Good morning.
Mark Zuckerberg has admitted to a fascination with the Roman emperor Augustus, an all-conquering figure who turned Rome from a republic into an empire and doubled its size in the process.
On Wednesday the Facebook founder acknowledged that some monoliths, like his own, can struggle to hold on to their territory. He announced Meta – the owner of Facebook, Instagram and WhatsApp – would have to cut 13% of its global workforce, or more than 11,000 employees, after admitting he had overextended the company.
There is added symbolism in the fact that these are the first heavy job cuts at a company that went from humble beginnings in a Harvard dorm room in 2004 to playing a dominant role in politics, culture and news around the world thanks to its trio of apps.
So what is happening at Meta? Is this situation entirely of Zuckerberg’s own making? Or is it part of a wider tech downturn? There are some Meta-specific factors at play, but if you put this news in the context of what is happening in the global tech industry, this is the latest – albeit biggest – jobs blow to hit a sector that, like others, is not impermeable to geo-political and economic issues caused by other modern day empires (like Russia, China and indeed the US). I talked to our UK technology editor, Alex Hern, and economics editor, Larry Elliott, to find out. That’s after the headlines.
Five big stories
US politics | The Democrats have outperformed expectations in the midterm elections. The Senate is still hanging in the balance, with Republicans and Democrats tying 48-48 and the race for the house continues to be closer than originally thought, with Democrats at 184 seats and Republicans at 207.
Ukraine | Russian defence minister Sergei Shoigu has ordered the country’s troops to leave Kherson, the only regional capital captured by Moscow since the invasion began in February.
Health | Nurses across the UK will stage their fist ever strike action, the Royal College of Nursing has announced. Nurses at many, but not all, hospitals and other places of NHS care will take industrial action before Christmas and could continue striking until next May in pursuit of better pay and conditions.
Cop27 | China’s top climate official, Xie Zhenhua, has said the US must take responsibility for any reconciliation between the two countries at the Cop27 climate summit, calling on the US to “clear the barriers” to talks. Xie met with his counterpart, John Kerry, during the climate talks in Egypt.
For more from Cop27, sign up to Down to Earth, the Guardian’s climate crisis newsletter.Iran | Taraneh Alidoosti, one of Iran’s most prominent actors, posted an image on Instagram without her hijab, a mandatory piece of clothing for women in Iran, in support of the protests that have been sweeping the country for months.
In depth: ‘The sharp falls in the valuations of Big Tech are a sign of trouble ahead’
Meta has problems on several fronts. Advertising is its main source of income, and that has been affected by the global economy; Apple has dealt a blow to social media companies by making it much harder for them to track the behaviour of users across apps and thus build profiles for advertisers; it faces relentless competition from TikTok; investors are alarmed by Zuckerberg’s plans for the metaverse.
In a memo to staff on Wednesday, Zuckerberg (also Meta’s CEO and chairman) said there was a surge in e-commerce and online activity as coronavirus kept us indoors (and with 2.9 billion users of its apps, the company has a global span). He invested accordingly, including in job hires, but then the world returned to normal and a number of other problems compounded the misjudgement.
“Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss [a reference to Apple] have caused our revenue to be much lower than I’d expected. I got this wrong, and I take responsibility for that,” Zuckerberg wrote in his announcement.
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Will the metaverse come to the rescue?
Not immediately, and perhaps never. Meta’s share price is down 70% so far this year, reflecting the advertising situation but also investor scepticism that a multi-billion dollar investment in the metaverse – a merging of the physical and digital worlds via virtual and augmented reality – will ever generate the same returns as good old social media.
In corporate results last month, Zuckerberg said losses in the part of the business building the metaverse would grow “significantly” in 2023. That’s a lot of money given the “Reality Labs” unit has lost $9bn so far this year. In the first nine months of the year, Reality Labs generated revenues of $1.4bn, which seems impressive enough – but not when you compare it with the $82bn the rest of the business made in advertising. Meta remains very profitable: net income, a US measure of profit, was $39bn last year. But the metaverse is not going to make meaningful additions to that number any time soon.
“On a personal level, Zuckerberg is clearly fed up with running Facebook’s parent”, says Alex Hern. But, he adds, despite controlling the majority of voting shares in the company, Zuckerberg is still required to look after the interests of the other shareholders. “He’s described his job as waking up and being punched in the stomach every morning. But no matter how much he wants to be in charge of the fun work of building a virtual reality metaverse, he still has the legal responsibility to work in the interest of Meta as a whole, and so he has no choice but to insist that the metaverse is going to reap financial benefits in the future.”
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Are other tech firms suffering similar issues?
But this isn’t a Meta-specific story. Job cuts and hiring freezes are happening all over the tech sector. Last week Twitter, Elon Musk’s social media company (yes it’s still sinking in), cut about 3,700 jobs.
There have been cuts elsewhere: in August the company behind Snapchat said it would cut 1,300 jobs – or about 20% of its workforce – amid slow advertising growth; Salesforce, a US business software company, reportedly cut hundreds of jobs this week due to softening demand in some countries and industries; last week Amazon, which employs more than 1.5 million people, announced a freeze in corporate hiring for the “next few months”, saying the economy was in an “uncertain” place, and Apple is reportedly pausing hiring in some areas outside research and development (in a statement it said it continues to hire but is “taking a very deliberate approach in some parts of the business”).
