Facebook’s parent is poised to begin large scale layoffs this week after months of warnings from executives that cutbacks were coming, according to a person familiar with the matter.
The Meta cuts, first reported by the Wall Street Journal, could begin as soon as Wednesday and would be the first wide-scale job cuts of the company’s 18-year history. Meta representatives did not immediately respond to a request for comment.
The move would add to a string of layoffs and hiring slowdowns within the tech sector, most notably Twitter, which slashed roughly half its head count last week after Tesla billionaire Elon Musk acquired the platform in October.
Meanwhile, ride-hailing service Lyft announced plans to cut 13 percent of its staff. The online payment company Stripe will cut 14 percent of its workforce. Chime, a private fin tech firm, will cut 12 percent. Real estate marketplace Zillow and crowdfunding platform GoFundMe both announced layoffs in October of 5 percent and 12 percent, respectively.
Apple and Amazon, whose founder Jeff Bezos owns The Washington Post, have each reportedly ordered hiring freezes.
Meta CEO Mark Zuckerberg said during his company’s quarterly earnings call in October that Meta expected to conclude 2023 “either roughly the same size, or even a slightly smaller organization than we are today.”
“So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year,” he said.
The industry’s job cuts come as tech firms warn of recession risk and race to cut costs after pandemic-era hiring binges.
As the Federal Reserve raises interest rates (it approved a fourth 0.75 basis point hike on Wednesday), the tech sector is hit especially hard, said Josh White, an assistant professor of finance at Vanderbilt University.
Technology firms’ largest asset is their workforce, he said, rather than businesses in other industries that have capital-intensive equipment or high-priced materials. And tech companies’ debt financing is often reliant on consistent interest rates.
When rates increase, especially this sharply, White said, it gets too expensive for tech companies to keep borrowing money to feed their voracious hiring habits. And without much else to cut to maintain profit margins, they’re forced to shed staff.
“This is a manifestation of the slowing in tech,” White said. And tech is always hit harder with rising interest rates because a lot of their profit comes down the road.
“For them to make money, sometimes it takes years. I think we’re seeing an unwinding now that’s typical of cost cutting measures when we see a slowing economy. Their value comes from their intellectual property which is patents, trade secrets or people. You can’t cut costs on patents. Trade secrets are what they are. That just leaves people. That’s where you have to cut costs.”
For Meta in particular, Zuckerberg has used the past 13 months to pivot the company he co-founded in his Harvard University dorm room to a leader in the metaverse.
In February, its flagship platform Facebook reported losing users for the first time, and the months since have seen it shed market share to upstarts TikTok and BeReal.
Zuckerberg has signaled that the company has outgrown its Facebook first mentality, particularly in the wake of damaging scandals over its privacy protections, algorithm infrastructure and user safety.
“Facebook is one of the most-used products in the world. But increasingly, it doesn’t encompass everything that we do,” he said in October 2021 during an event announcing the firm’s name change. “Right now, our brand is so tightly linked to one product that it can’t possibly represent everything we are doing.”
But the layoffs could also be an indication that the transition is moving slower than anticipated, White said, as users eschew movement to the metaverse and Meta’s new metaverse products fall short of consumers’ expectations.
“Companies often try to reinvent themselves or push themselves back toward the high growth stage, and that’s what Zuckerberg was trying to do with Facebook and Instagram,” White said. “That pivot toward the metaverse was his attempt to pivot back to a high-growth stage. But sometimes those pivots don’t always pay off.”