Meta to cut headcount for first time, slash budgets across teams

Meta Platforms CEO, Mark Zuckerberg outlined sweeping plans to reorganise teams and reduce headcount for the first time ever, calling an end to an era of rapid growth at the social media giant.
 

In what would be the first major budget cut since the founding of Facebook in 2004, Zuckerberg said the company will freeze hiring and restructure some teams to trim expenses and realign priorities. Meta will likely be smaller in 2023 than it was this year, he said.
 

He announced the freeze during a weekly Q&A session with employees, according to a person in attendance. 
 

He added that the company would reduce budgets across most teams, even those that are growing, and that individual teams will sort out how to handle headcount changes. That could mean not filling roles that employees depart, shifting people to other teams, or working to “manage out people who aren’t succeeding,” according to remarks reviewed by Bloomberg.
 

“I had hoped the economy would have more clearly stabilized by now,” Zuckerberg said. “But from what we're seeing it doesn't yet seem like it has, so we want to plan somewhat conservatively.” A Meta spokesperson declined to comment.
 

Meta stock, which was already trading down to start the day, fell further on the news, down 3.7 per cent from Wednesday’s close. The shares have fallen 60 per cent so far this year.
 

The further cost cuts and hiring freeze are Meta’s starkest admission that advertising revenue growth is slowing amid mounting competition for users’ attention. It’s not an ideal time to be cutting; besides economic pressures, the company’s advertising business, built on precise consumer targeting, has lost some of its edge due to new privacy restrictions from Apple on tracking iPhone users. TikTok is attracting younger users away from Instagram. And, Zuckerberg is making an expensive bet on the metaverse, an effort he has said will lose money for many years.
 

Meta said earlier this year that it was planning to slow hiring for some management roles, and had postponed handing out full-time jobs to summer interns. The freeze announced Thursday was necessary because “we want to make sure we’re not adding people to teams where we don’t expect to have roles next year,” Zuckerberg explained in the meeting.
 

Zuckerberg had warned in July that that Meta would “steadily reduce headcount growth,” and that “many teams are going to shrink so we can shift energy to other areas.” Priorities internally include Reels, Meta’s TikTok competitor, and Zuckerberg’s metaverse. Meta had more than 83,500 employees as of June 30, and added 5,700 new hires in the second quarter.
 

Zuckerberg said Thursday that the company would be “somewhat smaller” by the end of 2023. “For the first 18 years of the company, we basically grew quickly basically every year, and then more recently our revenue has been flat to slightly down for the first time,” he told staff.
 

During its first-quarter earnings call, Meta said annual expenses would be roughly $3 billion lower than initially projected, trimming an estimated range that had been as high as $95 billion.  In prior moves to reduce spending, a dual-camera watch the company was building to compete with the Apple Watch was shuttered.
 

Meta is not the only advertising-reliant company to be hit by broader economic challenges. Twitter enacted its own hiring freeze in May, and has been asking employees to watch their expenses and reduce travel and marketing costs. Google, too, said that it would slow hiring during the back half of the year, and Snap cut 20 per cent of its workforce in August.

Euro zone inflation hits record high

Euro zone inflation zoomed past forecasts to hit a fresh record high this month, reinforcing expectations for another jumbo interest rate hike from the European Central Bank in October.
 

Price growth in the 19 countries sharing the euro accelerated to 10.0 per cent in September from 9.1 per cent a month earlier, data from Eurostat showed on Friday, beating expectations for a reading of 9.7 per cent.
 

Figures a day earlier had shown inflation in Germany, the bloc's biggest economy, jumping to its highest rate since the time of the Korean War 70 years ago.
 

Inflation was still driven mainly by volatile energy and food prices but continued to broaden out, with virtually all categories, from services to industrial goods, now showing painfully high readings.
 

That is likely to make uncomfortable reading for the ECB, which targets price growth at 2%, as it suggests that inflation is increasingly being fuelled by excess demand and is at risk of getting entrenched.
 

Indeed, underlying inflation, which filters out volatile food and fuel prices and is closely watched by the ECB, also jumped to a fresh high, adding to the urgency for more rate hikes after oversized moves in July and September.
 

Excluding food and fuel prices, inflation jumped to 6.1 per cent from 5.5 per cent while an even narrower measure, which also excludes alcohol and tobacco, rose to 4.8 per cent from 4.3%.
 

Energy prices were meanwhile up 41 per cent compared to a year ago while unprocessed food was up 13%.
 

While the ECB's next rate meeting is still almost a month away, a host of policymakers have already made the case for another 75 basis point rate hike after a combined 125 basis points of moves in two meetings, the ECB's fastest pace of policy tightening on record.
 

Markets now see the 0.75 per cent deposit rate rising to around 2 per cent by the end of the year, then to around 3 per cent next spring before levelling off.
 

A key problem is that an inflation peak, predicted many times by the ECB, could still be months away as household energy contracts are repriced and sky-high gas prices filter through.
 

A devastating drought over the summer will keep food prices under pressure while the fall of the euro to a two-decade low against the dollar will raise imported inflation, particularly since the bloc's energy bill is mostly denominated in dollars.
 

But price pressures may be tamed by a looming recession.
 

Expensive energy and projected gas shortages are draining savings and are likely to eat deep into growth as consumers will have little spare cash left.
 

The European Systemic Risk Board, the EU's financial risk watchdog, warned on Thursday that a perfect storm may be brewing that could challenge financial stability, as businesses and households yet to recover from the pandemic now face a fresh hit.
 

Confidence indicators across the bloc have also been plummeting in recent weeks, suggesting that the euro zone may already be in recession with little respite likely until the spring.
 

This could also provide desperately needed help for the ECB.
 

Workers would normally demand big pay increases during bouts of high inflation but firms are also facing soaring costs, leaving them little cash to increase wages. This is keeping wage growth muted and offering hope that price growth will eventually stabilize and start retreating next year. Reuters