Meta needs 10,000 workers for its metaverse but can't hire them.
The metaverse will have to wait. Meta has frozen hiring new employees to improve its accounts this second quarter of 2022, CNBC reports, after six financially sluggish months that have sown unease among its investors. A decision that, inevitably, will delay the development of the aforementioned digital universe since Mark Zuckerberg said a few months ago that they would need at least 10,000 new workers for it.
A delay that, if prolonged a long time, could ruin Zuckerberg's megaproject since the metaverse has become a money-burning machine that is far from giving benefits at a time when the company, due to various factors (decline of Facebook, scandals, fines, and unfavorable global economic context), is having increasingly worse financial results.
Bad results. Since Zuckerberg announced his all-or-nothing bet on the metaverse, his company's results have been increasingly resentful. During the last quarter of 2021, Meta had 8% less profit, and during the first quarter of 2022, its earnings fell again, in this case by 21%.
Despite all this, Meta is still making money, but much less than before. Thus, while in the last quarter of 2020, its profits grew by 58%, in that same period of 2021, they grew by 35%, and in the first quarter of this year by 21%. And that's not all, as the company's internal forecasts predict that profits will continue to sink during the second quarter of 2022.
Those responsible. Part of the blame for this drop in profits lies with the massive investment in the metaverse. Specifically, in the first three months of 2022, the development of this digital universe swallowed 3,000 million dollars without reporting any benefit. Although it was even more voracious during the previous quarter, the last of 2021: it devoured 10 billion.
But this considerable investment is not solely responsible for the slowdown in Meta's profits. Since the Facebook Files were published, the company has been facing a major reputational crisis for several months, which has alienated some advertisers from the company. Apple's privacy changes and the global economic situation also affect its advertising revenue.
Things can get worse. The spending of the metaverse and the decline in advertising revenue, which will continue during 2022, could be added as a third factor that would further media the benefits of Meta: fines. Mark Zuckerberg faces two new legal battles this 2022, one in the United States and another in the United Kingdom, which could be very expensive.
The American trial. In the United States, on January 11, a court in the District of Columbia admitted an antitrust lawsuit by the Federal Trade Commission of that country against Meta, by which the US state agency denounced that the company has an illegal monopoly on social media services by having acquired two direct rivals of Facebook, Instagram, and WhatsApp, and increasingly integrate some platforms with others.
This type of lawsuit against Facebook, now Meta, is not new since, in 2020, the court dismissed one of a similar nature. But this time, on the other hand, the judge has considered that the evidence provided is more solid and detailed than before, so he admits it to proceedings rejecting the allegations of Those Zuckerberg and allowing the US justice to investigate if, indeed, the digital conglomerate exercises an excessive dominance of the digital market.
Suppose the US justice system concludes that the company exercises a monopolistic position in the market. In that case, it could force it to get rid of two of its most profitable businesses, especially Instagram.
The British trial. Separately, on January 14, it was made public that the UK's Financial Conduct Authority has filed a class-action lawsuit against Meta for about €2.8 billion for abusing its market dominance in the British Isles to exploit the information 44 million users, Reuters reports.
The lawsuit states that Facebook used its dominant position in the social media market between 2015 and 2019 to impose unfair terms and conditions on its users, demanding the delivery of precious personal data to access the social network, giving Zuckerberg's company the power to exploit them as they wished.
The solution: hire less. The metaverse will continue to devour money. The problems with advertisers seem not to be solved in the remainder of 2022, especially since the bump in the world economy appears that will not begin to be overcome until 2023. And to this, we must add possible judicial sentences that increase the bleeding. For all these reasons, Meta has decided that the best option to stop the bleeding is, for the moment, to park its ambitious hiring plan.
The metaverse falters. And that break in hiring, if prolonged a long time, could jeopardize Zuckerberg's megaproject. Because the development of the metaverse is a race against time for several reasons that require a lot of labor: on the one hand, Meta can not afford to lose between 3,000 and 10,000 million per quarter indefinitely in its development without signs of income, and on the other, because the rivals are going to squeeze and the great bet of the company to make its investment profitable is to arrive first and commercialize multiple aspects of this digital universe.