It took some time but Mark Zuckerberg seems, for the first time, to want to water down the wine of his metaverse-oriented strategy.
The CEO of Meta Platforms (META), formerly Facebook, apologized on Nov. 9 to the employees of the social media giant. Zuckerberg announced the dismissal of 11,000 of them, or 13% of the group's 87,000 employees.
"I want to take accountability for these decisions and for how we got here," said the Chief Executive Officer in a blog post.
"I know this is tough for everyone, and I’m especially sorry to those impacted," he added.
Interestingly, the young billionaire, who has seen his fortune plummet by $88.2 billion since January according to the Bloomberg Billionaires Index, said the downsizing would also hit Reality Labs. Reality Labs is the division of Meta housing its projects in the metaverse. This division has already lost nearly $20 billion since 2021, but Zuckerberg keeps repeating that it is the future of Meta, despite investors telling him to focus on the core business which remains profitable.
Workforce Reductions Also Affect the Metaverse
"While we’re making reductions in every organization across both Family of Apps and Reality Labs, some teams will be affected more than others," Zuckerberg said on Nov. 9. "Recruiting will be disproportionately affected since we’re planning to hire fewer people next year. We’re also restructuring our business teams more substantially. This is not a reflection of the great work these groups have done, but what we need going forward."
The fact that Reality Labs is affected by the workforce reductions is a sign that Zuckerberg plans to cut costs in this division as well, after repeating last month that he would continue to invest there, a decision that sent Meta shares plunging.
"Our growth in cost of revenue is expected to accelerate, driven by infrastructure-related expenses and, to a lesser extent, Reality Labs hardware costs driven by the launch of our next generation of our consumer Quest headset later next year," the company said during its third quarter earnings.
These investments will not, however, pay off in the short and medium term, the company warned, appearing to prepare investors in advance for additional disappointments.
"We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year. Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run," Meta said.
Meta shares are down 71.3% since January, translating into a market value crash of around $681 billion. In another company, there would already be calls by the shareholders to replace the CEO. But Zuckerberg has power. He controls the votes through special action shares (Class B). He cannot, therefore, be voted out.
'I Take Responsibility'
Zuckerberg took responsibility for this stock market disaster, while emphasizing that the macroeconomic environment had become difficult.
"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.
He continued:
"In this new environment, we need to become more capital efficient," the young billionaire said. "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."
In addition to the job cuts, Meta will also freeze hiring until the first quarter of 2023, reduce its offices and adopt desk sharing going forward.
"We’re making all these changes for two reasons: our revenue outlook is lower than we expected at the beginning of this year, and we want to make sure we’re operating efficiently across both family of apps and Reality Labs," Zuckerberg concluded.
