Meta CEO Mark Zuckerberg said the company’s staff would shrink after the social media giant reported an annual decline in quarterly revenue for the first time in the company’s history, as the economy falters and competition from TikTok intensifies.
‘Many teams are going to shrink so that we can shift energy to other areas inside the company,’ he said, noting that the Facebook parent company would also be reducing its ‘headcount growth over the next year.’
Meta, which also owns WhatsApp and Instagram, on Wednesday reported revenue of $28.82 billion for the second quarter, a 1 percent decline from a year ago and less than Wall Street analysts had expected.
The company also projected that third-quarter revenue to fall further, to between $26 billion and $28.5 billion, saying that ‘a continuation of the weak advertising demand’ would weigh on sales.
Analysts had been expecting a revenue forecast of $30.52 billion for the current quarter, according to IBES data from Refinitiv.
Facebook’s parent company Meta has reported an annual decline in quarterly revenue for the first time in the company’s history. Pictured: Meta CEO Mark Zuckerberg
Meta shares have dropped by more than half so far this year, and lost as much as 6% in after-hours trading on Wednesday when the company reported its first decline in revenue
The social media giant also reported profits of $2.46 per share, less than the consensus expectation of $2.59 per share, according to Refinitiv.
Shares of Meta dropped as much as 6 percent in extended trading immediately following the announcement.
In a statement, CEO Mark Zuckerberg highlighted some of his favorite initiatives, including Facebook’s TikTok challenger Reels and artificial intelligence.
‘It was good to see positive trajectory on our engagement trends this quarter coming from products like Reels and our investments in AI,’ said Zuckerberg.
‘We’re putting increased energy and focus around our key company priorities that unlock both near and long term opportunities for Meta and the people and businesses that use our services,’ he added.
After reporting its first quarterly declines in daily Facebook users earlier this year, Meta has been struggling to convince investors that it still has big days of growth ahead.
Meta executives, including Zuckerberg, have responded on a wartime footing, warning workers of cost cutting and potential headcount reductions.
Late last month, an irate Zuckerberg warned staff that he will weed out underperforming employees with ‘aggressive performance reviews’ as the company braces for a deep economic turndown.
Late last month, an irate Zuckerberg warned staff that he will weed out underperforming employees with ‘aggressive performance reviews’
‘If I had to bet, I’d say that this might be one of the worst downturns that we’ve seen in recent history,’ Zuckerberg told workers in a weekly employee Q&A session on Thursday, audio of which was heard by Reuters.
Zuckerberg said the company would be ‘turning up the heat’ on performance management to weed out staffers unable to meet more aggressive goals.
‘Realistically, there are probably a bunch of people at the company who shouldn’t be here,’ he said.
‘Part of my hope by raising expectations and having more aggressive goals, and just kind of turning up the heat a little bit, is that I think some of you might decide that this place isn’t for you, and that self-selection is OK with me,’ he said.
The social media and technology company is bracing for a leaner second half of the year, as it copes with macroeconomic pressures and data privacy hits to its ads business, according to an internal memo seen by Reuters last week.
The company must ‘prioritize more ruthlessly’ and ‘operate leaner, meaner, better executing teams,’ Chief Product Officer Chris Cox wrote in the memo, which appeared on the company’s internal discussion forum Workplace before the Q&A.
‘I have to underscore that we are in serious times here and the headwinds are fierce. We need to execute flawlessly in an environment of slower growth, where teams should not expect vast influxes of new engineers and budgets,’ Cox wrote.
The memo was ‘intended to build on what we’ve already said publicly in earnings about the challenges we face and the opportunities we have, where we’re putting more of our energy toward addressing,’ a Meta spokesperson said in a statement.
Sheryl Sandberg (right), Meta’s COO, resigned following an investigation into whether she used corporate resources to help plan her upcoming wedding to Tom Bernthal (left)
Last year, whistleblower and former Meta employee, Frances Haugen, testified to Congress after anonymously filing eight complaints about her former employer
Meta’s struggles come after a tumultuous two years where the company has faced harsh scrutiny from lawmakers and regulators, and increasing competition for younger users from rivals Snapchat and TikTok.
Last month, Sheryl Sandberg, Meta’s chief operating officer, stepped down from the firm following an investigation into whether she used corporate resources to help plan her upcoming wedding to Kelton CEO Tom Bernthal, the brother of actor Jon Bernthal.
A Meta spokeswoman insisted to DailyMail.com that: ‘Sheryl did not inappropriately use company resources in connection with the planning of her wedding.’
Last year, whistleblower and former employee Frances Haugen testified to Congress after anonymously filing eight complaints about her former employer to the Securities and Exchange Commission, accused the company of using its algorithm to push negative posts which keep users coming back to their newsfeeds.
She leaked internal reports that showed that ‘anger and hate’ is the ‘best way to grow’ on the platform, and that Facebook was reluctant to sacrifice ‘even slithers of profit’ to prioritize online safety and ‘unquestionably’ makes online hate worse;
She also said that Facebook was fully aware that its photo sharing app Instagram makes many teenage users feel worse about their body image, but that it plowed on with plans to launch a version for children regardless.
Haugen also revealed that there was an ‘underinvestment’ in foreign languages at the company, which means that Facebook is less able to monitor content not in English.