Alma Bax 
The massive stock price plunge of Meta Inc., formerly known as Facebook, together with an overpopulated firm and a flock of other economic factors, urged CEO Mark Zuckerberg to “take accountability” for his decisions. The embattled CEO is doing so by reducing “the size of the Meta team” through mass layoffs to cushion the damages the company faced.
As announced during last week’s staff purge, more than 11,000 Meta employees will be laid off when the booting period ends. Zuckerberg cites that his over-optimism regarding growth in the metaverse led him to overstaff, with the company’s 70% stock price decline being the wake-up call for cost-cutting measures.
As per its Securities and Exchange Commission (SEC) filing in September, Meta had a headcount of more than 87,000 employees. This number will be reduced by about 13%. Once valued at more than $1 trillion last year, Meta’s market value sank to just about $250 billion, according to CNN Business. A nearly one-fifth rise in costs and expenses pushed operating income down by 46% ($5.66 billion), whereas profit was 52% (under $4.4 billion).
The Thorn in Meta’s metaverse
The metaverse is an immersive virtual world usually depicted in futuristic films, such as “Ready Player One” and “Minority Report,” built on merged elements of augmented-virtual reality. Users of the metaverse are envisioned to have enhanced security, a whole new level of enjoyment, and exclusivity with the platform.
This is a vision that had many forward thinkers and investors excited in the metaverse, and Zuckerberg is one of them. However, there are many factors to consider when building the metaverse before it can be successfully launched and used by the public.
One of these considerations is building the metaverse on a blockchain. Scalability and transaction fees, as well as Internet bandwidth, are important factors to consider. These will determine the speed and ease of use, efficiency in handling the massive amount of data needed to run the metaverse, and affordability for users, advertisers, and investors.
With a scalable blockchain, block sizes can be increased on demand, and throughput can be made higher—as high as millions of transactions per second. As these figures improve, the fees per transaction are then reduced to tiny fractions of a cent—an amount insignificant enough to make using the blockchain practical.
Maybe these are the factors that Zuckerberg failed to give importance to in his excitement to make his vision of the metaverse a reality. Given Meta’s massive loss of revenue, it is a real possibility that Zuckerberg invested heavily in highly expensive yet ineffective technology. It also failed to create its own digital currency multiple times.
Reality Labs, one of Meta’s platforms that produce both virtual and augmented reality (VR and AR) hardware and software, performed at an all-time low with a revenue of $285 million, down from $558 million in the third quarter (Q3) of 2021 and $452 million in Q2 2022.
Furthermore, the $4 billion in technology in staffing costs to bring the fledgling Reality Labs to life resulted in a divisional operating loss of $3.67 billion. This is a billion worse than in Q3 2021 and around $900 million worse than Q2 2022.
With these grim financial figures, investors rightly panicked. Meta’s shares went down sharply in after-hours trading, with the Thursday (October 27) opening falling more than 25%. The day closed below $98, which is less than one-third of its value when the year began and barely a quarter of its August 2021 peak value.
To cut Meta some slack, they were not alone in the times of pain of a market downturn. The tech sector is sustaining damages from inflation, interest rates, macroeconomic hurdles, and a stunning shift in spending trends. A rapid growth in online spending during the pandemic urged tech companies to announce hiring freezes or job cuts.
“At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth,” Zuckerberg wrote on his blog about the lay-offs.
“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.”
Facebook rival Twitter, cryptocurrency exchange platform Coinbase, rideshare company Lyft, and payment-processing firm Stripe also announced the massive axing of their staff. Furthermore, e-commerce giant Amazon implemented a pause on corporate hiring.
“Overall,” he said, “this will add up to a meaningful cultural shift in how we operate.”
At the very least, Zuckerberg now knows his mistakes in executing his vision of the metaverse. For the sake of all of Meta’s remaining employees, it would be best if the young CEO takes into consideration building on a scalable, efficient, and economic blockchain.
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