Founder: Turnaround Talk
One sure sign of an economic recession is rising inflation. Since the beginning of the Ukrainian War, inflation has been on an uncontrollable upward spiral with many companies struggling to cope with the current reality that they are faced with.
One of the first items to go is money that is set aside for paid advertising. This was one of the main features of the 2008 financial crisis which saw many media-based companies either close their doors or face significant downsizing.
This trend is being replicated as the world heads for another possible global recession. This is leaving social media platforms, which generate their income through paid advertising, in a tough position with massive job losses on the horizon.
Massive downsizing
The EWN article points out that Facebook owner Meta will lay off more than 11 000 of its staff in “the most difficult changes we’ve made in Meta’s history,” boss Mark Zuckerberg said on 9 November.
He said the cuts represented 13 percent of the social media titan’s workforce and would affect its research lab focusing on the metaverse as well as its apps, which include Facebook, Instagram and WhatsApp.
“I want to take accountability for these decisions and for how we got here,” Zuckerberg said in a note to staff. “I know this is tough for everyone, and I’m especially sorry to those impacted.”
The article adds that ad-supported platforms such as Facebook and Google are suffering with advertisers looking to cut costs as they struggle with inflation and rising interest rates.
Zuckerberg told the company’s 87 000-strong staff he had expected the boost in e-commerce and online activity during the Covid pandemic to continue, but added: “I got this wrong, and I take responsibility for that.”
The downturn has affected companies across the sector, with Apple and Amazon also recently announcing results that disappointed investors.
Fighting off problems
While inflation is a challenge that is largely out of Meta’s control, the company is facing challenges of its own making.
The EWN article points out that the California-based company is being squeezed by Zuckerberg’s decision to devote billions of dollars to developing the metaverse, an immersive version of the web accessed via virtual reality headsets.
Zuckerberg renamed the company Meta a year ago to reflect the commitment to the project, but the division working on metaverse technology has since made losses of more than $3.5 billion.
Facebook is also struggling to fend off Chinese-owned TikTok, the now dominant social media platform for younger users, to the detriment of Meta’s Instagram.
Photo By: AFP
Addressing the problem
Most companies are facing austerity measures in the current economic climate, and Meta is no different. Aware of the challenges that he is facing, Zuckerburg has a plan to address these challenges.
Staff layoffs are one of the measures which Zuckerburg has labelled as unfortunate. The company has also frozen all recruitment until further notice.
“Fundamentally, we’re making all these changes for two reasons: our revenue outlook is lower than we expected at the beginning of this year, and we want to make sure we’re operating efficiently,” Zuckerberg wrote.
Investing in the right places
Digitization, and the way that humans consume access and consume information, is one of the fundamental drivers of business models in a technologically driven age. It is one of the main criticisms of print media and a reason why media companies invest significant time in research and development.
TickTok’s model is simple. It packages information in a video clip that lasts between 15 seconds to 3minutes. Humans are visually driven and will be more attracted to a platform like TickTok over Meta. TickTok also has an advantage over Meta in that it is a platform where influencers have a greater voice than on Meta. Perhaps Zuckerburg should have invested his research in developing Instagram into a platform that beat TickTok to the market.
Meta is a perfect example of the duel challenges that companies are facing. They are facing significant pressure from the external environment, which they cannot control, and they are also facing the challenge of one misled decision that can negatively impact a company. The precipice is fine.
