Meta announced earlier this year that it intended to slow hiring for certain executive positions.
For the first time, Meta Platforms Inc. Chief Executive Officer Mark Zuckerberg disclosed broad plans to reorganise teams and reduce headcount, signalling the end of a period of fast development at the social media giant.
In what would be the firm’s first big budget cut since its inception in 2004, Zuckerberg announced that the company will freeze hiring and restructure some teams in order to minimise costs and refocus priorities. He predicts that Meta will be smaller in 2023 than it is this year.
According to an individual in attendance, he announced the freeze at a weekly Q&A session with employees. He went on to say that the corporation would cut budgets across most teams, including those that are expanding, and that individual teams would figure out how to handle personnel fluctuations. According to remarks seen by Bloomberg, this could include not filling roles when employees leave, transferring people to other teams, or working to “manage out people who aren’t successful.”
“I had hoped the economy would have more clearly stabilised by now,” Zuckerberg said. “But from what we’re seeing it doesn’t yet seem like it has, so we want to plan somewhat conservatively.” A Meta spokesperson declined to comment.
Meta stock, which was already trading down to begin the day, plummeted much worse on the news, falling 3.7% from Wednesday’s close. So far this year, the stock has dropped 60%.
The additional expense cuts and employment freeze are Meta’s most direct acknowledgement that ad revenue growth is slowing due to increased competition for users’ attention. It’s not an ideal time to be downsizing; aside from economic challenges, the company’s advertising business, which is based on precise consumer targeting, has lost some of its edge as a result of new Apple Inc. privacy limits on tracking iPhone users.
TikTok is luring younger people away from Instagram. And Zuckerberg is placing a large bet on the metaverse, an immersive virtual reality future in which he believes people will someday communicate, which he has stated will be a costly endeavour for many years.
Meta announced earlier this year that it planned to slow hiring for some management positions and postpone employing full-time summer interns. The freeze announced Thursday was necessary because “we don’t want to bring people to teams where we don’t anticipate to have roles next year,” Zuckerberg noted during the meeting.
In July, Zuckerberg warned that Meta would “steadily curtail employee growth” and that “many teams will shrink so we can shift emphasis to other areas.” Internal priorities include Reels, Meta’s TikTok rival, and Zuckerberg’s metaverse. As of June 30, Meta has over 83,500 employees and added 5,700 new personnel in the second quarter.
According to Zuckerberg, the company will be “slightly smaller” by the end of 2023. “We really grew significantly basically every year for the first 18 years of the company, and then more recently our revenue has been flat to slightly down for the first time,” he told employees.
During its first-quarter results call, Meta stated that yearly expenses will be around $3 billion lower than previously forecast, reducing an estimated range of up to $95 billion. Previously, the business shut down a dual-camera watch it was developing to compete with the Apple Watch.
Meta is hardly the only ad-reliant startup facing bigger economic issues. Twitter Inc. imposed its own hiring restriction in May and has asked employees to limit their spending and cut travel and marketing costs. Alphabet Inc.’s Google has also stated that it will reduce hiring in the second half of the year, and Snap Inc. eliminated 20% of its personnel in August.