Meta To Layoff 11,000 Workers As Pandemic Hiring Frenzy Backfires

Key Takeaways

• Meta is laying off 11,000 members of staff, representing 13% of its global workforce.
• Mark Zuckerberg has admitted hiring too fast in the high growth pandemic years, and the company now needs to scale back to improve profitability.
• It comes at a time when the metaverse division, Reality Labs, is losing around $10 billion a year, a number that is expected to climb in 2023.
• The tech sector has become a minefield for investors, and we share some options to construct a portfolio which can profit even if times remain tough.

Mark Zuckerberg has announced mass layoffs at Facebook parent company Meta, with 13% of the global workforce being shown the door. This equates to roughly 11,000 jobs in what is one of, if not the largest round of tech layoffs this year.

It follows job cuts across the board at many other tech heavyweights, including Snap, Spotify, Coinbase, Stripe, Lyft and of course, Twitter.

While these are all billion dollar companies, they’re nowhere near the size and scope of Meta. Such a drastic reduction in headcount at one of the biggest companies on Earth is likely to make the industry increasingly nervous.

It’s not just jobs that are going at Meta. Zuckerberg also stated in the release that they will be “Taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.”

Sounds like the unlimited free snacks and latte’s at the Meta cafeteria might be at risk for the staff who do manage to hold on to their jobs.

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Meta’s layoffs announcement

Zuckerberg has taken “accountability” for the wide spread cuts. He spelled out the trajectory throughout Covid that saw a huge uptick in online activity and revenue growth, which many believed would continue once the pandemic was over.

He said that he too thought that this would be the case and therefore sought to capitalize on the trend through mass investment into hiring more staff to grow and develop alongside the apparent opportunity.

The e-commerce trend has not continued at the same level, he said, and due to the overall macroeconomic environment, higher levels of competition and the impact of Apple’s new privacy restrictions, revenue is far below expectations.

This error of judgment and an outlook that is looking dour over the coming months means that cost cuts are required. In addition to the layoffs of 11,000 workers, Meta wil also be reducing team budgets, cutting perks and giving up office leases where possible.

All in all, there are looking to be some big changes at Meta.

What this means for Meta employees

In the announcement Zuckerberg outlined how the process would work for impacted employees. He stated that every employee would receive an email outlining whether they were being shown the door or still had a job.

Laid off staff would receive a minimum of 16 weeks severance of their base pay, plus an additional two weeks pay for every year of service.

In addition, they would be paid out for any unused paid time off, would receive their November RSUs and six months of health insurance for staff and their families.

While tech jobs have been scorching hot over the last decade, it’s likely to be a more difficult time to be looking for a role in tech. With layoffs occurring right across the sector and hiring freezes even more widespread, the timing isn’t great.

System access was removed immediately for fired employees, leaving little room for ambiguity as to whether they still had their jobs or not.

The metaverse play and outlook for ad tech

Meta has been blowing through huge amounts of cash in the push to create their version of the metaverse. Reality Labs, the division on Meta responsible for their VR world, lost $3.7 billion in Q3 alone, following losses of $2.8 billion in Q2.

At the Q3 earnings call, Zuckerberg explained that these losses were just the beginning and that he expected that “Reality Labs operating losses in 2023 will grow significantly year on year.”

Even still, this is a long term play that he believes is necessary for the future of the company.

A major driver of these decisions are the ongoing pressures on advertising revenues. The company has been dealt a number of blows in that space over the past 24 months, the first of which has been Apple’s change in iOS 14 which makes it much more difficult for companies such as Meta to extract data on their users.

The company has previously said that this change is expected to impact their revenue by as much as $10 billion a year.

As well as this fundamental change to the advertising landscape, the company is also dealing with cyclical issues around the current state of the economy. Inflation and low growth are weighing on corporate forecasts, with many expecting the US to fall into a recession in late 2022 or early 2023.

This is causing many companies to pull back on their marketing budgets, further depressing revenues for advertisers. This same issue has impacted many tech companies whose revenue is heavily reliant on ads, such as Snap.

How can investors navigate the challenging economic environment?

The overall market has been incredibly volatile so far this year, and the sector sector has been one of the hardest hit. This isn’t likely to turn around any time soon, and investors should be prepared for continued stormy seas.

With that said, there are a few different ways investors aim to continue to generate profits during a difficult market. The first option is to weight the overall investment strategy away from a tech focus. In the past decade, the default stock investment options for many people have been a selection of tech giants.

Now might be a good time to look for a bit more diversification. Our Active Indexer Kit is worth considering, as it invests across the entire US stock market and uses AI to optimize the portfolio.

We use AI to predict how different sectors of the market are likely to perform in the coming week, and then automatically rebalance the Kit to take advantage of the projections. This Kit can also toggle the exposure to tech specifically, by increasing or reducing the exposure to two specific tech ETFs.

This means the potential to capture some of the upside if tech bounces back, while also aiming to reduce the downside risk if it continues to be volatile.

It’s a great choice for investors who want to capture the overall market, without going for a full index-only approach. Not only that, but investors can also add our AI-powered Portfolio Protection can provide some downside insurance.

This works by having the AI analyze your portfolio each week and assess its sensitivity to a range of different risks such as oil risk, market risk or interest rate risk. It then automatically puts in place sophisticated hedging strategies to combat these risks.

It’s the kind of feature that is usually reserved for high flying hedge fund clients, but we’ve made it available for everyone.

Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $100 to your account.