Facebook parent company Meta has announced it will be making 13% of its staff, some 11,000 workers, redundant. The news come as another tech giant, Salesforce, revealed it has been hundreds of job cuts this week as the wave of tech layoffs continues.
News of the job cuts was first reported on Monday, and the scale of the layoffs has been confirmed by the company today.
Why is Facebook owner Meta making job cuts?
In a message to staff, CEO Mark Zuckerberg said today’s news represented “the most difficult changes in Meta’s history”.
“At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth,” Zuckerberg explained. “Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.”
Online commerce has returned to prior trends, the Facebook founder said, but he added “the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected. I got this wrong, and I take responsibility for that.”
Zuckerberg said that Meta needs to “become more capital efficient.” He explained: “We’ve shifted more of our resources onto a smaller number of high-priority growth areas — like our AI discovery engine, our ads and business platforms, and our long-term vision for the metaverse. We’ve cut costs across our business, including scaling back budgets, reducing perks, and shrinking our real estate footprint. We’re restructuring teams to increase our efficiency. But these measures alone won’t bring our expenses in line with our revenue growth, so I’ve also made the hard decision to let people go.”
The news will bring Meta’s much-talked-about focus on the metaverse into sharp focus. Zuckerberg’s ambition is for his business to be the “metaverse company”, supplying technology and services for a future where social and business interactions take place in virtual worlds. However, so far this has proved a costly decision, with Meta’s metaverse technologies division, Reality Labs, losing $9bn this year alone.
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Why is Salesforce making layoffs?
News of cuts at cloud company Saleforce was first reported by Protocol, which said up to 1,000 workers could face being laid off. However, the company has since said that the number of roles cut is in the hundreds. It employs 73,000 people in total.
A brief Salesforce statement said: “Our sales performance process drives accountability. Unfortunately, that can lead to some leaving the business, and we support them through their transition.”
The company was one of the most successful during the Covid-19 pandemic, with its cloud-based CRM and other sales management tools being widely adopted and driving rapid revenue growth. However, the company’s strategy of using its rocketing revenues to fuel growth, through the purchases of companies such as Slack and Tableau, has come under scrutiny from investors, who are looking for larger returns.
One activist investor, Starboard Value, took an undisclosed stake in the company last month, stating its profit margin should be significantly higher than current levels. Cost-cutting may be seen as a way to remedy this.
Salesforce had previously laid off all its contract workers and instigated a hiring freeze until January 2023.
News of tech worker layoffs has become a regular occurrence over recent months as businesses cut spending in the face of challenging economic headwinds, with factors such as the war in Ukraine driving high inflation and interest rates.
As reported by Tech Monitor, both Stripe and Lyft announced redundancies last week.
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