Facebook group Meta is laying off more than 11,000 employees in the first major layoffs in its history. That’s about 13 percent of the workforce, as CEO Mark Zuckerberg explained Wednesday.
Meta is in a stalemate: while less money comes from its core business, online advertising, the group is spending more and more billions on Zuckerberg’s vision of a virtual world under the Metaverse keyword.
With the price drop after the last three months of numbers, the stock market has made it clear how little investors think about the route. The layoffs will follow the austerity measures previously announced. The stock gained nearly 4 percent in premarket trading.
Zuckerberg stated that he overestimated the online boom at the start of the pandemic, thus increasing investment. Now the Internet business is back to earlier trends.
In addition, the weakening economy and increased competition weighed on sales. Takes responsibility for decisions and their results. “A sad moment,” Zuckerberg wrote.
Whether Metaverse will establish itself as the next computing platform after the smartphone is an open question. But the costs are already real.
In the last quarter alone, the Reality Labs division working on Metaverse reported an operating loss of almost $3.7 billion. Since the beginning of the year, a deficit of $9.4 billion has occurred, with sales of $1.4 billion in the region.
At the same time, less money remains in the safe. Meta apps like Facebook and Instagram have generated operating profits of $32 billion in the last nine months, up from $41 billion a year ago.
Calculated differently: At that time the group burned almost 17 percent compared to Metaverse’s operating result, up from almost 30 percent so far this year. When the numbers were presented, Zuckerberg announced that Reality Labs’ losses would “increase significantly” next year.
The Facebook founder now stressed that he sees layoffs as a last resort. Previously, costs had been reduced elsewhere, for example through smaller office spaces. Employees who mostly work outside the office must now share desks. A comprehensive hiring freeze will be implemented until the end of the first quarter of 2023.
Zuckerberg stressed that the layoffs would hurt both the lucrative app business and reality labs. There were no figures for the different fields.
He also confirmed his belief that the future will be developed in Meta. “I believe we are deeply underestimated as a company today.” “Historically important work” is being done in Meta.
The layoffs at Meta come days after a net cut on Twitter that about half of the roughly 7,500 employees had to go under new boss Elon Musk. This radical dimension may be due to the tech billionaire’s ideas for the short message service. But elsewhere in the tech industry, overly optimistic expectations took their toll after the Corona crisis.
One example is fitness equipment maker Peloton, which believes it can permanently replace gyms following shortages in supply at the height of the pandemic. The trend did not last long, however, and Peloton had to stop the construction of an additional factory at great cost and lay off several thousand employees. Recently, chip company Intel, among others, cut things off. (kae/SDA)