Facebook continues to fall

In my column last August I predicted that Facebook had peaked and was facing an inevitable decline from it’s former torrid growth.

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 those days of year to year growth. They’re on a path of increasing decline, sustained only by the same couple of 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 away once something better came along. Facebook was a once in a generation product that still generates tons of profits. But the company has never successfully moved beyond it to sustain its growth. It’s because it’s failed to come up with new products and the product has been poorly managed.

In recent months Zuckerberg has layed off 20,000 employees in two actions, one late last year and one last 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 resulted from poor planning, mismanagement, and panic. 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 their future holds.

But even more insane is that Meta 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 the few products they have. 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 big product idea of creating a Metaverse was unveiled with a huge splash in 2020 that led to huge spending and hiring. 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 goggles that would allow them to experience this fantasy world.

But his vision has turned to mush as the Metaverse found little interest. Few signed up to try the new concept and many that did complained about how bad the experience was. One executive complained how the spending to build this product made him sick to his stomach.

In spite of a failure to innovate, Meta’s cost cutting has been well received by investors because it will improve profits over the short term. Facebook and Instagram still attract billions of users and they provide some 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 improves their profits and drives up the price of the stock. Layoffs have become to Facebook what new products are to other companies.

by Phil Baker