“Today I share some of the toughest changes we’ve made in Meta’s history,” Zuckerberg said in the letter. “I have decided to reduce the size of our team by approximately 13% and let go of over 11,000 of our talented employees. We are also taking a number of additional steps to become a leaner and more efficient company by reducing discretionary spending and extending our hiring freeze through the first quarter.”
Shares of Meta rose 4% in premarket trading.
The layoffs come amid tough times for Facebook’s parent company Meta, which provided lukewarm information tips in late October for its upcoming fourth-quarter results that spooked investors and sent its shares plummeting nearly 20%.
Investors worried about rising costs and expenses for Meta, which jumped 19% year-over-year in the third quarter to $22.1 billion. The company’s overall sales fell 4% to $27.71 billion in the quarter, while its operating profit fell 46% from a year earlier to $5.66 billion.
“I want to take responsibility for these decisions and how we got here. I know it’s difficult for everyone, and I’m especially sorry for those affected.” Zuckerberg said.
He said Meta was making cuts at every organization, but recruiting would be disproportionately affected as the company plans to hire fewer people in 2023. The company extended its hiring freeze until the first quarter. with a few exceptions, Zuckerberg said.
“It’s a sad moment, and there’s no getting around it. To those leaving, I want to thank you again for everything you put into this place,” he added.
Affected employees will receive 16 weeks of pay plus an additional two weeks for each year of service, Zuckerberg said. Meta will cover health insurance for six months.
Meta invests heavily in the metaverse, which generally refers to a digital world yet to be developed and accessible by virtual reality and augmented reality headsets. This heavy gamble has cost Meta $9.4 billion so far in 2022, and the company anticipates that the losses “will increase significantly year on year”.
Zuckerberg said on a call with analysts as part of its third-quarter earnings report that Meta plans to “focus our investments on a small number of high-priority growth areas” over the next year.
“That means some teams will grow significantly, but most other teams will either be flat or shrink over the next year,” Zuckerberg said. “Overall, we expect to end 2023 with roughly the same size, or even a slightly smaller organization, than we are today.”
Meta has more than 87,000 employees at the end of September.
Here is Mark Zuckerberg’s letter to employees:
“Today, I’m sharing some of the toughest changes we’ve made in Meta history. I’ve decided to reduce the size of our team by approximately 13% and let go of over 11,000 of our talented employees We are also taking a number of additional steps to become a leaner and more efficient business by reducing discretionary spending and extending our hiring freeze through the first quarter.
I want to take responsibility for those decisions and how we got here. I know this is difficult for everyone, and I am especially sorry for those affected.
How did we come here?
At the onset of Covid, the world quickly moved online and the rise of e-commerce led to outsized revenue growth. Many people predicted that it would be a permanent acceleration that would continue even after the pandemic was over. I, too, have therefore taken the decision to considerably increase our investments. Unfortunately, it didn’t go as I expected. Not only has online commerce returned to earlier trends, but the macroeconomic downturn, increased competition, and loss of ad signal has caused our revenue to drop from what I expected. I was wrong and I take responsibility for it.
In this new environment, we need to become more capital efficient. We’ve shifted more of our resources to fewer high-priority growth areas, like our AI discovery engine, our advertising and commerce platforms, and our long-term vision for the metaverse. We have reduced costs across our business, including reducing budgets, reducing benefits and reducing our real estate footprint. We are restructuring the teams to be more efficient. But these measures alone will not bring our spending in line with our revenue growth, so I also made the difficult decision to let people go.
How will this work?
There is no right way to go about a layoff, but we hope to get you all the relevant information as soon as possible and then do everything we can to help you get through this ordeal.
Everyone will soon receive an email letting you know what this layoff means for you. After that, each affected employee will have the opportunity to speak to someone to get their questions answered and participate in information sessions.
Some of the details in the United States include:
- Breakup. We will pay 16 weeks of base salary plus two additional weeks for each year of service, with no cap.
- PTO. We will pay for any remaining PTO time.
- Acquisition of RSUs. Everyone concerned will receive their November 15, 2022 acquisition.
- Health insurance. We will cover the cost of health care for individuals and their families for six months.
- Career services. We will provide three months of professional support with an external provider, including early access to unpublished job leads.
- Immigration assistance. I know it’s especially difficult if you’re here on a visa. There is a notice period before termination and some visa grace periods, which means everyone will have time to make plans and work out their immigration status. We have dedicated immigration specialists to guide you based on your needs and those of your family.
Outside of the US, support will be similar, and we will follow soon with separate processes that take into account local employment laws.
We have made the decision to remove access to most Meta systems for people leaving today given the amount of access to sensitive information. But we keep email addresses active throughout the day so everyone can say goodbye.
While we’re making cuts across every organization in both the App Family and Reality Labs, some teams will be impacted more than others. Recruitment will be disproportionately affected as we expect to hire fewer people next year. We are also restructuring our commercial teams more substantially. This does not reflect the great work done by these groups, but what we need to move forward. Leaders from each group will schedule time to discuss what this means for your team over the next few days.
The teammates who will leave us are talented and passionate and have had a significant impact on our company and our community. Each of you has contributed to the success of Meta, and I am grateful to you. I’m sure you’ll continue to do good work in other places.
What other changes are we making?
I see layoffs as a last resort, so we decided to limit other sources of costs before letting our teammates go. Overall, this will mean a significant cultural shift in the way we operate. For example, as we reduce our real estate footprint, we are moving to desktop sharing for people who already spend most of their time away from the office. We’ll be rolling out more cost-cutting changes like this in the coming months.
We are also extending our hiring freeze through the first quarter, with a few exceptions. I will monitor our business performance, operational efficiency and other macro factors to determine if and how much we should resume hiring at that time. This will give us the ability to control our cost structure in the event of a continued economic downturn. It will also put us on the path to a more efficient cost structure than the one we recently presented to investors.
I am currently in the midst of a thorough review of our infrastructure spending. As we build our AI infrastructure, we strive to become even more efficient with our capability. Our infrastructure will continue to be an important advantage for Meta, and I believe we can achieve this while spending less.
Basically, we’re making all these changes for two reasons: our revenue outlook is lower than we anticipated at the start of this year, and we want to make sure we’re operating effectively in both Family of Apps and Reality Labs.
How are we progressing?
It’s a sad moment, and there’s no getting around it. To those leaving, I want to thank you once again for everything you have invested in this place. We wouldn’t be where we are today without your hard work, and I appreciate your contributions.
To those left behind, I know this is a difficult time for you too. Not only are we saying goodbye to the people we have worked closely with, but many of you also feel uncertain about the future. I want you to know that we make these decisions to ensure our future is strong.
I believe we are deeply underestimated as a company today. Billions of people use our services to connect, and our communities keep growing. Our core business is among the most profitable ever built with huge potential ahead of us. And we’re leading the development of technology to define the future of social connection and the next computing platform. We do historically important work. I am confident that if we work effectively, we will emerge from this downturn stronger and more resilient than ever.
We will share more about how we will operate as a streamlined organization to achieve our priorities in the weeks ahead. For now, I will say once again how grateful I am to those of you leaving for all you have done to further our mission.
look: Meta must return to its core advertising business and redouble its efforts.