By Sheera Frenkel and Adam Satariano
Since Mark Zuckerberg founded Facebook in 2004, the Silicon Valley company has steadily hired more employees. At the end of September it had amassed its largest-ever number of workers, totaling 87,314 people.
But on Wednesday, the company — now renamed Meta — began cutting jobs, and deeply.
Meta said it was laying off more than 11,000, or about 13% of its workforce, in what amounted to the company’s most significant job cuts. The layoffs were made across departments, though some areas, such as recruiting, were affected more than others.
“I want to take accountability for these decisions and for how we got here,” Zuckerberg wrote in a letter to employees. “I know this is tough for everyone, and I’m especially sorry to those impacted.”
The scale of the cuts — nearly triple what Twitter announced last week — represent a stunning fall for a once high-flying company whose ambition and room for growth had seemed limitless. It grew rapidly and spent lavishly over the years, accumulating users, buying companies such as Instagram and WhatsApp, and showering its employees with envious perks. Not even scrutiny over its data privacy practices and the toxic content on its apps could dent its financial performance, as its stock continued climbing and its revenues soared. At one point last year, Meta was valued at $1 trillion.
But the company has struggled financially this year as it has tried to move into a new business — the immersive world of the so-called metaverse — while also grappling with a global economic slowdown and a decline in digital advertising, the main source of its revenue. New competitors such as TikTok emerged to capture a younger audience while Meta’s services lost their sheen. Last month, Meta posted a 50% slide in quarterly profits and its second straight sales decline. Its stock has dropped roughly 70% this year.
Zuckerberg, 38, attributed the cuts to growing too quickly during the pandemic, when a surge in online commerce led to a big spike in revenue. Like changes at other businesses, he said he thought the shift would be permanent, leading him to significantly increase spending.
“Unfortunately, this did not play out the way I expected,” Zuckerberg said Wednesday. “I got this wrong, and I take responsibility for that.”
The reduction in the size of Meta’s workforce marks an attempt to reduce some of the exuberance that came to define an era of success in Silicon Valley. Zuckerberg said budgets would be reduced, including some employee perks, and the company would cut back on real estate. A hiring freeze was extended until March.
Zuckerberg said the company would focus on a smaller number of “high priority” areas, including artificial intelligence, advertising and the metaverse.
On Tuesday, Zuckerberg met with executives to discuss the layoffs, two people who took part in the meeting said. One person who was present said the chief executive took responsibility for the cuts, saying his company had scaled up too quickly. Meta had also canceled travel plans for employees to ensure they were available to meet with managers, should their team be affected by layoffs, three other people said. The Wall Street Journal earlier reported Zuckerberg’s meeting with executives on Tuesday.
For those who lose their job, Meta said it would pay severance of 16 weeks of an employee’s base pay, along with two additional weeks for every year a person worked at the company.
After the layoff announcement, Meta’s stock price rose nearly 4% in premarket trading.
Meta joins other tech companies, such as Snap, which have laid off employees as economic conditions have grown more challenging. While many of these companies boomed during the coronavirus pandemic, some of the largest ones have reported financial results in recent weeks that showed they are feeling the fallout of global economic jitters. Last week, Elon Musk, the new owner of Twitter, laid off roughly half of the company’s 7,500 employees, saying that the social media service was losing $4 million a day.
“These cycles of boom and bust are incredibly destructive within organizations because people employed there feel like they don’t know where they stand,” said Sandra J. Sucher, a management professor at Harvard. By rapidly hiring across all departments during the pandemic, Zuckerberg had set up his company to need reductions in staff, she said.
Zuckerberg has been telegraphing that Meta would have to clamp down on costs, starting with cutting back on many of the lavish perks that employees once enjoyed. In March, he announced the company was trimming or eliminating free services such as laundry and dry cleaning. He also scaled back the company’s free dinner offerings, making it harder for employees to take home dinner for themselves and their families.
In July, Zuckerberg warned employees that the company was experiencing “one of the worst downturns that we’ve seen in recent history” and, in September announced a hiring freeze.
Last month, he warned that “teams will stay flat or shrink over the next year.” He added that the company would “end 2023 as either roughly the same size or even a slightly smaller organization than we are today.”
Inside Meta, friction has been building over Zuckerberg’s financial commitments to the metaverse, two executives said.
Meta has been spending billions of dollars on metaverse-related products such as virtual-reality headsets, though such products are niche and there is no guarantee that people will flock to them. There was growing concern that Meta had spent too much on trying to realize Zuckerberg’s ambitions, the people said, at the cost of the core business of social networking.
In its earnings report last month, Meta disclosed that Reality Labs, the part of the company working on the metaverse, had $3.67 billion in operating losses. Reality Labs also experienced its lowest revenue since the final quarter of 2020. The company expects the operating losses for Reality Labs to increase next year.