Meta Platforms Inc. Lays Off 11 Thousand Employees. Here's The List Of Causes!

Meta Platform Inc, its value is down 70 percent this year. (photo: Doc. Pixabay)

JAKARTA- Meta Platforms Inc announced on Wednesday, November 9 that it will cut more than 11,000 jobs, or 13% of its workforce. This is because Facebook's parent company is doubling its investment in the risky metaverse amid a collapsing advertising market and decades of high inflation.

The mass layoffs, one of the largest this year and the first in Meta's 18-year history, followed thousands of layoffs at other tech companies including Elon Musk's Twitter, Microsoft Corp, and Snap Inc.

Like its peers, Meta is recruiting aggressively during the pandemic to meet the surge in social media use due to consumers stuck at home. But his business has suffered this year as advertisers and consumers halted spending in the face of soaring cost pressures and rapidly rising interest rates.

"Not only has online commerce returned to previous trends, but the macroeconomic downturn, increased competition, and loss of advertising signals have caused our revenue to be much lower than I expected," Meta Chief Executive Officer Mark Zuckerberg said in a message to employees.

"I misunderstood, and I take responsibility for it," Zuckerberg said, as quoted by Reuters.

Meta, once worth more than a trillion US dollars, is now worth only 256 billion US dollars (IDR 4012 trillion) after losing more than 70% of its value this year alone.

Meta shares rose 4% last Wednesday as investors cheered the move for a company that has hung its future in the metaverse with expensive investments that Zuckerberg himself says will take a decade to pay off.

"The market is breathing a sigh of relief that Meta management or Zuckerberg, in particular, seems to be heeding some of the advice, namely that you need to cut some of the rising spending bills," said Hargreaves Lansdown analyst Sophie Lund-Yates.

Meta now expects 2023 costs to be between $94 billion and $100 billion, compared to a previously projected $96 billion to $101 billion range. It also narrowed the range of 2023 capital expenditure forecasts.

In addition to the layoffs, which will impact units at Meta with a disproportionate hit to hiring and business teams, the company will also reduce office space, lower its discretionary spending, and extend its hiring freeze through the first quarter to control spending.

Burn Money on Metaverse

However, more of the remaining resources will go to the Reality Labs unit responsible for its metaverse investment. Businesses lost 9.44 billion US dollars between January and September this year, with losses expected to grow significantly in 2023.

The massive spending has drawn the ire of Wall Street and shareholders, with one investor recently calling the investment "super-sized and scary". Analysts also question how long Meta can pour money into the project in such a weak economy.

"They have to keep measuring... next year is going to be a tough environment for them," said Paul McCarthy of Kisco Capital, which previously owned Meta shares.

McCarthy added that he was skeptical about the company's metaverse investment, and that rising interest rates and a gloomy macro environment could continue to weigh on the ad market.

As part of the severance package, Meta will pay 16 weeks of base salary and two additional weeks for each year of service, as well as all remaining paid leave time.

Affected employees will also receive their assigned share of a vest on November 15 and six months of health care coverage. Meta alone reportedly had 87,314 employees worldwide at the end of September 2022.

But Meta did not disclose the exact cost for the layoffs, but said the figure was included in its previously announced 2022 spending estimate of between $85 billion and $87 billion.