Meta's "Year of Efficiency" Is Everything That's Wrong With Big Tech
Meta's "Year of Efficiency" Is Everything That's Wrong With Big Tech
Forget innovation; just fire employees
In September 2021, Mark Zuckerberg stood amongst an elite group of ultra-wealthy individuals, with only Jeff Bezos and Bill Gates in front of him in the queue. Facebook’s shares had hit a high of $382, and his wealth — well, not paper wealth, of course — had ballooned to $142 billion.
But then, Mark Zuckerberg had a catastrophic 2022.
After the rebrand to Meta and the pivot to the Metaverse — which he heralded as “the next chapter for the way that the internet evolves after the mobile internet” — things began to unravel. In early February 2022, we learned that Reality Labs had made a $10 billion loss, and all it had to show for it were some knockoff Nintendo Wii avatars floating around an empty, pixelated world. Zuckerberg admitted that the losses would increase significantly. In the 11 minutes after the markets closed that day, the value of Meta plunged over 20%.
It was a sign of things to come.
No matter how hard it tried, Meta struggled to build interest in the Metaverse concept, and there were signs the public had already stopped caring. Worse, Meta was still relying on Facebook’s ad revenue machine to foot the bill, and things on that side were going just as badly. In July, the company reported a drop in revenue for the first time, revealing it had missed virtually all its targets, bringing a decade of unprecedented growth and relentless revenue to a close. They pointed the blame at a weak advertising demand environment, and while not said aloud, Apple’s tracking changes had hit Meta’s ad model like a wrecking ball. Throw in a whole host of other problems, including whistleblowers, leaked data showing the company knew Instagram negatively affects the mental health of teenagers, the ongoing Capital Hill investigation, and the fact TikTok is eating its breakfast, lunch and dinner, and 2022 would go down as the worst year in the company’s history.
And with it, Meta wiped out the entirety of its pandemic gains, with the stock price sinking to its lowest since January 2019, when Facebook was dealing with the aftermath of the Cambridge Analytica crisis.
Zuckerberg’s wealth is tied up in Meta stock, to the tune of more than 350 million shares. The steep decline amounted to a loss of $71 billion from his fortune. Ouch. It was obvious the situation needed turning around and fast. Many called for Zuckerberg to move aside. In many other companies, it would have happened. But Zuckerberg has majority rule in the company and is effectively impossible to boot out.
So, what was the answer? Was it double-down on the Metaverse and either reach the summit or die trying? Was it to spend time fixing its core product, Facebook, and restoring it to its former glory? Was it to get Instagram out of its rut and eat away at TikTok’s market share? Was it to innovate in a surprising new direction?
Of course not.
The answer was simple: pivot to the latest trendy thing and fire employees.
News broke this year that Meta was doubling down on A.I., conveniently at a time when all anyone can talk about is A.I. In a recent update, Zuckerberg announced that Meta is reverting to the Copy-Acquire-Kill playbook, abandoning any form of innovation to pursue the current popular thing. Which, of course, is all things A.I., and stuffing them into as many products and services as possible. The grift shift had begun.
Alongside this pivot from the pivot were savage staff cuts. In November 2022, Meta let go of 11,000 employees. Then, earlier this year, the company announced two more rounds of layoffs in April and May — side note, a callous move, why not just fire them then and let them move on, rather than have them hanging in a state of dread for months? — the latter of which just finished. In total, 21,000 employees have been fired, reducing Meta’s workforce by a quarter, all in the name of Meta’s “year of efficiency.”
The impact. on Meta’s fortunes will come as no surprise. Firing employees and adding the latest buzzwords to your company’s repertoire? Check, check and double check.
The stock price has been steadily rising in 2023, up 110.07% YTD. As a result, Zuckerberg has seen his personal wealth balloon by over $45 billion, back to somewhere over $90 billion, all at a time when he wants his company to be “scrappier.”
I think this sums up Big Tech and the vulturous shareholders these companies are beholden to. When things were going well, these companies hired recklessly and threw money at projects and concepts nobody wanted. They were encouraged to do so, as the share price ticked ever higher. But then the wheels came off, and suddenly, everybody demanded the opposite approach. Soon enough, the CEOs were widely swinging the axe to the very fabric of their companies, cutting anything and anyone in sight. And again, the stock price results encouraged these actions. While I hate the Metaverse concept, the outlook for Meta — and Big Tech — seems to be that innovation is less effective at increasing a company's market value than just announcing layoffs. It's sad.
The only reason Meta needed to make efficiency its priority was because of the management of its overlord. He ramped up hiring. He decided to pivot to the Metaverse. He is the one who destroyed billions in shareholder value. But now, not thanks to innovating, but thanks to cutting over 21,000 employees, Zuck is regaining his wealth. Meta is regaining its market value. And everything will keep ticking up, at which point Zuck will be encouraged to hire again and pump billions into new projects in a never-ending cycle of boom and bust.