WEBVTT - Sarah Frier on Meta (Audio)

0:00:00.200 --> 0:00:03.080
<v Speaker 1>It was a sharply lower session on Wall Street where

0:00:03.080 --> 0:00:05.960
<v Speaker 1>we had a lot of aggressing, aggressive selling that was

0:00:06.080 --> 0:00:10.480
<v Speaker 1>mostly tied to macro conditions, very aggressive commentary from the FED,

0:00:10.520 --> 0:00:14.560
<v Speaker 1>but also a lot of interesting individual stories. One we're

0:00:14.560 --> 0:00:18.160
<v Speaker 1>about to talk about at Facebook Corp. Metta and also

0:00:18.239 --> 0:00:21.800
<v Speaker 1>at Apple with that stock down nearly five percent, and

0:00:22.320 --> 0:00:24.759
<v Speaker 1>often we can say that as Apple goes, so goes

0:00:25.440 --> 0:00:29.520
<v Speaker 1>the NASDAC and the broader indexes. Well, let's take a

0:00:29.520 --> 0:00:32.080
<v Speaker 1>look at this meta story though. The CEO Mark Zuckerberg

0:00:32.159 --> 0:00:36.640
<v Speaker 1>outlining plans to reorganize the company, reorganized teams and reduce

0:00:36.760 --> 0:00:40.599
<v Speaker 1>the headcount for the first time ever, and joining us

0:00:40.640 --> 0:00:44.160
<v Speaker 1>to discuss this is Sarah Fryer, Bloomberg News, Big Tech

0:00:44.400 --> 0:00:47.600
<v Speaker 1>team leader. So this is a big story, first time

0:00:47.640 --> 0:00:50.239
<v Speaker 1>since two thousand and four, I guess to see this

0:00:50.600 --> 0:00:54.880
<v Speaker 1>sort of restructuring. It also has some big implications about

0:00:55.080 --> 0:00:58.480
<v Speaker 1>advertising revenue growth. Maybe save that for a moment and

0:00:58.600 --> 0:01:02.120
<v Speaker 1>just walk us through if you could share how they're

0:01:02.120 --> 0:01:05.200
<v Speaker 1>going to do this is just through um sort of

0:01:06.600 --> 0:01:10.640
<v Speaker 1>you know, just people leaving and not being replaced, or

0:01:10.680 --> 0:01:13.759
<v Speaker 1>will they actually lay off people. Well, I think it's

0:01:13.760 --> 0:01:16.160
<v Speaker 1>a little bit the same thing Basically, what they're saying

0:01:16.280 --> 0:01:19.600
<v Speaker 1>is that teams across the board at Meta are going

0:01:19.640 --> 0:01:22.559
<v Speaker 1>to have their budgets reduced, and how the teams manage

0:01:22.640 --> 0:01:25.080
<v Speaker 1>that is going to be up to them. UM, but

0:01:25.160 --> 0:01:27.800
<v Speaker 1>they are going to rely, as you said, eleettrition, if

0:01:27.840 --> 0:01:30.720
<v Speaker 1>people believe their jobs, they may not fill those roles.

0:01:31.240 --> 0:01:34.680
<v Speaker 1>In Overall, they do ext to be a smaller company

0:01:34.720 --> 0:01:38.639
<v Speaker 1>by the end of This is significant because, as you noted,

0:01:39.040 --> 0:01:41.760
<v Speaker 1>Meta for its entire history has been growing and growing

0:01:41.760 --> 0:01:46.640
<v Speaker 1>and growing UM using it's it's advertising business, which essentially

0:01:46.720 --> 0:01:52.000
<v Speaker 1>prince cash to fund these grand visions like like growing

0:01:52.040 --> 0:01:55.040
<v Speaker 1>into the metaverse, which is Mark Zuckerberg's idea of how

0:01:55.040 --> 0:01:58.720
<v Speaker 1>we'll all be hanging out in virtual reality in the future.

