Meta is laying off employees for the first time in

Meta is laying off employees for the first time in its history

According to several media reports, Facebook parent Meta is cutting staff for the first time in its history.

CEO Mark Zuckerberg told employees Thursday that the 18-year-old company will freeze hiring and cut budgets for most teams, with Meta expecting to end the year with fewer employees, Bloomberg reported. As part of the shift, Meta will no longer automatically replace employees who leave, pause internal transfers, and “manage out” underperformers, the news service said. The company also said its budget would be “very tight” next year, the Wall Street Journal reported.

Meta spokespeople declined to comment but cited comments Zuckerberg made to investors in July.

“Our plan is to steadily reduce headcount growth over the next year,” he told investors in the company’s earnings call, adding, “Many teams will be downsizing so we can shift energy to other areas.”

Zuckerberg also noted that Meta would be deferring some projects to next year, and said it plans to “do more with fewer resources.”

Midlife Crisis

A number of big tech companies have laid off employees this year, including Netflix, Snap, Twilio, Taboola, and Twitter, but Meta is by far the largest company to do so. In recent years, the company had increased headcount dramatically as it doubled down on content moderation. At the end of June it had around 83,000 employees.

The news highlights the challenges faced by a company that has gone from startup to juggernaut in just over a decade. Amid an economic slowdown that’s hitting technology and advertising particularly hard, Facebook is also trying to overhaul its business model.

Long dominant in the online advertising industry it helped build, it has more recently transformed itself into a software company with the aim of owning the digital infrastructure on which people will work, play and interact in the future. It’s a lofty goal, and an expensive one, as Zuckerberg estimates the ongoing transition will cost $10 billion a year for the foreseeable future.

Meta’s stock has plummeted this year in the face of a series of headwinds typical of more mature companies looking to stay ahead: fewer users, falling revenue, and dramatically increased spending to grow its corner of the burgeoning metaverse of which Zuckerberg believes it’s deadlocked to be the next stage in the evolution of the internet.

“The Street is concerned that there is no specific message out there, no real way this company is going to generate revenue from the metaverse,” Angelo Zino, an analyst at CFRA who covers social media companies, recently told CBS MoneyWatch.

CBS Reports | Welcome to Metaverse 46:29

Meanwhile, Facebook’s traditional revenue stream — extremely lucrative advertising sold for hyper-specific user data — falters. Advertisers are spending less this year amid a shaky economy, and traditional social media advertisers are facing increasing competition from other offerings.

“Netflix, HBO Max, Disney+, TikTok… There are new avenues available to advertisers,” Zino said. On the social media front, Meta is no longer dominant among the all-important youth demographic flocking to TikTok, and Meta’s ability to target ads hasn’t recovered from Apple’s iOS changes over the past year, making it difficult to engage users pursue.

The departure in June of Sheryl Sandberg, the company’s respected chief operating officer and chief architect of the company’s ad targeting system, served to underscore the shift for Meta.

Certainly other tech companies have done poorly this year, too. But Meta’s stock price is down 60%, more than double the decline in the tech-heavy Nasdaq Composite Index. The drop was severe enough to reduce Zuckerberg’s net worth by $74 billion.

Meta is still a dominant digital company with tons of cash to spend. In its most recent quarter — the bad enough it got investors going — the company posted $28 billion in revenue and boasted a 29% profit margin.

“They are in a financial position that most companies would envy,” Zino said.

The problem for Wall Street is that Meta is no longer a promising growth startup, while its core business model remains unclear. Until the company has a more compelling story to tell, investors will look elsewhere.

“Over 40% of the global economy uses one of their four main platforms, and there are many ways to monetize them over time. They will see better days,” Zino said. “They’re going through a lot right now, and it’s about weathering the storm — and in many cases, many storms happening at once.”

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