments last month, though, it’s hard to envision Zuckerberg straying too far from taking on TikTok and building the metaverse—regardless of what Wall Street thinks.
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Jacob Carpenter
