Meta Platforms is reportedly planning thousands of layoffs beginning this week – it would be its second round of job cuts in less than six months as US tech giants battle a worsening slowdown.
Rumors of Meta planning further job cuts have been circulating for around a month now and Bloomberg has reported that the social media giant could lay off thousands of employees beginning this week.
In November, Meta Platform laid off 11,000 employees or 13% of its global workforce, with CEO Mark Zuckerberg apologizing for the layoffs which were the first round in the company’s history.
Zuckerberg admitted that the company erred in over-hiring as he wrongly believed that the high growth in the early days of the pandemic would sustain – in hindsight we know that has not been the case.
Last year, for the first time ever, Meta Platforms reported a YoY fall in revenues and, barring Q1 2022, its revenues fell in all three quarters last year.
The lower end of the company’s Q1 2023 guidance implies a YoY fall in revenues although the upper end of guidance signals a small rise in revenues.
Meta Platforms Reportedly Planning Second Round of Layoffs
Meta Platforms’ user base has almost saturated and the company admitted to peak penetration in key markets during the Q3 2022 earnings call.
Apple iPhone targeting rules have also hampered its targeting capabilities and the company estimated that it lost around $10 billion in revenues in 2022 due to the new rules.
Also, the digital ad market is slowing down. To make things worse, the competition is rising with the likes of Amazon and TikTok vying for a share of digital ad dollars.
Last year, the combined market share of Google and Facebook in the US digital ad market fell below 50%.
Amid sagging growth, Meta Platforms has been looking to cut costs – during the Q4 2022 earnings call, Meta Platforms lowered its 2023 expense guidance to $89 billion-$95 billion which was $5 billion below the previous guidance.
Zuckerburg said that the company wants 2023 to be the “year of efficiency”, with increasing efficiency and productivity discussed prominently during the earnings call.
Markets also gave a thumbs up to the efforts and the stock soared after the earnings release.
Zuckerburg Bets on ‘Efficiency’ to Beat the Slowdown
Meta Platforms is also eliminating some middle management roles, with Zuckerburg saying: “By reducing layers of management, it’s made information flow through the company better, and it will help us make better products and attract and retain better people.”
Zuckerburg reiterated that while the company’s short-term priority is AI, in the long-term, it sees metaverse as a key growth driver.
Some Meta Platform investors have been wary of the company’s metaverse investments which have been a drain on its profits.
However, many analysts believe that the metaverse is crucial for the company’s long-term success.
- Read our guide on the best metaverse stocks.
Meta Platforms Sees Metaverse as the Key Growth Driver
AI is continuing to generate huge interest from tech giants, with numerous companies such as Baidu, Nvidia, and Alphabet seeing AI as a key growth driver.
Baidu is looking to launch its AI chatbot Ernie in March, ahead of the original schedule, while Slack and Salesforce have just launched new AI tools powered by ChatGPT developers OpenAI.
Meanwhile, for now, Meta Platforms’ massive metaverse investments are posting massive losses.
Its Reality Labs business, which is building the metaverse, lost $13.7 billion last year and last week Meta Platforms slashed the prices of its VR headsets.
While the company said that the price cut is to increase adoption, analysts see it as a reflection of weak demand and rising competition.
Amid spiraling metaverse losses, Meta Platforms has been under pressure to cut costs. Notably, job losses have risen in the tech space even as the overall US job market is still quite tight.
Markets have meanwhile been generally supportive of tech companies’ cost-cut efforts and even Meta Platforms stock is trading higher in US premarkets today on reports of layoffs.
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