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Facebook continues to fall

In my column last August I predicted that Facebook had peaked and was facing an existential threat that was unreversible.

I wrote:

I’ve been around the high tech industry for more than 40 years and have experienced it first hand. Usually what you see from the outside bears little resemblence to what goes on inside. After a while you get a feeling for the signs. And those signs are becoming clear with Facebook, a company I’ve followed and written about for years. 

Facebook is in serious trouble. No, it will not go out of business, because Facebook the app brings in huge revenue and large profits. It’s still one of the most effective ways for companies to advertise. But over time we will continue to see more Facebook users and advertisers leave for the next big thing, much as many are now doing with TikTok.

It’s now becoming clear that Facebook has reached the point of no return to the days of rapid growth. They now are on the decline, sustained only by the few products they’ve had for over a generation. They remind me of AOL (America On Line), the pioneering online company that peaked and then slowly faded into oblivion.

In recent months Zuckerberg has layed off 20,000 employees in two actions, one late last year and one this week. How does a company get to the position of shedding the population the size of a small city within a few months?

From CNN, “The cuts to the parent of Facebook, Instagram, and WhatsApp come after it laid off about 11,000 employees in November, which at the time represented the company’s first-ever workforce reduction. Coupled with the new cuts, Meta will have cut about 24% of its workforce, or one in four employees, in just about half a year.”

The second layoff was unexpected and indicates poor planning and mismanagement. Zuckerberg told employees in a companywide meeting after the first layoff that he didn’t anticipate having to make those kind of cuts again for the “foreseeable future.” Companies try to do their layoffs all at once to minimize disruption and to move beyond the bad news. Imagine the remaining employees wondering what comes next?

But even more insane is that Facebook hired more than 27,000 employees in 2020 and 2021 and had over 80,000 employees before the November layoffs. It’s hard to fathom what 80,000 people do to sustain a few products. They certainly are not there to keep the sites safe and free of misinformation.

Zuckerberg defined 2023 as a “year of efficiency.” A better name might be “a year of collapse.” People are hired to fill positions that relate to building new products and supporting existing ones. People are eliminated because those products go away and existing ones require fewer people to support. The reality is Facebook has no new products.

Zuckerberg’s product idea in 2020 that led to huge spending and hiring was to build a metaverse that led to much of the hiring then and in 2021. He described it as a “utopian future in which billions of people would occupy immersive digital environments for hours on end, working, socializing, working, and playing games inside these virtual and augmented worlds.” They would wear huge googles that would allow them to experience this fantasy world.

But his vision has turned to mush as his ideas found little interest. Few signed up to the new service and many that did complained about how bad the experience was. One executive complained how the spending made him sick to his stomach. Users of the googles complained they got headaches.

Many thought that Facebook’s future growth was boundless, but, like most everything, what goes up eventually comes down.

In spite of a failure to innovate, Meta’s cost cutting has been well received by investors because it will improve profits in the short term. Facebook and Instagram still attract billions of users and they provide one of the best channels for advertising. But it’s hard to imagine that they need 80,000 people to run it.

So expect more layoffs because that has been shown to improve profits and drive up the price of the stock. Meta is now a company that continues to make lots of money from a few old products, and will do so until something better comes along.