Meta share strong: Facebook parent Meta separates from several thousand employees

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That’s about 13 percent of the workforce, as CEO Mark Zuckerberg announced on Wednesday. Meta is in a quandary: while less money comes in through its core business of online advertising, the group is spending more and more billions on Zuckerberg’s vision of a virtual world under the keyword Metaverse.

With a price drop after the latest quarterly figures, the stock exchange made it clear how little investors think of the course. The austerity measures that have already been announced are now being followed by the downsizing.

Zuckerberg pointed out that he overestimated the online boom at the beginning of the pandemic and therefore increased investments. Now the Internet business has returned to earlier trends. In addition, the weakening economy and increased competition weighed on sales. He takes responsibility for the decisions and their consequences. “It’s a sad moment,” Zuckerberg wrote.

Whether the Metaverse will establish itself as the next computer platform after the smartphone is an open question. But the costs are already real.

In the last quarter alone, the Reality Labs division, which is working on the Metaverse, posted an operating loss of almost $3.7 billion. Since the beginning of the year, a deficit of 9.4 billion dollars has accumulated – with sales of 1.4 billion dollars in the area.

At the same time, less money stays in the till. Meta apps like Facebook and Instagram generated operating profits of $32 billion in the past nine months, up from $41 billion a year earlier. Calculated differently: At that time the group burned almost 17 percent compared to the operating result for the Metaverse, this year it was almost 30 percent so far. When the figures were presented, Zuckerberg announced that Reality Labs’ losses would “grow significantly” in the coming year.

The Facebook founder has now emphasized that he sees job cuts as a last resort. Previously, costs had been reduced elsewhere, for example through smaller office spaces. Employees who mostly worked outside of the office should now share desks. A far-reaching hiring freeze will apply until the end of the first quarter of 2023.

The job cuts will hit both the lucrative app business and the reality labs, stressed Zuckerberg. There were no figures for different areas. At the same time, he confirmed his belief that the future would be developed at Meta. “I believe that we are deeply underestimated as a company today.” “Historically important work” is being done at Meta.

The job cuts at Meta follow a few days after a clear cut at Twitter, where under the new boss Elon Musk around half of the approximately 7,500 employees had to go. This radical dimension may be due to the ideas of the tech billionaire for the short message service. But elsewhere in the tech industry, overly optimistic expectations took revenge after the Corona crisis. One example is fitness equipment provider Peloton, which believed it could permanently replace gyms after supply shortages at the height of the pandemic. But the trend didn’t last, and Peloton had to stop the construction of an additional factory at great expense and lay off several thousand employees. Most recently, the chip company Intel, among others, cut jobs.

In NASDAQ trading, the Meta share temporarily rose 5.31 percent to $101.59.

MENLO PARK (dpa-AFX)

Image sources: Valeriya Zankovych / Shutterstock.com