That’s not all. Lyft, the ride-hailing company, said last week it is laying off nearly 700 employees citing a “probable recession” over the next year; Stripe, which processes online payments, also said last week it is cutting about 1,000 jobs citing macroeconomic factors such as inflation, rising energy prices and higher interest rates, and last month the owner of Google, Alphabet, announced a slowdown in hiring.
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What next for the tech industry?
There are a number of factors that have affected tech firms, some playing a bigger role than others depending on the business. For instance, Musk buying Twitter was the biggest single influence on the timing and scale of those cuts (yes, Twitter was losing a lot of money and was being buffeted by the ads downturn but it’s hard to imagine the prior leadership would have suddenly axed half the workforce – before deciding to rehire some of them).
“Tech companies such as Facebook, Google and Amazon were the big winners from the pandemic, because they benefited from people working from home during lockdowns,” says Larry. “Their share prices boomed as investors took advantage of plentiful supplies of cheap money provided by central banks. The cycle has now turned and the sharp falls in the valuations of Big Tech are a sign of trouble ahead both for stock markets and the wider economy.”
The easiest answer to whether these tech firms bounce back is: keep an eye on the global economy. Advertising sales, demand for hardware like mobile handsets, online purchases … they all depend on economic factors.
It would be very neat to continue the Roman empire analogy to its conclusion, but these companies, including Meta, will be around for a while yet. In the case of Zuckerberg, however, he might never achieve similar heights.
What else we’ve been reading
Why did the Democrats defy grim expectations in the US midterms? The focus on the overturning of Roe v Wade is one clue, writes Matthew Yglesias: “a shocking and traumatic event that can suspend the laws of political gravity”. Charlie Lindlar, production editor, newsletters
Should we stop using dry shampoo? The Cut (£) investigates ... and thankfully for my greasy roots it’s not a blanket ban. Hannah J Davies, deputy editor, newsletters
For 25 years, the San Francisco Transgender Film Festival has been a haven for stories about trans lives. Despite the progress of LGBT representation on screen, it remains so, says festival director Shawna Virago – because “mainstream films may approximate trans experiences, but there’s this kind of ceiling.” Charlie
Alexis Petridis charts the rise of “Easter eggs, cryptic clues and mysteries” in pop – not least in the music of one Taylor Swift. Hannah
It’s more what we’re watching than reading, but the Guardian’s Patrick Greenfield confronting World Bank president David Malpass at Cop27 about his history of climate change denial is fascinating, if uncomfortable, viewing. Charlie
Sport
Football | Arsenal lost 3-1 to Brighton and Nottingham Forest beat Tottenham 2-0 in a busy night of League Cup action.
Basketball | After nine months in detention in Russia, WNBA star Brittney Griner has reportedly been moved to a penal colony. Griner, whose exact location is unknown, was convicted on charges of drug possession and smuggling after being caught with cannabis oil in February. US officials say they continue to work on freeing the 32-year-old from her “intolerable” conditions.
Cricket | Pakistan cruised to the T20 World Cup final, beating New Zealand by seven wickets thanks to a 105-run opening partnership from Mohammad Rizwan and Babar Azam. Unlikely finalists after losing their first two group games, Pakistan will face India or England in Sunday’s final in Melbourne.
The front pages
The Guardian this Thursday morning leads with “Congress in balance as Biden defies expectations”. The front page photo is a muck-coated Matt Hancock grinning through his jungle trials. “Matt Han-cockroach” – says the Metro, adding that the former health sec “got a bucketful”. Its lead story is “Food banks crisis point”. The i splashes with “No 10 clashes with nurses over six months of NHS strikes” and the Telegraph says “Nurses to stage first national walkout” while the Times has “Nurses to strike within weeks”. The latter’s page one picture story is from the US midterms, about which the Financial Times reports “Democrats avoid crushing defeat but risk losing control of Congress”. The Daily Express has “Suella attacks police for failing to stop eco mob”, in reference to protesters on the M25. The home secretary suggests they’ll get theirs when the public order bill comes in. The Daily Mail has “Time to end eco mob rule, police are told” – it adds that Scotland Yard top brass have hit back at Braverman’s demand they pull their socks up. Back to the nurses, and the Mirror says they are being “forced to survive on patients’ leftovers”. “This is why we’re striking” says its page one banner. And readers of the Sun will begin their day learning about Jennifer Aniston’s “secret IVF battle”.
Today in Focus
Iran’s protest generation on why they won’t be silenced
There have been arrests, violence and a rising death toll during more than seven weeks of protests in Iran. Demonstrators across the country – many of whom are students or even schoolchildren – are refusing to back down. What do they want and why are they willing to risk everything to get it?
Cartoon of the day | Steve Bell
The Upside
A bit of good news to remind you that the world’s not all bad
Glow in the dark sharks might sound like something out of science fiction, but they do indeed exist, with kitefin sharks the biggest bioluminescent sharks on record according to researchers. While some light-up sharks use their glow to aid survival or to hide their silhouettes, kitefins might have other ideas. Belgian biologist Jérôme Mallefet believes they use their light to help them hunt, and to sneak up on prey. He achieved the “holy grail” of seeing one in the flesh 1,000 miles east of New Zealand, 800 metres below sea level.
Sign up here for a weekly roundup of The Upside, sent to you every Sunday
Bored at work?
And finally, the Guardian’s crosswords to keep you entertained throughout the day – with plenty more on the Guardian’s Puzzles app for iOS and Android. Until tomorrow.
