Meta Invests More Money In The Metaverse While Laying Off 11,000 Employees

As the Facebook parent doubled down on its risky metaverse bet amid a collapsing advertising market and decades-high inflation, Meta Platforms Inc. announced on Wednesday that it would eliminate more than 11,000 jobs, or 13% of its workforce.

One of the largest layoffs this year and the first in Meta’s 18-year history, these layoffs come on the heels of thousands of job cuts at other tech firms like Snap Inc., Elon Musk-owned Twitter, and Microsoft Corp.

Like its competitors, Meta hired actively during the pandemic to handle an increase in social media use by customers who were stuck at home. However, as a result of advertisers and consumers cutting back on purchases in response to escalating cost pressures and swiftly rising interest rates, its business has suffered this year.

“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,” Chief Executive Officer Mark Zuckerberg said in a message to employees.

“I got this wrong, and I take responsibility for that.”

After having lost more than 70% of its value this year alone, Meta, which was once worth more than a trillion dollars, is now valued at $256 billion.

Shares increased 4% on Wednesday as investors applauded the company’s caution in making costly investments in the metaverse, which Zuckerberg himself estimates will take ten years to pay off.

“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.

In 2023, the company now anticipates spending between $94 billion and $100 billion, up from the $96 billion to $101 billion range previously anticipated. The forecasted range for capital expenditures in 2023 was also reduced.

The company will reduce office space, cut back on discretionary spending, and extend a hiring freeze into the first quarter in addition to cutting jobs, which will disproportionately affect the business and recruiting teams.

In this illustration, tiny figurines can be seen in front of Facebook’s newly redesigned logo Meta.

However, a larger portion of the remaining funds will go to the Reality Labs division in charge of its investments in the metaverse. Between January and September of this year, the company lost $9.44 billion, and losses are projected to rise sharply in 2023.

Wall Street and shareholders are furious about the spending binge; one investor recently referred to the investments as “super-sized and terrifying.” Additionally, analysts have questioned how long Meta can continue to fund the endeavor in a struggling 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 dubious about the company’s bets on the metaverse and that the ad market might still be negatively impacted by rising interest rates, a gloomy macro environment, and other factors.

Meta will pay 16 weeks of base pay and two additional weeks for each year of service as part of the severance package, in addition to any unused paid time off.

According to Meta, which had 87,314 employees as of the end of September, impacted employees will also receive their shares that were supposed to vest on Nov. 15 and healthcare coverage for six months.

The cost of the layoffs was not made public by the company, but it was stated that it was covered by its previously stated estimate of between $85 billion and $87 billion in expenses for 2022.

(Adapted from ThePrint.com)

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