More than 11,000 employees of Meta will soon receive generous severance packages after CEO Mark Zuckerberg conceded that he had “got this wrong” by deciding to go all-in on a metaverse strategy that has cost the company more than $23 billion ($US15 billion).
Pandemic-era surges in online service usage were expected to continue indefinitely and he increased the company’s investments accordingly, Zuckerberg said in a memo to Meta’s employees in which he admitted that “this did not play out the way I expected”.
“Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I had expected,” he said.
“I got this wrong, and I take responsibility for that.”
In a push to become “more capital efficient,” Zuckerberg said, Meta is shifting resources to “a smaller number of high priority growth areas” such as its AI discovery engine, ads and business platforms, and long-term metaverse vision.
The move comes on the heels of equally drastic layoffs at digital bellwethers like Twitter – whose new owner Elon Musk last week undertook a massive spring clean of half its workforce that has been criticised for its ferocity compared with more compassionate layoffs at firms like Stripe.
While Twitter’s employees will have a two-month paid ‘Non-Working Notice period’ to avoid wrongful dismissal claims, Meta has taken the compassionate route: the firm’s “talented and passionate” retrenched employees, Zuckerberg said, will receive 16 weeks’ base pay plus two weeks for every year of service, as well as a range of support measures to help them find new jobs.
Although they have cut staff-related costs, the layoffs are also telegraphing instability that have led many key Twitter advertisers to suspend advertising commitments that are measured in the tens of millions of dollars – putting that company’s revenues into freefall in echoes of the advertising shortfall that continues to plague Meta.
That company will pursue cost-cutting measures and drive a “meaningful cultural shift” through measures such as a hiring freeze, downsizing offices, and introducing hot desking for its itinerant employees, Zuckerberg said, while flagging a “thorough review of our infrastructure spending.”
“This is a sad moment, and there’s no way around that,” he said, adding that he still believes Meta is “deeply underestimated as a company” that is doing “historically important work.”
Tough times for the revolution
Zuckerberg’s latest mea-culpa – the latest in a long-running ‘apology tour’ that has seen him donning the hairshirt over disasters around data privacy, “stalker-esque” new features, – has amplified the long-running concerns of analysts such as Eq Applied’s Justin Bariso, who recently warned that Zuckerberg was making “a huge mistake” and that “prioritising short-term financials over people is a recipe for disaster.”
The implications of the move on Zuckerberg’s metaverse mission are still unclear: the interactive virtual platform, on which Meta has spent over $23 billion ($US15 billion) even as revenues bleed red ink – only got one mention in his announcement.
Cost-cutting recently forced the company to disband its Responsible Innovation ethical team after just one year – and as Meta fights to continue innovating while executing a major financial turnaround, the new situation will be a litmus test to see whether Zuckerberg’s massive bootstrap investment has given the metaverse enough momentum to sustain industry interest through difficult economic times.
There are some encouraging signs: Apple, for one, is said to have around 3,000 employees working on that company’s rumoured ‘Apple Reality’ mixed-reality headset and is preparing to launch the device next year in a direct challenge to Meta’s $2,300 ($US1,499) mixed-reality Quest Pro headset, which it launched last month to bolster its metaverse push.
“We are at this incredible phase right now, where we’ve had five years of tech advancement within the last 12 months,” Dr Catriona Wallace, an industry consultant and founder of the Responsible Metaverse Alliance, told this week’s Gartner Data & Analytics Summit as she prepares to launch the New South Wales metaverse strategy later this month.
As part of a spectrum of new technologies that includes AI, machine learning, augmented and virtual reality, Wallace said, the metaverse is “absolutely now regarded as having emerged, and that is on the back of a pandemic where things we expected in five years, have actually arrived right now.”
Despite mixed reactions to the metaverse from many – some early experiments have found working in the metaverse affects employees’ well-being – Wallace and her team meet in the virtual space once a week, she said, and so far it is proving to be a winner “that we need to know more about”.
No matter “where we are in the world,” she said, “we come together and in the metaverse, we have this very strong sense of presence and immersion.”