0:01:59.240 --> 0:02:02.080
<v Speaker 1>Now that, it's a lot harder when a few factors

0:02:02.120 --> 0:02:05.200
<v Speaker 1>come to account, namely UM, the economy is slowing, so

0:02:05.320 --> 0:02:09.640
<v Speaker 1>advertisers spending less UM, there have been some privacy restrictions

0:02:10.120 --> 0:02:14.040
<v Speaker 1>by Apple Inc. On iPhones that make it harder for

0:02:14.160 --> 0:02:18.280
<v Speaker 1>Meta to target advertising effectively. And UM people are being

0:02:18.360 --> 0:02:22.840
<v Speaker 1>drawn away from from Facebook and Instagram to new products

0:02:22.840 --> 0:02:27.960
<v Speaker 1>like TikTok. So you have this this UM, this the

0:02:28.000 --> 0:02:30.240
<v Speaker 1>set of factors that make it difficult for this company

0:02:30.280 --> 0:02:33.160
<v Speaker 1>to grow revenue in the way that they used to grow. Plus,

0:02:33.200 --> 0:02:38.360
<v Speaker 1>they're spending billions on this metaverse vision that is unlikely

0:02:38.480 --> 0:02:42.839
<v Speaker 1>to contribute to the bottom line for years now. During

0:02:43.600 --> 0:02:46.040
<v Speaker 1>let's during the first quarter, earning school better so that

0:02:46.040 --> 0:02:49.560
<v Speaker 1>the annual expenses would be roughly three billion dollars low

0:02:49.600 --> 0:02:53.240
<v Speaker 1>than initially projected. And what was the reading from that, Well,

0:02:53.240 --> 0:02:55.800
<v Speaker 1>the reading from that was that you know, they were

0:02:55.840 --> 0:02:59.680
<v Speaker 1>they were being responsible. Investors were UM, you know, pleased

0:02:59.680 --> 0:03:03.400
<v Speaker 1>to hear at UM. Now it's a little different. I mean,

0:03:03.440 --> 0:03:07.600
<v Speaker 1>I think this with this announcement, we're seeing an era

0:03:07.800 --> 0:03:13.040
<v Speaker 1>of UM a lot of limited opportunities for Meta. They

0:03:13.080 --> 0:03:15.760
<v Speaker 1>don't really have a backup plan for the way their

0:03:15.760 --> 0:03:18.440
<v Speaker 1>business is working right now. UM they need to grow

0:03:18.440 --> 0:03:22.720
<v Speaker 1>advertising revenue, but their their legacy services are not adding

0:03:22.800 --> 0:03:25.160
<v Speaker 1>users the way they used to. UM they need to

0:03:25.160 --> 0:03:28.160
<v Speaker 1>come up with their next big business model after advertising,

0:03:28.160 --> 0:03:31.000
<v Speaker 1>but things like e commerce haven't worked and they haven't

0:03:31.000 --> 0:03:34.880
<v Speaker 1>come up with a new blockbuster idea. UM. They've basically

0:03:35.480 --> 0:03:41.119
<v Speaker 1>acquired UM they're big growth areas like like Instagram and WhatsApp,

0:03:41.360 --> 0:03:44.200
<v Speaker 1>and they can't make a major acquisition like that again

0:03:44.280 --> 0:03:46.720
<v Speaker 1>because of antitrust pressure. So so they're really in a

0:03:46.720 --> 0:03:49.560
<v Speaker 1>tough spot here. Uh and they've lost more than half

0:03:49.600 --> 0:03:54.000
<v Speaker 1>of their value this year, um and and it is

0:03:54.120 --> 0:03:56.720
<v Speaker 1>it is a sort of an existential moment for this company.

0:03:56.760 --> 0:03:58.960
<v Speaker 1>And you know, it's not surprising that they're going to

0:03:59.040 --> 0:04:02.160
<v Speaker 1>have to cut cost, but how they recover from it

0:04:02.200 --> 0:04:04.760
<v Speaker 1>is going to be what's worth watching. Well, it's a

0:04:04.760 --> 0:04:07.560
<v Speaker 1>tough period of time for sure. I mean other companies

0:04:07.600 --> 0:04:11.160
<v Speaker 1>also reducing headcount and struggling with how to get leaner

0:04:11.520 --> 0:04:13.960
<v Speaker 1>going into the next year. Out of time now, Sarah,

0:04:13.960 --> 0:04:16.159
<v Speaker 1>but thanks very much for joining us. Sarah Fryar, Bloomberg

0:04:16.160 --> 0:04:18.239
<v Speaker 1>News Big Tech team Leader,