10 Nov 2022

Facebook owner Meta cuts 11,000 jobs as it sinks more money into metaverse

7:05 am on 10 November 2022
(FILES) In this file photo taken on October 28, 2021 in this illustration photo taken in Los Angeles, a person watches on a smartphone Facebook CEO Mark Zuckerberg unveil the META logo. - Facebook owner Meta will lay off more than 11,000 of its staff in "the most difficult changes we've made in Meta's history," boss Mark Zuckerberg said on November 9, 2022. (Photo by Chris DELMAS / AFP)

Meta haas lost 70 percent of its value this year. Photo: AFP

Meta Platforms says it will cut more than 11,000 jobs, or 13 percent of its workforce, as the Facebook parent doubled down on its risky metaverse bet amid a crumbling advertising market and decades-high inflation.

The mass layoffs, one of the biggest this year and the first in Meta's 18-year history, follow thousands of job cuts at other tech companies including Elon Musk-owned Twitter, Microsoft and Snap.

Like its peers, Meta hired aggressively during the pandemic to meet a surge in social media usage by stuck-at-home consumers. But its business has suffered this year as advertisers and consumers pull the plug on spending in the face of soaring cost pressures and rapidly rising interest rates.

"Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads loss have caused our revenue to be much lower than I'd expected," chief executive officer Mark Zuckerberg said in a message to employees.

"I got this wrong and I take responsibility for that."

(FILES) In this file photo taken on October 23, 2019 Facebook Chairman and CEO Mark Zuckerberg arrives to testify before the House Financial Services Committee on "An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors" in the Rayburn House Office Building in Washington, DC. - Facebook owner Meta will lay off more than 11,000 of its staff in "the most difficult changes we've made in Meta's history," boss Mark Zuckerberg said on November 9, 2022. (Photo by MANDEL NGAN / AFP)

Mark Zuckerberg is putting his hand up over Facebook's troubles. Photo: AFP

Meta, once worth more than a trillion dollars, is now valued at $US256 billion ($NZ434b) after losing more than 70 percent of its value this year alone.

Shares rose 4 percent on Wednesday as investors cheered caution by a company that has been pinning its future on the metaverse with pricey investments that Zuckerberg himself says will take a decade to bear fruit.

"The market is breathing a sigh of relief that Meta's management or Zuckerberg specifically seems to be heeding some advice, which is you need to take some of the steam out of the growing expenditure bill," Hargreaves Lansdown analyst Sophie Lund-Yates said.

The company now expects 2023 expenses between $94b and $100b, compared with the $96b to $101b range projected previously. It also narrowed its 2023 capital expenditures forecast range.

Other than the job cuts, which will impact units across Meta with a disproportional hit to the recruiting and business teams, the company will also reduce office space, lower its discretionary spending and extend a hiring freeze into the first quarter to rein in expenses.

Metaverse cash burn

Still, more of the leftover resources will go toward the Reality Labs unit responsible for its metaverse investments. The business lost $9.44b between January and September this year, with losses expected to grow significantly in 2023.

The spending spree has drawn the ire of Wall Street and shareholders, with one investor recently calling the investments "super-sized and terrifying". Analysts have also questioned how long Meta can pour money into the project in a weak economy.

"They're going to have to continue to rightsize ... next year is going to be a difficult environment for them," said Paul McCarthy at Kisco Capital, which previously owned Meta shares.

McCarthy added that he was sceptical about the company's metaverse bets, 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 pay and two additional weeks for every year of service, as well as all remaining paid time off.

Impacted employees will also receive their shares and healthcare coverage for six months, according to Meta, which had 87,314 employees as of the end of September.

The company did not disclose the exact charge for the layoffs, but said the figure was included in its previously announced 2022 expense outlook of between $85b and $87b.


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