Meta laying off 11,000 employees

Facebook parent company Meta on Wednesday said it is cutting more than 11,000 jobs, or 13 percent of its workforce, marking the most significant job cuts in the tech giant's history in an attempt to become "leaner and more efficient".

The social media giant also will cut discretionary spending and extend its hiring freeze through March, said Mark Zuckerberg, the founder and CEO of Meta, in a statement.

Meta's stock has lost more than 71 percent of its value so far this year, and the company became the worst performer in the S&P 500 last week.

Shares of Meta closed up 5 percent on Wednesday after the company announced the layoffs.

The job cuts will affect much of the company, and Meta's recruiting team will be hit particularly hard as "we're planning to hire fewer people next year", Zuckerberg said in a blog post.

Meta's layoffs come as the company is taking a big gamble on building the metaverse. Part of the hiring boom of recent years has focused on building immersive digital realms accessed through virtual reality, which Zuckerberg says will be the next great computing platform after mobile phones and replace some in-person communication.

Last month, the company posted its second quarterly revenue decline and said that its profit was cut in half from the prior year. Once valued at more than $1 trillion last year, Meta's market value has since plunged to around $250 billion.

The company blamed its low revenue on "macroeconomic downturn" and "increased competition" and is planning to scale back expenses and transform its business in a more competitive digital advertising market.

The layoffs mark a turbulent new period for Silicon Valley, long known as a bastion of economic power and being recession-proof, has seen its companies lay off thousands in recent months.

According to Crunchbase, a data provider, more than 50,000 American tech personnel have been laid off this year.

One of the biggest downsizings happened at Twitter last week, where new owner Elon Musk cut roughly half the 7,500-member workforce.

Aggressive pandemic-era expansion is partly to blame. Meta, for example, increased its workforce by nearly 60 percent over the course of 2020 and 2021. Facebook alone grew its staff 28 percent, to 87,314, in the 12 months ending in September, regulatory filings show.

"At the start of COVID, the world rapidly moved online, and the surge of e-commerce led to outsized revenue growth," Zuckerberg wrote Wednesday. "Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.

"I got this wrong, and I take responsibility for that," he added.

Other companies such as Peloton, a maker of internet-connected exercise bikes that were all the rage amid lockdowns, have more than halved their workforce as revenue began to shrink.

Robinhood, a stock-trading app that became a popular pastime during the pandemic, also has cut its workforce by 30 percent.

In an employee memo announcing the layoffs, Stripe's founders acknowledged that the company was "too optimistic" about growth, which has grown rapidly over the past two years due to consumers' embrace of e-commerce but has since cooled.

The layoffs also are the result of numerous other factors, including high inflation, rising interest rates and fears of a looming recession.

For example, Meta operates social media platforms Facebook and Instagram and messaging app WhatsApp, which has a more traditional business model that relies on advertising, an industry that has been hit particularly hard by larger economic challenges. Some digital advertisers have pulled back on spending as rising inflation and the Russia-Ukraine military conflict contributed to market instability.

The looming threat of a recession was causing customers to scale back spending, companies said. Earnings are waning for tech companies, and tech companies are starting to tighten their belts as they start planning for the coming year.

"When they cut costs, the first thing to go is typically labor costs and also advertising and marketing," Dan Wang, an associate professor at the Columbia Business School, told Business Insider. "So, when it comes to forecast what their numbers will look like, it'll depend on how they have seen the trend in advertising spending on their platforms. When that doesn't look good, then they have to accommodate those expectations by adjusting the workforces."