#21: The Meta Rebranding | Lessons on building products in hard times

Layoffs, cost-cutting and betting too big.

Today’s case study is special. We learn about lessons from Meta rebranding about building products in hard times. Really hard times.

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In 2022, Meta's stock declined approximately 63% due to macro-economic situation, weak advertisement business and the bet on ‘Metaverse’ seemingly not working out.

Meta did not grow on Revenues in 2022 compared to 2021 (dropped by 1%) and Net Income decreased by whopping 41% ($23.2B in 2022 vs. $39.3B in 2021).

But, something changed in Q4' of 2022. Meta stock went up in drastically in Q4’22:

What worked? Well, it was the commitment that Mark Zuckerberg showcased (backed by actions) towards ‘productivity through cost-cutting’, and it did play a role in this stock trend reversal.

In the last quarter of 2022, Meta beat all wall street estimates:

Well, that is exactly what we deep-dive today in a slightly different case study that focuses on ‘re-creating business value in hard times’. A must-read lesson for product builders in any capacity. Hard times teach us a lot.

Meta’s cost-cutting adventure: Beginning of the focus on Efficiency

Meta laid off 11,000 workers in Nov’22 and there are reports Meta could lay off another 10,000 employees very soon (as of March’23 news).

Mark Zuckerberg started focusing on ‘Productivity’ and cost cutting in last quarter of ‘22 and also went ahead to say that 2023 is going to be the year about ‘efficiency measures’. Mark Zuckerberg took it so seriously that the list of META cost cutting initiatives also includes ‘100 cafeteria workers’.

When it came down to which departments were most impacted. It started with Recruiting, followed by Engineering - both adding up-to almost 49% of all layoffs.

Engineering layoffs were mostly impacting more junior employee, whereas Product/Marketing/Sales impact was more on senior employees. 46% of engineering layoffs were on visa support.

Layoff’s Impact on workforce and customers

Layoffs could lead to a short-term financial boost, but do they really help in the long-term?

With your peers and colleagues being laid off and next wave of layoffs in the news, how could employees remain effective? It could be you next - would you be giving your 100% daily? .. and that is exactly what happens when layoffs are looked at as a means to boost earnings.

“So many of the employees feel like they’re in limbo right now,” Erin Sumner, who was laid off from Facebook in November, told the NYT. “They’re saying it’s ‘Hunger Games’ meets ‘Lord of the Flies,’ where everyone is trying to prove their worth to management.” (Source: NYTimes)

Also, layoffs are not also good for customers. With thousands of employees leaving, many content creators and businesses are not getting timely support from customer service as well. A lot of accounts have hit their heads against a wall hoping to get reply from customer service on their issues.

Katya Karlova, a verified Instagram influencer with more than 250,000 followers, told CNBC that since the layoffs she'd seen a rise in scammers stealing her pictures and creating fake accounts. Some had even lured users into sending money for what was described as adult content which Karlova doesn't make, she has confirmed to Insider. 

"These fake accounts and scammers were contacting my followers and trying to sell content that doesn't exist or ask for money, extremely damaging to a brand I've worked so hard to build," Karlova told Insider adding that Instagram was already slow in removing fake accounts despite having paid verification.  (Source: Business Insider)

In the post-layoff world: Will the Metaverse promise still hold?

In August’22 - Mark Zuckerberg shared the launch of Horizon Worlds in France and Spain. Users were expected to explore new worlds using Oculus headset. But the ‘new worlds’ shown in Mark’s facebook update looked far away from the promises that were made. They looked like video games of 1990’s and it was surprising why would Mark put out such a below average experience after making big promises.

Another troubling fact is that Mark himself doesn’t believe this will improve or happen soon enough. He informed shareholders that creating metaverse would need spending money till 2027 atleast and some products will not be ready till 2037.

It doesn’t help that Meta already spent $10B on creating metaverse products already.

Horizon Worlds is Meta’s attempt at the metaverse as a virtual social space. Prior to the recent launch in Spain and France, the project was already opened to users in Canada, the United Kingdom, and the United States who are above the age of 18. As of February’22, the monthly users were reported to be over 300,000.

There are lessons for product leaders here

When you’re building products in companies at a scale of Meta or even at 1/10th the scale of Meta, you can’t be building MVPs (Minimum Viable Products) because you’re not in position to give your users an experience which is suboptimal and worse that other products you have built.

At high scaled companies, the very first product you should build and launch is the minimum lovable product - something that solves at-least one big problem nicely and it is marketable. Compared to MVP which only is a riskiest assumption test - you cannot be risking to test assumptions (and market it) when the problem-solution fit is not clear yet.

You can read about the difference between MVP, MMP and MLPs here on twitter.

On the same note, for a product to be MLP, Meta cannot be dropping virtual experiences that seem like from 10 to 20 years ago. Maybe Meta focused too much on owning /monopolizing the ‘Metaverse’ i.e creating identity, facilitating ads in metaverse, selling the ‘immersive experience’ idea without first fixing the basic - i.e how the virtual environments look and feel for users to start using them.

Second lesson here is about Meta’s reputation about identity and security.

With Cambridge Analytica fiasco and facebook’s image getting tarnished about its lack of ability to manage privacy and security. The next big bet cannot be about ‘give me more of your identity’ through the metaverse.

Meta could have first focused on fixing its image, double down on security issues before going into any further dream project.

Third lesson here for business and product leaders here is about building products in troublesome macroeconomic situations such as what we face now in 2023.

In troubled times, it is wise to focus on the core - i.e the business that got you profitability in its first place, and pause on ambitions that dilute the focus on the core.

Meta should focus back on reviving its advertisement business outside of metaverse, now that it faces rules imposed by other companies (such as Apple).

Whether metaverse becomes the technology of the future or not, and whether it is going to be Meta or not leading the way.. is yet to be seen. But the Meta rebranding and its bet on metaverse has three important lessons for any product builder out there:

1. At a highly scaled company, the first iteration of the product should be a minimum lovable product and not a MVP.

2. Do not expand into products and businesses where you start on defense already because of your current weaknesses.

3. In troubled times, go back to products and businesses at the core - what made you a star would help you stay afloat as well.