Meta’s foundation is crumbling
Meta, formerly Facebook, once seemed an impenetrable fortress, but it’s now showing big cracks.
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Why it matters: These problems run deeper than the current ad slowdown and won’t be fixed by big layoffs announced Wednesday.
Driving the news: Meta said it will lay off 11,000 jobs, or 13% of its staff.
- The company’s first-ever widespread job cuts come after years of rapid, unchecked hiring, including a jaw-dropping 28% rise in headcount last year.
What’s happening: While many other big tech companies are making or considering job cuts, Meta faces major structural challenges that predate this year’s economic downturn — and now need to be addressed by a smaller, potentially demoralized staff.
Signs of slowed momentum have been surfacing for months.
- The company reported its second consecutive quarter of year-over-year revenue declines last month, after confirming its first-ever user decline in February.
- Meta’s stock has lost more than 70% of its value this year, making it the worst performer so far this year in the S&P 500.
- Its net income has grown significantly slower than its revenues in the past five years.
- Meta said at the outset of the year that it expected Apple’s changes to app tracking would cut $10 billion from its bottom line this year — a huge tax on a company that was already starting to see growth slow.
The big picture: Meta has been investing heavily in a years-off metaverse future, while scrapping forays into cryptocurrency, gaming and live shopping.
- At the same time, it has not found ways to counter huge near-term threats to its core social network advertising business, including an aging user base, the rise of TikTok and a new Apple privacy policy that makes ad targeting much harder.
- The company’s unchecked metaverse investment and hiring might have been sustainable in a growing market, but the sudden, sharp slowdown in advertising is making that project’s cost stand out as a problem.
Between the lines: Meta’s old playbook for dealing with setbacks and challenges isn’t working any more.
- New internal projects — including a Facebook Gaming effort to take on Twitch and YouTube as well as a live shopping feature for Facebook — keep getting scrapped.
- Cloning the features and services of rivals worked to a degree to counter the rise of Snapchat, but it hasn’t done much to fend off TikTok, despite the launch of Meta’s TikTok clone Reels last year.
- Buying other companies with promising new technologies and services — as Facebook did through its purchases of Instagram in 2012 and WhatsApp in 2014 —is largely off the table today thanks to a hostile antitrust climate in D.C.
“Meta is amidst an identity crisis,” Forrester research director Mike Proulx said in a statement. “The company has one foot in a risky long-term metaverse bet and another foot failing to compete with TikTok.”
- “Expect more headwinds for Meta as Gen Z continues to exit Facebook and favor TikTok over Reels, and CMOs consolidate their slashed media budgets towards safe and sure bets.”
Yes, but: CEO Mark Zuckerberg, in a message announcing Wednesday’s layoffs, told workers Meta had become a “deeply underestimated” company.
- “Billions of people use our services to connect, and our communities keep growing,” he wrote. “Our core business is among the most profitable ever built with huge potential ahead.”
What’s next: Meta still faces all the same problems that it has failed to address in recent years — only now with less ad revenue and a smaller staff worried about job security.
As for Facebook’s fail, the public says:
He really thought they’d cheer for him like when Elon did it
It’s the staff we need to think about. Being made redundant is not a nice thing to happen. Long term employees end up so much. Employee Paid health care in the US is essential. What about employees with family with health issues???
Lazy WFH employees just showed how useless they are. They showed companies that their jobs can be done remotely from India for 1/10 of the cost. FB will fire more employees next year.
Nothing like Mark calling it wrong and making a huge financial mistake with MetaVerse and then his employees who are raising families and attempting to survive in this economy financially paying for it with losing their jobs. Oh,well, he can relax on his megamillion property in Kauai when this blows over.
Musk cuts 3,500 jobs at Twitter and the left goes nuts and turns it into a personal vendetta against him. Zuckerberg fires 3x more employees and the left will be silent about the job loss.
About a year ago I deleted almost all of my pictures and posts on fb. Deleted as much personal info as I could without closing the account.
Over promised and under delivered with billions lost: Meta, the new Theranos of Silicone Valley. Elizabeth Homes can use this at her sentencing phase.
