Meta has laid off 11,000 people, or 13 per cent of its total workforce, following an abysmal quarterly report.
“Today I’m sharing some of the most difficult changes we’ve made in Meta’s history,” said Meta chief executive officer Mark Zuckerberg in a letter to his employees. “I’ve decided to reduce the size of our team by about 13 per cent and let more than 11,000 of our talented employees go.”
Zuckerberg added he takes responsibility for the decision, attributing the mass layoff to being unable to meet the high revenue expectations investors had set during the pandemic, and overinvesting based on incorrect predictions.
“Unfortunately, this did not play out the way I expected,” said Zuckerberg in the letter. “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.”
The Facebook parent company, which also owns Instagram and WhatsApp, saw a four per cent dip in revenue in Q4 2021 compared to the same period last year. Meta’s operating income dropped by 46 per cent to US$5.7 billion, while its expenses rose by 19 per cent to US$22 billion.
The news sent Meta’s stock price plunging by 24 per cent in a single day, landing at US$97.94, its lowest price since 2016. The company’s market value has dropped by 60 per cent since the start of the year.
Despite the downturn, Zuckerberg reiterated the company’s commitment to building the metaverse. The Meta CEO had previously wanted to put US$10 billion a year into nurturing the metaverse into a profitable service. Additionally, Zuckerberg wants to refocus investments on Meta’s core products, including AI and ads. Trimming its workforce will help to bring expenses in line with revenue.
Since 2019, Meta has sunk US$36 billion at Reality Labs, its internal division for developing the metaverse. But even with the tremendous investment, returns remain meagre. Business Insider reported that Meta made just US$285 million from Reality Labs in Q3 2022, half of what it made in the same period in 2021. However, Reality Labs did manage to beat earnings reported last year in the nine-month period.
A big cog in Meta’s metaverse machine is its VR social platform, Horizon Worlds. First launched in December in North America, Horizon Worlds aimed to create communities, workspaces, and social hubs in virtual reality. Users would don headsets and enter user-generated environments as virtual avatars. Meta wants to eventually push the service onto all computing platforms, not just desktops, in the near future.
Initial reception for Horizon Worlds seemed positive, garnering 300,000 users in just three months. However, its growth stagnated as interest waned. Users complained about the lack of content, discomfort from wearing the headset for long periods of time, motion sickness, and a high cost of entry. An internal memo obtained by The Verge revealed that not even Meta’s internal teams were using the service. By October 2022, the Wall Street Journal reported that Horizon Worlds had lost 100,000 users. Meta responded by halting the release of new features to improve the quality of existing services.
Meanwhile, Meta has made several notable partnerships with technology companies, such as one with Microsoft to put Microsoft services onto the Meta Quest VR headsets, and with Qualcomm to use its chips for Meta’s hardware.
It appears that the technology sector still believes that the metaverse is the future for collaboration. In its Work Trend Index, Microsoft predicted that 50 per cent of Gen Z and millennials envision doing some of their work in the metaverse within the next two years.
For those affected by the layoffs, Meta will be offering three months of career support. It will also pay 16 weeks of base pay, plus two weeks for each year of service, pay all remaining PTO time, and cover the healthcare of the fired workers and their families for six months. Other details will vary by country.
Meta will also extend its hiring freeze through Q1 2023 as it figures out a way forward.