New York: Technology firm Meta, the parent company of social media websites Facebook and Instagram, is set to lay off thousands of employees starting soon, the Wall Street Journal reported.
The exact number of layoffs is not known yet, but they could be the “largest to date at a major technology corporation in a year”, according to the website. The layoffs which are expected to begin from Wednesday, would come days after Twitter sacked 50% of its staff across the world on Saturday.
The Meta staff has already been told to cancel non-essential travel as part of its efforts to cut costs, sources told the Wall Street Journal.
What led to the potential layoffs?
The possible layoffs have been triggered due to two major reasons – stagnancy in the growth of Meta’s core social media business, and a lack of returns from its new “metaverse” technology, which focuses on augmented reality.
Both these factors have led the Mark Zuckerberg-led company to look for cost-cutting measures.
At a meeting in June, Zuckerberg had told employees: “Realistically, there are probably a bunch of people at the company who shouldn’t be here”, the Wall Street Journal reported.
As life and livelihood shifted to online platforms during the coronavirus pandemic, Meta hired over 42,000 employees between 2020 to September 2022. These employees account for nearly half of the company’s 87,000 staff strength, as reported in September.
The increased spending on this front, added with the Zuckerberg’s thrust on “metaverse”, has resulted in a sharp rise in the expenses of Meta. The company’s free cash flow – or the money available to repay creditors and pay dividends to investors – has declined 98% on a quarter-to-quarter basis in the last three-month period, according to the Wall Street Journal.
After unveiling its “metaverse” in October last year, the company had changed its name from Facebook to Meta, in what the firm said represented everything it was “doing today, let alone in the future”.
The company billed “metaverse” as an augmented reality-based virtual environment which can be accessed by people using different devices. Zuckerberg had said that the technology was a “constellation of interlocking virtual worlds in which people will eventually work, play, live and shop”.
What went wrong?
Meta investors have not been been impressed by the company’s increased spending on its Reality Labs division, which is responsible for the creation of metaverse and its virtual and augmented reality products.
The company has spent over $15 billion (over Rs 1.2 lakh crore) on the project since the beginning of the last year, but visitors to its virtual reality platform Horizon Worlds have fallen drastically, the Wall Street Journal reported.
“I get that a lot of people might disagree with this investment,” Zuckerberg had admitted on a company earnings call last month, stressing, however, on the future “importance of the work that was done”. After the call, analysts downgraded the ratings of Meta stock and slashed its price targets.
However, the 70% fall in Meta’s stock prices is not just because of the failure of “metaverse” to take off.
Stiff competition from short-duration video platform TikTok and an option given by Apple to its users in some countries to avoid targeted advertisements has also led to an increase in Meta’s spendings, according to the Wall Street Journal.
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