That’s about 13 percent of the workforce, CEO Mark Zuckerberg announced Wednesday. Meta is in trouble: As less money comes in from its core online advertising business, the group is pouring more and more billions into Zuckerberg’s vision of a virtual world under the Metaverse keyword.
With a price drop after the latest quarterly numbers, the stock market made it clear how little investors think of the exchange rate. Job cuts must now follow austerity measures that have already been announced. In NASDAQ trading, Meta stock temporarily rose 5.31 percent to $101.59.
Zuckerberg noted that he overestimated the online boom at the start of the pandemic and therefore increased investment. Now the internet business has returned to the previous trends. In addition, the weakening economy and increased competition weighed on sales. He takes responsibility for his decisions and their consequences. “It’s a sad moment,” Zuckerberg wrote.
Whether Metaverse will be established as the next computing platform after the smartphone is an open question. But the costs are already real.
In the last quarter alone, the division of Reality Labs, which is working on Metaverse, posted an operating loss of almost 3.7 billion dollars. A deficit of $9.4 billion has accumulated since the beginning of the year – with sales of $1.4 billion in the area.
At the same time, less money remains in the pot. Meta apps like Facebook and Instagram generated $32 billion in operating profit in the past nine months, up from $41 billion a year earlier. Calculated differently: At that time the group was burning almost 17 percent compared to the operating result for Metaverse, this year it was almost 30 percent so far. When the figures were presented, Zuckerberg announced that Reality Labs’ losses would “increase significantly” in the coming year.
The founder of Facebook has now emphasized that he sees job cuts as a last resort. Previously, costs were cut elsewhere, for example through smaller office spaces. Employees who work mostly outside the office now have to share desks. A broad hiring freeze will be implemented until the end of the first quarter of 2023.
The job cuts will hit both the lucrative app business and the reality labs, Zuckerberg said. There were no figures for different areas. At the same time he confirmed the belief that the future will develop at Meta. “I believe that today we are deeply underestimated as a company. At Meta, “work of historical importance” is being done.
The job cuts at Meta come days after an apparent layoff at Twitter, where about half of its roughly 7,500 employees were to go under new CEO Elon Musk. This radical dimension may be due to the tech billionaire’s ideas for the text messaging service. But elsewhere in the tech industry, over-optimistic expectations backfired after the Corona crisis. One example is fitness equipment maker Peloton, which believed it could permanently replace gyms after a supply shortage at the height of the pandemic. But the trend didn’t last, and Peloton had to stop building an additional factory at great expense and lay off several thousand workers. Recently, chip company Intel, among others, cut jobs.
MENLO PARK (awp international)