What does reveals its just that the dude is a mediocrity and he got lucky by taking someone elses code for a fancy password protected alternative forum its really a built-in board system Ive been saying this for decades nothing else they just gain popularity and advertisers got in. Now with this thing with 3-D versions of you in Sims like world it shows complete lack of originality called like strangeness I mean really
Is this another layoff happening before Christmas? How Scroogey. Zuckerberg can afford to keep them on.
Where’s the negative press now? How come Elon Musk was painted as the devil last week? Zuckerberg is the worst
“I” says it all. He needs a proper board, shareholders with real rights, and advisors who he’ll listen to. He bet the whole company on a sci-fi novel’s vision of the future and blew $10bn in the process.
Delusional.. That vision. He must really think of people as animals that need some device on their heads to experience more of the world.
Do American employees get a payout when they’re made redundant or are they just left to fend for themselves? That’s not a rhetorical question. Genuinely asking.
“Sorry folks, but what’s left of my billions comes before your measly paycheck to paycheck existence, ohh, and have a Happy Thanksgiving & a Merry Christmas!” MZ
Facebook, Google and Twitter are websites. The companies run websites that could be replaced at any time like a popular dance routine. The fact that we refer to them as “Big Tech” as if they existed to create revolutionary technology shows how stagnant we’ve become.
The majority will be Dems so I am glad they are part of this demise. 1 economy and 2 FBs position as a leftist soapbox caused this and they still keep voting Dem.
I hope Facebook disappears for good, along with him. Did he not unveil a $1500 + vr cr@p recently? I have disliked Facebook from day 1, never liked the virtual friends and the “you are the product concept”. Bin, finally!
The Metaverse is a joke. People want real connections with others, not with some silly looking avatars in a 90s Atari game.
Things change. Fads wear off. Some no longer even post on Facebook public groups because of ID theft.
Facebook has now become a shell of its former self. All it is left are senior citizens sharing Apple pie recipes and Q-drops.
Dubai Metaverse vested $4B the public, investors and non goggle wearing peeps want nothing to do with. boondoggle for Zuck
This is kind of great news for those employees. They get out of a horrible environment, get severance that will allow them not to work through the holiday season, and then can move on in January. Enjoy your time with family!
It’s just astounding he believed people want to spend massive amounts of time and money pretending to be a silly looking cartoon version of themselves. I know nothing about video dames but I know some have almost realistic looking animation. People may have gone for enhanced versions of themselves but nobody wants to look like a Scooby Doo cartoon.
You will never be able to convince me this man is human. Looks like a robot or reptile in a skin suit. So unsettling.
They displaced some other form of amusement and entertainment…they in turn have been replaced. Evolution and a fickle public
Creepy weirdo Zuckerberg is a one-hit wonder. He lucked out coming up with one reasonable idea at the perfect time.
I don’t understand what he thought would happen. Metaverse and Meta in general was a bad idea. No one wanted this.
It’s difficult not to despise this guy. I kinda hope this “metaverse” is Zuck’s white whale but that would only hurt more people. Although if the metaverse succeeds it will only hurt more people but in a different way…idk I’m stuck in a loop. Slow day.
Some people might loose their million dollars homes and their expensive lifestyles. Maybe then they will not be democrats anymore due to the high cost of living.
Its great to see all the woke companies who peddled the leftie agenda going broke – advertisers revenue down….i wonder why!!
Sorry, but not sorry. A small dose of reality for these little whiny lib tools. Maybe the coal mines are hiring?
In no way a fan of FB, but compare people’s reactions to when American auto manufacturers do similar. Mature businesses, especially “first at the post” technological innovators, must make adjustments as competition catches up and markets evolve. True story. I mean, it’s not like Mark had a midlife crisis and bought FB and is running it into the ground like you know who
The only way his company comes back is if he gets out of the driver’s seat. at this point he’s the problem for the company.
It was a pyramid scheme. He was paying huge salaries to ‘meta entrepreneurs’ to find more meta entrepreneurs who will pay to get started and then find more suckers. Obviously it failed, it’s an endless chain of nothing.
Great news. Keep the cuts coming.
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