Alejandro Arrieche
Meta Platforms – the parent company of Facebook and Instagram – could be getting ready to further reduce its headcount according to a report published by the Financial Times today that cited two sources familiar with the plans.
The company headed by Mark Zuckerberg could make an official announcement about these layoffs next month. The sources cited by the Times did not provide details in regards to the number of people that may be affected by the decision.
The sources commented stated that managers have been struggling to get things done lately as they have not received approval for this year’s budgets. Moreover, getting a nod from the upper management to move forward with certain projects is taking much longer than it used to.
This upcoming round of layoffs will add up to the tally from November last month when Meta laid off more than 11,000 employees – approximately 13% of its headcount – as the firm is struggling to trim its overhead at a point when its Reality Labs unit – the one in charge of developing the firm’s metaverse strategy – is dragging the firm’s operating results.
Meta’s CEO Zuckerberg Promised a “Year of Efficiency”
Zuckerberg told investors during the latest earnings call that 2023 will be a “year of efficiency” for the business. He emphasized back then that the layoffs that took place in November just marked the beginning of this strategy, not the end.
According to the billionaire founder of the social media company, his plans include “flattening” the firm’s organizational structure, removing some layers of middle management, and the use of AI tools to help engineers get their work done faster.
Meta’s Chief Executive Officer also commented that some projects were going to be fully cut off as the company aims to focus its resources on its most promising endeavors. In regards to these projects, Zuckerberg hinted at some “things” that are being used by a lot of people but that are not directly contributing to the business.
In this regard, analysts have speculated that he could be referring to the monetization of WhatsApp – arguably the world’s largest instant messaging platform but one that brings zero dollars to Meta at the moment.
The Tech Industry is Changing and Meta is Struggling to Adapt
Meta Platforms (META) is facing headwinds from multiple directions. First, macroeconomic conditions across the world have deteriorated as central banks have taken hawkish actions such as interest rate hikes that have threatened to trigger a global recession.
For now, economists are expecting a slowdown in global economic growth. This translates into lower ad spending, which hurts Meta’s core business directly. However, if these institutions are forced to take further measures, they could end up causing a recession and that would depress Meta’s revenues to an extent that the market does not seem to be expecting.
Moreover, Meta is heavily invested in its metaverse strategy to the point that it is investing billions in strategic acquisitions and shedding billions in operating expenses in what many have deemed a “far-fetched” initiative.
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Last year, Meta’s revenues retreated by 1%. This is the first time that this occurs in 18 years. Meanwhile, the firm’s operating margin went down by 1,500 basis points to 25% a $13.72 billion operating loss booked by the Reality Labs units.
Meanwhile, Meta may have missed the boat of what could be the most relevant technological trend of the decade – artificial intelligence. The company is not making any effort to incorporate AI into its platforms at a point when everyone is rushing to do so as consumers have shown significant interest in these solutions. In addition, TikTok is gaining further and further ground in the US while Facebook is becoming less relevant to younger cohorts by the day.
Meta’s metaverse strategy is yet to pay off and it is uncertain if it will. Perhaps in anticipation of that possibility. By shrinking its overhead, Meta could keep investing in Reality Labs without affecting its core business so dramatically.
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This article was written for Business 2 Community by Alejandro Arrieche.
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