Meta, the parent company of Facebook and Instagram, is making drastic changes to its business model in the face of the increasing competition from smaller tech companies such as TikTok. In response to the economic downturn, CEO Mark Zuckerberg has declared 2023 as the “year of efficiency” and is initiating cost-cutting measures that include layoffs of 10,000 employees and closure of 5,000 open roles. These cuts come in addition to the 11,000 which were announced in November last year. Investors have responded positively to the cuts, with Meta shares rising 6% in early trading and more than 53% since the beginning of the year.
Meta expects lower full-year expenses of between $86 billion and $92 billion following the cuts and is also “flattening” its organization by removing middle management layers and giving middle managers an ultimatum to either move to a non-managerial role or exit. Billionaire tech CEO Thomas Siebel has criticized the companies for over-hiring during the boom of the pandemic in tech valuations, arguing that many of the newly-hired workers were doing nothing working from home.
The tech sector as a whole is struggling with a challenging economic environment. A number of tech companies, including Google, Microsoft, Zoom, PayPal and Spotify, have all cut jobs in recent months. The collapse of Silicon Valley Bank, which serviced the tech sector, in the largest bank failure since the 2008 financial crisis is indicative of the difficult market conditions in which the tech sector is currently operating.
Meta is also planning to rebalance its product teams for a more “optimal ratio of engineers to other roles” and to ask many managers to become individual contributors. It is clear that the tech sector is undergoing a period of transformation, and that Meta is taking steps to ensure its survival in the face of mounting competition.