Hello everyone and welcome to ZDTech, ZDNet’s daily editorial podcast. I am Guillaume Serries and today I explain to you why Tech companies are starting to lay off workers massively.
This is one of the big tech trends of the end of this end of the year 2022. Meta, the publisher of Facebook, WhatsApp or Instagram, must this week carry out large-scale layoffs.
Twitter for its part last week fired half of its 7,500 employees, following Elon Musk’s takeover of the company.
Facebook has never made any major layoffs in its 18-year history
So, why this new trend, and above all, will it affect all companies in the sector, small and large. At Meta, an article from the Wall Street Journal tells us that several thousand employees should be informed this Wednesday of their departure. Meta had 87,000 employees last September. This is no small matter. Because Meta, which was called Facebook until this year, has never made any major layoffs in its 18 years of existence.
“In reality, there are probably a lot of people in the company who shouldn’t be there,” Mark Zuckerberg told employees last June at a company meeting. So why ?
It seems that the budgetary constraints linked to lower financial performance are weighing directly on Meta’s payroll now. Meta’s stock has fallen more than 70% this year. Meta plans to reduce its expenses by at least 10% in the coming months, and this seems to have to be done on the backs of the group’s employees.
Twitter laying off half of its 7,500 employees
But Meta also recruited a lot during the Covid 19 pandemic, to cope with the explosion in the consumption of online products. The company has recruited 43,000 people since 2020, nearly half of its current workforce, and this in a context where the competition has never shown its teeth so much, starting with TikTok.
Finally, Meta’s cost explosion stems from its metaverse program. 15 billion dollars have already been swallowed up. These investments will continue, but the return on investment is already long overdue. And in the meantime, we must degrease the payroll.
Last week, Twitter laid off half of its 7,500 employees. At the same time, the company temporarily closed its offices.
Stripe and Lyft, announced large-scale layoffs
Here it is both a change of business model and a new business strategy. Elon Musk took out $13 billion in debt to acquire the company, and he wants to move from a free, ad-based model to a subscription-based, paid model.
But with more than 3,500 layoffs, we are not going into detail. We learn today that the company is now contacting dozens of employees who have lost their jobs and asking them to come back. Yes, they would have been fired by… mistake.
Still, the job removal movement does not only affect Meta and Twitter. Last Thursday, two Silicon Valley companies, Stripe and Lyft, reported sweeping layoffs as Amazon froze hiring at its offices.