the end of the golden age for Zuckerberg?

Sunny days are over for Mark Zukerberg! Meta suffers the backlash of a series of bad decisions and has to lay off 11,000 employees. A novelty for the company that does not abandon its obsession with the metaverse …

“Today I share with you some of the most difficult changes we have made in Meta’s history.” This is how Mark Zuckerberg begins his message to all employees of Meta, the group behind Facebook, WhatsApp, Messenger and Instagram. The company is preparing to carry out a massive layoff, the result of the dramatic decline in its market capitalization since the beginning of 2022 and its disastrous financial results. It had in fact announced at the end of March a turnover of 27.71 billion dollars, down 4% in one year. As for the net profit, it was reduced to 4.40 billion dollars, a decrease of 52% compared to the third quarter of 2021! On the stock market side, Meta’s stock fell more than 70% in 2022, from $ 1 trillion to less than $ 350 billion. In short, all the indicators are in red … Mark Zuckerberg had at the time tried to put things in perspective, declaring that “We are dealing with an unstable macroeconomic environment, increased competition, ad targeting problems and rising costs for our long-term investments, but I have to say that our products seem to work better than some reviews say.” Since then, the Meta boss has changed his tone, admitting that he made several mistakes and that he is responsible for the situation. This episode marks a turning point in the history of the group, which is heading towards a future full of turbulence …

Layoffs at Meta: the result of bad forecasts

If at the end of October Meta had hypothesized to study a possible layoff of 10% of its workforce, it would seem that the situation is worse than expected. This Wednesday, November 9, the show announced the forced departure of 13% of its employees, or 11,000 people worldwide. Those affected will receive a minimum of 16 weeks’ pay as severance pay and unused vacation will be reimbursed. They will also benefit from covered health costs for six months, support for three months to find work and administrative assistance for immigrant workers who will have to renew their visas. Social measures that should help them take the pill …

This is an important novelty in the history of the Meta group – formerly Facebook – which at the end of September had over 87,000 employees and benefited from a gradual increase in its workforce since its creation in 2004. The company had in particular hired many people – too many – during the pandemic, convinced that its growth would continue. With the subsequent confinements linked to Covid-19, e-commerce has experienced strong growth and the Internet has taken an even more important place in everyday life. Many experts believed this growth would continue once the situation returned to normal, and Mark Zuckerberg decided to significantly increase his workforce. Between 2020 and 2021, 27,000 people were hired and another 15,344 arrived in 2022. And that’s not counting the increase in investments at the same time.

The Meta boss drew from an overly optimistic view since, after the pandemic passed, the various sectors returned to normal. Furthermore, the company suffered “Macroeconomic slowdown, intensified competition and loss of advertising”, which he refers to in his statement. Furthermore, not all has gone well on the part of its social networks, which have faced stiff competition from TikTok and Apple’s obligation to let its users choose whether or not to accept tracking of their devices – unsurprisingly. that many turn down – and have therefore seen their ability to target advertisements reduced, which, thing after thing, scared investors. Result: the income turned out to be much lower than estimated. Mark Zuckerberg says he wants to “take responsibility for those decisions and how we got there“.

The other big problem facing Meta is the development of the metaverse – or metaverse, depending on the version – which, while heralded as a real revolution, turns out to be a real money pit. The Reality Labs division, which is in charge of its development, loses more than $ 2 billion every quarter, significantly reducing the company’s cash flow. Horizon Worlds fails to seduce Internet users, even the company’s employees don’t use it, so much so that they have to go at least once a week. Ultimately, the digital world is more of a desert, with fewer than 200,000 monthly active users. They typically end up not arriving after a month due to the presence of many bugs, stability issues, and no Internet users to interact with. It’s a vicious circle: Horizon Worlds loses users because they lack them, which causes them to lose even more, and so on. The fact that access to the metaverse – currently available in Canada, the US, France, Spain and the UK – is so limited, as only people with a VR headset in their possession can get there, certainly doesn’t help. . And it is certainly not the company’s new model, the Meta Quest Pro, which is likely to make up for it given its price! To attract more people, the company plans to launch a browser-based web version and smartphone application. However, it has had to postpone new features to add – which are highly anticipated anyway – to focus on fixing bugs and erasing several items intended to popularize the metaverse, such as its first connected glasses for augmented reality.

© Meta

This obsession with the metaverse and the colossal investments it requires do not convince investors. “As Meta increased spending, you lost investor confidence” , Brad Gerstner, a major shareholder of the group, said in an open letter addressed to the company. But this one seems really determined to invest in it against all odds. In fact, Mark Zunkerberg stated in his press release that he wants to focus the group’s efforts on “an fewer high-priority growth areas, such as our AI research, our advertising and commercial platforms, and our long-term vision for the metaverse. “Furthermore, he would consider accelerating investments from Reality Labs, which does not expect to be profitable at least before 2030, to further his long-term vision in which he strongly believes. A bet that promises to be very risky, especially with the increase in inflation, the energy crisis and global warming that force us to rethink our relationship with consumption more than ever …

Times will be tough, but not just for Meta. They are all in the technology who seem impressed. With its takeover by Elon Musk, Twitter is about to lose 50% of its workforce, if not more. Likewise, Snap, Snapchat’s parent company, said it will cut staff by 20%, or around 1,000 employees. Ditto for enterprise software company Salesforce, which this week began firing some of its employees. For their part, Amazon froze hiring, online payment firm Stripe cut 14% of its workforce, and Uber’s competitor Lyft lost 13% of its employees. Tech players have really entered a period of crisis: it remains to be seen how it will translate for consumers and users …

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