It had been rumored earlier in the week, and now, Meta has confirmed that it’s cutting 11k roles – or 13% of its workforce – to cut costs as a result of changing industry conditions, and the broader economic downturn around the world.
Meta CEO Mark Zuckerberg announced the job cuts on the Meta blog, putting the blame on slower than anticipated growth of eCommerce and changing data privacy approaches, specifically.
As per Zuckerberg:
“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 I’d expected. I got this wrong, and I take responsibility for that.”
Ads signal loss refers to Apple’s iOS data privacy update (ATT), which now sees iOS device users prompted to give their permission for each app to track their data. And given Meta’s not-so-great reputation around the protection and usage of such, many people have cut off Meta’s app from that tracking, which has had a big impact on Meta’s bottom line.
Earlier in the year, Meta estimated that Apple’s ATT update alone would cost the company over $10 billion in lost ad revenue in 2022.
There has also, as Zuckerberg says, been a reversion back to physical shopping, where many saw eCommerce becoming the key shopping destination post-COVID. Meta made a big push on this, with Shops on both Facebook and Instagram, while it also made a push on live shopping, which has been huge in Asian markets. None of these elements has taken off, and Zuckerberg has taken responsibility for making the wrong call on this front.
But it was a fair one. Again, most experts had predicted that the COVID-inspired online shopping boom would spark a broader shift, because the rate of online shopping had been on the rise for years anyway.
COVID simply accelerated this - but evidently, we’re still some time away from people, in western markets in particular, looking to conduct all of their purchases online.
The job losses at Meta come on the back of Twitter culling half of its staff under new CEO Elon Musk, while TikTok and Snapchat have also revised their business plans, and decelerated growth initiatives, as a result of economic impacts.
For Meta, Zuckerberg says that it’s refining its focus down to three key areas where it sees potential for significant growth:
“AI discovery engine, our ads and business platforms, and our long-term vision for the metaverse.”
Meta employees impacted by the change will be given 16 weeks of base pay plus two additional weeks for every year of service.
It’s no doubt a difficult time for those in the tech sector, many of whom will now be competing for new roles, but it could also be a period of opportunity, where some of the next big tech shifts may well be conceptualized by former social platform staff who now have an opportunity to explore passion projects.
But they won’t be thinking of this now, and with 11k people out of work, the impacts here are significant.