RACHEL MARTIN, HOST:
On this day after the election, there is other news to report. The economy has been a major concern for voters, but businesses are also concerned about the state of the economy. Meta, the parent company of Facebook, is laying off 11,000 employees. This is about 13% of its workforce. And these layoffs are the first the company has made since it was founded 18 years ago. We've got NPR tech reporter Bobby Allyn with us.
Hey, Bobby.
BOBBY ALLYN, BYLINE: Good morning.
MARTIN: So has Meta already started notifying employees who are getting laid off at this point?
ALLYN: They have. As you mentioned, they started notifying 11,000 workers today that they had no choice but to eliminate some of these positions. It's worth noting that Meta is a massive company of more than 87,000 employees, you know, working on Facebook, Instagram, WhatsApp and other services. But Meta, like so many other tech firms, went on a hiring spree during the pandemic, when so much of our lives went digital, and a lot of that hiring was sort of hanging on the hope that the rapid growth would continue. And well, Rachel, it just didn't.
It's been a bruising year for the tech industry. CEO Mark Zuckerberg personally apologized to employees today, calling it, you know, one of the most difficult decisions in the company's history and saying he takes personal accountability for the action. He wrote, quote, "I know this is tough for everyone, and I'm especially sorry to those impacted."
MARTIN: So they overestimated their growth plan. But is that it? Were there other factors at play here?
ALLYN: There was some other factors at play. Firstly, the online advertising market is really taking a beating right now. I mean, the fear of a recession, rising inflation and the war in Ukraine just have caused the advertising sector to slow down. And companies reliant on ads like Meta are really feeling the pain. Remember, around 97% of Meta's revenue comes from ads. So when the ad market gets shaky, social media companies get clobbered.
Another major factor has to do with what's happening inside of Meta. As the name suggests, Meta now cares a lot about the metaverse, you know, this future in which, you know, we're all wearing these fancy headsets and going about our lives in virtual reality. Well, that pivot has cost billions of dollars, but investors are getting impatient with it because it's just not paying off as fast as the company had hoped. It's still in its early stages. True believers say, just give it some time. But investors say, it's unproven. It's a money pit, and it's hurting the company.
MARTIN: So what does this mean? I mean, do we really look to tech as a bellwether for the broader economy and a potential downturn?
ALLYN: You know, big tech companies are some of the most profitable firms in the world, sitting on these huge mountains of cash. So when they have to start laying people off like Meta's doing here, laying off 11,000 people, the rest of the corporate world sits up and sure does pay attention. Now, does it mean that other sectors will start preparing for a potential economic downturn? I am not sure. But it definitely sends a troubling sign to other large companies.
Now, that said, some of the reasons why Meta and other tech companies are scaling back are definitely particular to this industry. But, you know, big-picture concerns about inflation being at a 40-year high, the war in Ukraine causing economic uncertainty and recession fears ratcheting up are things that are sending jitters up and down the economy right now.
MARTIN: NPR's tech correspondent Bobby Allyn reporting on the layoffs expected to happen at Meta, the parent company of Facebook. They're going to lay off 13% of their workforce. We appreciate you, Bobby. Stay with NPR all...
ALLYN: Thank you, Rachel.
MARTIN: Stay with NPR all day. Npr.org has the election results that you need. You can also listen to our colleagues at All Things Considered later today for results and analysis.
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