Mark Zuckerberg, CEO of Meta Platforms Inc., has planned sweeping reforms to reorganize the team and reduce headcount. This is the first time for an exercise at the social media giant, which signals the end of an era of rapid growth.
Since the inception of Facebook in 2004, this will be the first significant cut in the budget. The company is trimming its workforce with a freeze on hiring and restructuring specific teams to realign priorities and cut expenses. According to Zuckerberg, Meta is expected to be smaller in 2023 compared to 2022.
Zuckerberg announced the hiring freeze in a weekly Q&A session with the Meta employees. He said that Meta would reduce budgets across the organization, and it was up to individual teams to work out and handle the changes in their headcounts. According to comments reviewed by Bloomberg, the new plan would mean not filling vacancies, shifting staff to different teams, and managing nonperformers.
Meta stocks fell further from the day’s opening low by 3.7% on Wednesday. The stock is already down 60% this year so far.
Sluggish Advertising Growth
The cost cuts and staff downsizing are seen as an admission by Meta that its advertising revenue growth is slowing and facing increasing competition for attention from social media users. Apart from economic pressures, the company, which has built its advertising business with accurate consumer targeting, is facing privacy restrictions from Apple Inc. for tracking iPhone users.
While TikTok has pulled away young users from Instagram, Zuckerberg is making big bets on the metaverse, where he is willing to spend money for years to make people communicate through an immersive virtual reality platform.
Meta Inc. had said at the beginning of 2022 that it was slowing hiring for management roles and postponing full-time job hiring for summer interns. The Thursday hiring freeze announcement was necessary as Zuckerberg explained that they were not adding people who were not expected to have any role in 2023.
In July, Zuckerberg warned that meta would slowly reduce headcount, many employees would be relocated, and teams would shrink. The priorities of Meta are Reels, a TikTok competitor, and the metaverse. Meta’s employee strength was 83,500 on June 30, and the company added 5,700 new hires in the second quarter.
During its first quarterly earnings call, Meta informed that its annual expenses were lower by about $33 billion than the initial projections. The company halted its dual-camera Apple watch project to reduce spending.
The broad economic challenges have hit not only Meta but others in advertising. Twitter Inc. also implemented a hiring freeze in May and asked its employees to cut down traveling and marketing costs. Snap Inc. cut its workforce by 20% in August, while Alphabet Inc. said it slowed hiring for the year’s second half.
