Is digital media economy crashing? Meta fires 11,000 employees, Twitter may go ‘bankrupt’

These job cuts follow layoffs at Twitter after Elon Musk's takeover and at Microsoft after forecasts showed its slowest revenue growth in five years.

Facebook’s parent company Meta has announced that more than 11,000 employees would be fired as a step to reduce costs following poor earnings and a drop in revenue.

Meta CEO Mark Zuckerberg spoke directly to employees addressing thousands of layoffs at the company.

Zuckerberg said in a statement:

“Today I’m sharing some of the most difficult changes we’ve made in Meta’s history. I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.”

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Taking responsibility for the decisions, Zuckerberg added:

“I take full responsibility for this decision. know this is tough for everyone, and I’m especially sorry to those impacted.”

Further, Zuckerberg observed that he anticipated that the surge in e-commerce and web traffic during the Covid lockdown would be part of a permanent acceleration. However, he noted:

“It appeared that the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than expected. I got this wrong.”

Meta had 87,314 employees as of the end of September. The company’s net income in the third quarter of 2022 (July to September) was US$4.4 billion – less than half the US$9.2 billion it made in the same period in 2021.

As a part of the severance package, Meta’s employees will get 16 weeks of base pay along with two additional weeks for every year of service and the cost of healthcare for six months.

These job cuts follow layoffs at Twitter after Elon Musk’s takeover and at Microsoft, including members of Microsoft’s Xbox and Edge teams, after forecasts showed its slowest revenue growth in five years.

It is reported that Musk in his first address to Twitter employees said that bankruptcy was a possibility.

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In an email, Musk warned employees of “difficult times ahead” and ended employees’ ability to work remotely unless he personally approved it. He added:

“Sorry that this is my first email to the whole company, but there is no way to sugarcoat the message. The economic picture ahead is dire. Without significant subscription revenue, there is a good chance Twitter will not survive the upcoming economic downturn. We need roughly half of our revenue to be subscription.”

Musk purchased the social media giant for $US44 billion (AUD68 billion) and it has a significant debt burden from the acquisition. He described a bleak future for businesses like Twitter that rely almost entirely on advertising to make money. Recently, some key advertisers have been moving away from Twitter with concerns about Musk’s plans for content moderation. 

Further reports suggest that the $850bn global advertising market will face the prospect of a crash in 2023 as inflation is triggering companies to consider slashing their marketing budgets.

In July 2022, the International Monetary Fund (IMF) highlighted a slowdown in the world’s top economies. IMF labelled its outlook “Gloomy and More Uncertain” with reference to the looming recession.

Gold prices have fallen about 6% this year and cryptocurrency exchange FTX, valued at US$32 billion, has just crashed shaking the investors in Bitcoin, Ethereum and other digital currencies.

It appears that major big tech firms are preparing in advance to grapple with the looming economic downturn and a drop in consumer demand given the war in Ukraine, rising inflation rates, Covid outbreaks, and other economic crises.