Why is Meta cutting thousands of jobs? Is the company running out of ideas?
Meta is reportedly planning to downsize further despite Zuckerberg saying no more layoffs and announcing paid “verified” service for Facebook and Instagram.
Mark Zuckerberg and Meta Platform Inc. are planning another job-cutting spree. The company’s CEO announced that the tech giant wants to cut unnecessary and wasteful projects. It is also looking to fire more people even after it laid off 13% of its workforce this past November.
Wall Street rallied behind Meta when they announced their debt restructuring of $4.5 billion back in November. The stock had fallen 62% last quarter, and it closed with a surge of 27% this quarter. However, investors are not so sure about the viability of Meta and are not entirely sold on this rise. The stock perhaps had an increase because of the cutbacks but not because of the service provided.
Announcing more cuts and creating job uncertainty is never good for morale. Unfortunately, Meta’s performance might fall before it can level off. Zuckerberg has called the company too bloated and too much middle management bureaucracy, not always good words when referring to the guys working day in and day out on your dream.
Meta reportedly planning to slash more jobs
Meta, parent company of Facebook and Instagram announced a mass layoff of 11,000 workers in November, around 13 percent of its workforce, after the company experienced major losses in the third quarter of 2022. After the sizeable cull, Mark Zuckerberg told the remaining staff that he didn’t “anticipate more layoffs” for the foreseeable future.
However, the Washington Post reports that Meta is gearing up for a major reshuffling to streamline its hierarchy and shed additional jobs which could affect thousands of employees. According to a person familiar with the matter, some leaders will be put into lower-level roles where they will no longer report directly to Meta CEO Zuckerberg in order to flatten out the layers of management.
Likewise, other managers could find themselves overseeing larger teams. The result according to expectations by some inside the company is that many will eventually quit thereby reducing the company’s workforce.
Meta at the same time is contemplating traditional cuts by getting rid of projects and positions. All of this won’t take place in one foul swoop but instead occur throughout the company over the coming months.
Why is Meta cutting jobs again?
The Meta CEO had told employees that the mass layoffs this fall were to “minimize the chance of having to do broad layoffs like this for the foreseeable future.” But he added that he couldn’t promise any further cuts in the future as the current environment is “very volatile.”
Earlier this month, Meta reported a third straight quarter of revenue decline, down 4 percent year over year in the fourth quarter of 2022. The company has seen a reduction in ad spending, the source of a majority of its profits, as well as increased competition from apps like TikTok.
Net income dropped 55 percent while costs grew 22 percent from the year before. The company, like many other tech companies, went on a hiring spree that has left its workforce bloated. Additionally, its vaunted metaverse has been hemorrhaging money to the tune of $13.7 billion lost on its Reality Labs unit in 2022.
To help shore up investor support, Zuckerberg promised investors that he would streamline decision-making by slimming down middle management proclaiming 2023 the “year of efficiency.”
Is Meta Platform Inc. desperate and out of ideas?
Seeking another revenue stream Meta CEO’s announced on Sunday that the company was launching a paid subscription service for users of Facebook and Instagram. The Meta verified will offer more perks to those who want better customer service and a little blue tick next to their name. These new features are mostly for content creators.
The new service is taking a page out of the book of other apps like Discord, Snapchat and Twitter, the last of which, put in place by its new owner Elon Musk, is intended to replace the social media platform’s need for advertising revenue. Whether the new subscription service costing $11.99 monthly for Android users and $14.99 through the IOS app will help boost Meta’s bottomline is in doubt.
It “makes strategic sense,” says Dan Ives, managing director and senior equity research analyst at Wedbush Securities, speaking to Wired. It gives the company the ability to monetize its massive installed base in light of the current advertising headwinds. However, he warns that “it’s potentially a risky move that could alienate consumers.”