Facebook’s parent company Meta has warned staff that mass layoffs are looming as the Big Tech giant’s profits slump.
Meta announced that it would freeze hiring and outlined a new plan to reorganize and cut back its staff for the first time in its history.
The move comes as the company’s profit growth begins to slow down due to its advertising business struggling.
The company revealed plans to cut costs by at least 10 percent in the coming months.
CEO Mark Zuckerberg, who founded the social media giant, said the group would “further restructure” due to financial struggles.
Meta, which also owns WhatsApp and Instagram, has lost nearly 60 percent of its value in the past year.
The company, which abused its position as the world’s largest network of social media platforms through mass censorship and election rigging efforts, is now starting to buckle under sluggish growth.
This is the first major budget cut since the company first opened in 2004.
Zuckerberg announced the freeze to employees during a weekly Q&A session, according to an employee who spoke to CNBC.
“For the first 18 years of the company, we grew quickly basically every year, and then more recently our revenue has been flat to slightly down for the first time,” the CEO told staff.
Zuckerberg said that Meta will shrink in 2023, from a total employee base of more than 83,500 employees as of June 30, after adding 5,700 new employees this year in the second quarter.
There were reports this spring, which suggested that the company would slow down the rate of new hires this year.
Since last week, there have been rumors, that Meta was quietly terminating workers, rather than conducting formal layoffs in an attempt to reduce staff by 10 percent, said a report by The Wall Street Journal.
In the recent weekly Q&A session, Zuckerberg said it was time for Meta to change tact due to an unstable economy.
“I had hoped the economy would have more clearly stabilized by now, but from what we’re seeing it doesn’t yet seem like it has, so we want to plan somewhat conservatively,” Zuckerberg reportedly told employees, according to Bloomberg.
Zuckerberg admitted that Meta would be slashing budgets for project teams across the board to save costs, despite their profitability.
Some positions will not be replaced, while other workers will be transferred to other teams to fill gaps, or sent to monitor those who are failing their assessments, according to Bloomberg.
Zuckerberg explained to shocked employees that “we want to make sure we’re not adding people to teams where we don’t expect to have roles next year.”
The company asked team heads in July to identify “low performers” ahead of potential downsizing, according to The Information.
Zuckerberg remarked at a July earnings call, “given the continued trends, this is even more of a focus now than it was last quarter,” reported Engadget.
“Our plan is to steadily reduce headcount growth over the next year.”
Zuckerberg said that he will give individual team leaders the authority to sort out how to handle the layoffs.
“Many teams are going to shrink so we can shift energy to other areas, and I wanted to give our leaders the ability to decide within their teams where to double down, where to backfill attrition, and where to restructure teams while minimizing thrash to the long-term initiatives,” he explained.
Meta is also planning to slow down hiring for certain management roles and will postpone its full-time job program that provides employment to summer interns.
Facebook has been losing active users since the fourth quarter of 2021, despite facing a recovery in the first quarter.
The company has not been able to maintain its earnings in advertising revenue compared to previous years.
For the second quarter, Facebook’s revenue dropped by one percent year-over-year for the first time in its history.
Meta admitted in its first quarter earnings call, that annual expenses were about $3 billion lower than earlier projections, which estimated profit margins as high as $95 billion.
The social media company said that it expects to lose $10 billion in revenue, due to updates to Apple privacy settings on iOS, which limits advertisers’ ability to exploit users’ targeted ad preferences.
Newer rivals like the Chinese Communist Party-linked TikTok, have also attracted a young generation away from its aging platforms.
The Facebook CEO had recently invested billions into the Metaverse, an immersive virtual reality community, which he admits will initially lose money.
Zuckerberg has already lost billions on the new VR investment and was forced to cut back on programs at its Meta Reality Labs division.
Meta announced that it will also cancel projects ranging from a dual-camera smartwatch to compete with the Apple Watch and has slashed several contractor development teams.
Shares of the company fell further on the news, with total losses of 60 percent so far this year.
Long-time competitors like Twitter and Google are hurting as well this year, which have both enacted a hiring freeze.
Meanwhile, Snap, formerly Snapchat, cut 20 percent of its workforce last month.