Meta Inc., the parent company that owns apps like Facebook, Instagram, and WhatsApp, on Wednesday announced the layoff of over 11,000 employees. This is one of the largest layoffs in the technology industry this year, as companies grapple with rising costs and a sluggish advertising market.
The massive layoffs are the first in the company’s history, and they follow in the footsteps of other tech companies such as Twitter, which Elon Musk recently acquired, and Microsoft Corp.
During the pandemic, the tech boom boosted these companies’ valuations. However, with record-high inflation and rising interest rates this year, it has become difficult for businesses to thrive.
It was recently announced that Meta’s stock had lost two-thirds of its value. As a result, the company intends to reduce discretionary spending while also extending its hiring freeze through the first quarter of 2023.
The company’s problems have been exacerbated by the economic slowdown and the low level of online advertising. However, reports indicate that some of the issues are internal. Investors are concerned because Meta is pouring more than $10 billion per year into the “metaverse” as it shifts its focus away from social media.
The company’s CEO, Mark Zuckerberg believes that the metaverse will replace smartphones as the major way people use technology.
There’s also the issue of Apple’s privacy tools, which make it more difficult for social media platforms like Facebook, Instagram, and Snap to track people without their consent and show them personalised ads.
Then there’s TikTok’s competition. The video-sharing app appears to be preferred by younger people over Instagram, which Meta also owns.
Meta’s stock dropped by $4.4 billion in the last quarter, resulting in a 52 percent drop in the company’s value.