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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.
In recent weeks, Meta had said it would stop making new offers to job candidates, sourcing candidates, approving internal transfers while the company reevaluated how best to prioritize its staffing resources, according to a memo posted to company’s internal message board and viewed by The Washington Post.
But the 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. They would also expand on a broader retrenchment within the tech sector, which has recently seen several big name companies cut staff or freeze hiring.
After years of soaring profits and seemingly endless success, Silicon Valley giants have been forced to manage their resources in an uncertain economic environment. Some digital advertisers are pulling back on spending as rising inflation has created market instability. While many internet platforms experienced a boom during the pandemic when people stayed home to avoid the spread of Covid-19, vaccines and fewer government-imposed lockdowns has given both marketers and users offline alternatives to social media.
Meta, in particular, is facing intensifying competition for advertising dollars and users in the social media market from newer rivals such as TikTok and Snapchat. And the targeted advertising methods that turned Meta into an economic behemoth took a hit last year when Apple introduced new privacy restrictions that forced app makers to explicitly ask users if they could track their activity across the internet — a request many rebuffed.
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.”
Last month, Meta reported its second-ever revenue decline and said it plans to lose more money next year in its metaverse push. The company nonetheless struck an optimistic tone as it reported that user growth numbers rose on Facebook and its other apps compared with same quarter last year.
During an October investor call, Zuckerberg added that the company can overcome larger macroeconomic threats and the fierce competition for advertising dollars with new product investments, including mimicking the same artificial-intelligence-fueled strategy that has made TikTok successful.
Tech’s largest companies are all grappling with slower growth as concerns about the economy and rising inflation has Wall Street asking whether tech’s era of domination has come to an end.
Source by www.washingtonpost.com