Mark Zuckerberg's announcement last 9 November 9 of his plans to reduce 13 percent of Meta's workforce came as a surprise as people are now wondering about the financial status of his tech companies. In his letter to his staff, Zuckerberg explained that the main reason for his decision to let more than 11,000 people go was due to declining ad revenues.
"At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did, too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected. 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 expected. I got this wrong, and I take responsibility for that," he said in his letter posted on Facebook.
The full message can be found here: https://about.fb.com/news/2022/11/mark-zuckerberg-layoff-message-to-employees/
He also explained about shifting the infrastructure of his company toward balancing operations between Reality Labs and his app-based brands like Facebook and Instagram. Reality Labs is Meta's business of expanding interactions and experiences through virtual reality and augmented reality. This is a clear sign of what to expect from Meta and probably other digital companies as social media platforms may become a thing of the past.
"In this new environment, we need to become more capital efficient. We've shifted more of our resources onto a smaller number of high-priority growth areas — like our AI discovery engine, our ads and business platforms, and our long-term vision for the metaverse. We've cut costs across our business, including scaling back budgets, reducing perks, and shrinking our real estate footprint. We're restructuring teams to increase our efficiency. But these measures alone won't bring our expenses in line with our revenue growth, so I've also made the hard decision to let people go," he added.
News reports indicate that some property leases in San Francisco, New York, and Texas will not be renewed as part of the downsizing efforts of Meta. It also pointed to an expected recession in the United States within a 12-month period. Advertisers are now holding on to their budgets tightly as inflation remains high and hiking interest rates is expected.
The loss in revenues and company values in the tech sector is not isolated to Meta alone. In recent days, Amazon, Microsoft, gaming companies, and video streaming services also lost their value due to the expected worsening economic conditions.
I believe these business decisions especially by Zuckerberg will create a stronger tech industry in the long run. We should also not underestimate his resiliency and vision.
"I believe we are deeply underestimated as a company today. Billions of people use our services to connect, and our communities keep growing. Our core business is among the most profitable ever built with huge potential ahead. And we're leading in developing the technology to define the future of social connection and the next computing platform. We do historically important work. I'm confident that if we work efficiently, we'll come out of this downturn stronger and more resilient than ever," Zuckerberg added.
