Meta Layoffs - Facebook continues to cut costs by reducing its workforce

Meta Layoffs – Facebook continues to cut costs by reducing its workforce

Key points to remember

  • Ad revenue has started to slow as fears of a 2023 recession grow.
  • By creating the metaverse, Meta continues to lose large sums of money, some $9.4 billion in the first nine months of 2022.
  • There are no signs of a slowdown in spending, which will impact the company’s bottom line.

Over the years, Meta has become one of the most valuable technology companies in the world. With Facebook, Instagram and WhatsApp, Meta has a firm grip on the media ecosystem.

However, things have started to change with the popularity of TikTok. Meta saw its daily active users decline for the first time in 18 years.

When you add that to a weak economy, Apple’s privacy initiatives, and Meta CEO Mark Zuckerberg’s all-out push into virtual reality, the company’s stronghold shows cracks. In fact, he recently announced significant layoffs.

Here’s what you need to know about the layoffs and why they might not be a one-time event if things don’t change soon.

Announcement of layoffs

Meta laid off more than 11,000 employees in early November, cutting its workforce by 13% and enacting a hiring freeze until the first quarter of 2023. The layoffs will come mainly from Facebook, Instagram and WhatsApp, while the Metaverse division will see fewer cuts .

The most affected areas are the sales and recruiting teams. Meta had 87,314 employees at the end of September 2022. This is a 28% increase over the previous year.

Until the layoffs, Meta had been on a seemingly endless hiring spree. He went to great lengths to hire top talent and offer unique employment benefits, which included 30 days of paid vacation every five years.

The company is now cutting employee benefits budgets and getting rid of some of its real estate. CEO Mark Zuckerberg had taken steps to slow spending before the layoffs, but ultimately opted to let the employees go.

Why the need to lay off workers

The layoffs are partly due to the reversal of fortune Meta has suffered over the past year. At one point in 2021, the company was valued at $1 trillion, but several factors strongly affected Meta’s value and share price.

In July 2022, the company recorded its first-ever advertising revenue loss and reported a 4% revenue loss for the third quarter of 2022, from $29 billion to $27.7 billion.

Digging deeper into this figure, we see that ad impressions, or the number of ads served, increased by 17% year-over-year. However, advertisers are spending less on ads, with the average ad price down 18% year over year.

This drop can be partly attributed to the stricter privacy guidelines that Apple has adopted. The Facebook, Instagram and WhatsApp applications collect your personal data and create a user profile of you. They then use these profiles to sell to marketers to better target ideal customers.

For example, if Instagram sees you looking at a lot of new cars and you visit car payment calculator websites, it might suggest that you might be interested in buying a new car.

This information is valuable for automakers since they know they have a potential customer. In turn, they advertise you. They are willing to pay more for a customer in the market for a car than pay to advertise to someone who is not interested in buying a new car.

With Apple’s new update, users have to opt in to data tracking, making it harder for Meta to sell highly targeted ads. This type of advertising is not as valuable, so advertisers pay less.

Additionally, the economy is weakening and could enter a recession in 2023. As a result, many businesses are cutting costs, and advertising budgets are often among the first to be hit. Combine these factors and you have less ad spend, which hurts Meta revenue.

Advertising revenue is the driving force behind the operation of all Meta properties, and the company generated $114.9 billion from advertising in 2021 alone. Total revenue reported for the nine months of 2022 is $84.4 billion, almost identical to the first nine months of 2021.

With estimates of $30 billion to $32.5 billion for the fourth quarter, total revenue for all of 2022 will be between $114 billion and $116 billion.

Slowing revenues are only part of the problem. Spending was up 19% year-over-year, with much of it going to Mr. Zuckerberg’s metaverse project.

Meta’s Reality Labs division, also known as the virtual reality and augmented reality division, lost $9.4 billion in the first nine months of 2022, compared to a loss of $6.8 billion for the same period in 2021.

In the earnings release, Meta said they expect Reality Labs’ operating losses to increase in 2023. This statement affected many shareholders. The company continues to spend recklessly while building the Metaverse, but offers no estimates of when the project will turn a profit.

Meta relies primarily on advertising revenue and has not found a secondary source of revenue. If revenues decline, the company will have to make difficult decisions.

Also discouraging investors is that sales of the Quest VR headset have slowed. Third-quarter revenue for the Reality Labs division fell 49% due to lower Quest 2 sales. This calls into question why Meta is releasing a new version of the headset, the Quest Pro, in 2023.

Meta is not alone in its losses. Almost every major tech company has suffered a loss of revenue and value since the Federal Reserve began raising the federal funds rate.

The company is also not alone in laying off workers and instituting a hiring freeze in response to financial pressures. What is different is the fact that Meta is not withdrawing funding from its metaverse project.

In contrast, other tech companies, such as Amazon, are pulling back on projects that don’t show signs of profitability any time soon.

Meta go ahead

To date, Mr. Zuckerberg has declared his unwavering support for the Metaverse. He is convinced that the virtual reality universe is the next “big thing” to connect people in a way that Facebook never could.

During the latest earnings call, Mr. Zuckerberg focused primarily on his vision for the metaverse and insisted that it was the future of social media. He mentioned that the number of daily users for all his social media properties increased to 2.93 billion in the third quarter of 2022.

Meta’s future is uncertain, especially considering that Mr. Zuckerberg has complete control over Meta. This means that no one can reverse their decision to spend money on their metaverse project even if it shows no signs of profitability.

Many companies do the opposite, having a separate CEO and executive chairman. Amazon, for example, has Jeff Bezos as executive chairman and Andy Jassy as CEO. Separating roles allows businesses to pivot more efficiently, ensuring they remain profitable.

It is important to note that the concept of a virtual reality world was once tried in a virtual universe known as Second Life, which ultimately failed to catch on and gain traction.

Another concern with Metaverse is that Meta employees don’t use it, and some users may feel bad about using a VR headset.

Investors interested in adding Meta to their portfolios may have some hesitation. Fortunately, can help you. Using artificial intelligence (AI),’s investment kits can help you find the right investments for your goals and risk tolerance.


At the moment, Facebook, Instagram and WhatsApp are still profitable. Their management is stable and risk averse. They are less likely to disrupt a successful business model, even with a loss of revenue.

The wildcard in the equation is Mr. Zuckerberg’s spending on the Metaverse and how long he can justify that spending. He expects it to lose even more money in 2023, but also expects it to eventually turn a profit.

Unfortunately, there is no timetable for when it will become profitable for the company. It remains to be seen whether he is right and whether the money spent is worth it. Meanwhile, the stock is down 66% year-to-date. eliminates investment assumptions.

Our artificial intelligence scours the markets for the best investments for all kinds of risk tolerances and economic situations. Then, it bundles them into convenient investment kits that make investing simple and strategic.

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