Meta will lay off more than 11,000 employees, CEO Mark Zuckerberg told workers in a message Wednesday.
The layoffs will reduce the company's workforce by about 13%, according to Meta, the parent company of Facebook, Instagram and WhatsApp.
“I want to take accountability for these decisions and for how we got here,” Zuckerberg told employees. “I know this is tough for everyone, and I’m especially sorry to those impacted.”
The layoffs will affect what are known as the company's "Family of Apps" — Facebook, Messenger, Instagram and WhatsApp — and the virtual reality business Reality Labs, Zuckerberg said. They will also affect Meta's business teams, which are being restructured, he said, adding that the company plans to hire fewer people next year and is extending its hiring freeze into the first quarter of next year "with a small number of exceptions."
Zuckerberg said the development follows his decision to "significantly increase our investments" at the start of the pandemic.
He told employees he made that decision based on the belief that e-commerce would continue to grow and provide a strong source of revenue post-pandemic — a prediction that turned out to be wrong, he said.
"Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition and ads signal loss have caused our revenue to be much lower than I’d expected," he said. "I got this wrong, and I take responsibility for that."
The job cuts come amid a broader retrenchment in the tech industry that has prompted further layoffs, hiring freezes and other cost-cutting measures across the sector. The industry is facing higher interest rates, a stronger dollar that raises costs abroad, and an overall slowing global economy that means less investment in the kinds of speculative projects that tech companies pursue.
“I think a lot of tech companies held out hope that they’d be able to navigate the softness, but as we’ve seen during this earnings season, it’s going to be a long cold winter for many of these companies as we go through this economic storm,” said Dan Ives, managing director and senior equity research analyst at Wedbush Securities.
Meta foreshadowed the job cuts in its most recent quarterly earnings statement, saying it would be “making significant changes across the board to operate more efficiently.” Those earnings saw its profit slashed by half, causing its stock to fall more than 20%. Shares are down more than 70% year to date.
“We expect hiring to slow dramatically going forward and to hold headcount roughly flat next year relative to current levels,” CFO David Wehner added.
The latest earnings prompted Morgan Stanley analysts to write in a note to clients that Meta’s stock price would be under pressure “until the market can feel confident in execution and return on invested capital from these outsized investments.”
Zuckerberg said Wednesday that additional measures will be forthcoming at the company, which has approximately 87,000 workers worldwide.
Employees affected by layoffs in the United States will receive 16 weeks of severance pay plus two additional weeks for every years they’ve been at the company; payment for their remaining paid time off; six months of health insurance; and immigration support for people on visas, he said.
Outside the U.S., support will be similar, Zuckerberg said, adding that the company will “follow up soon with separate processes that take into account local employment laws.”
He said the company removed affected employees’ access to most of the company’s systems “given the amount of access to sensitive information,” but that they would still have access to email throughout Wednesday to “say farewell.”
Facebook is facing headwinds on multiple fronts, including competition from TikTok, a pullback in advertising spending thanks to the slower U.S. economy, and a lag in the return on its investment in the Metaverse, a digital universe that remains inaccessible to many.
Facebook would be the immediate beneficiary of the growing movement to bank TikTok in the U.S. For now, though, some analysts say TikTok’s algorithm is unbeatable when it comes to keeping users on its platform for longer and thus generating more ad revenue.
“TikTok is simply more fun and engaging than Facebook and Instagram Reels, with Meta far more interested in becoming the platform for the Metaverse than out-innovating TikTok (which was abundantly clear in Zuckerberg’s Joe Rogan interview),” analysts with the research group LightShed Partners wrote in a recent note.
As for the metaverse, Zuckerberg has defended the company’s $15 billion bet on the technology.
“I get that a lot of people might disagree with this investment,” he said on the company’s earnings call last month. “I think people are going to look back on decades from now and talk about the importance of the work that was done here.”