WEBVTT - Mandeep Singh on Meta Job Cuts (Audio)

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<v Speaker 1>Well, Meta Platforms CEO Mark Zuckerberg, as we've been reporting,

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<v Speaker 1>says that the company will cut more than eleven thousand

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<v Speaker 1>jobs and that represents about of metas workforce, joining us

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<v Speaker 1>to discuss his mandate seeing Bloomberg Intelligence senior tech industry

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<v Speaker 1>analyst mandive. We've discussed some of the other ways that

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<v Speaker 1>Meta is trying to cut costs as well. We never

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<v Speaker 1>like to hear about job cuts, but is it actually

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<v Speaker 1>going to be enough to turn things around for Meta?

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<v Speaker 1>I mean, let's put it into context. So Meta actually

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<v Speaker 1>grew their employee base from twenty five thousand to almost

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<v Speaker 1>eighty five thousand in a span of four years. And

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<v Speaker 1>this kind of growth you could argue, you know, during

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<v Speaker 1>the pandemic, the company was growing, uh, you know, and

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<v Speaker 1>they were growing employee based in line with that. That

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<v Speaker 1>is what led to this situation. So what they're doing

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<v Speaker 1>now is going back to their levels. And I think

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<v Speaker 1>in terms of the offset, they're spending about you know,

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<v Speaker 1>fifteen billion dollars in operational costs on the reality labs,

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<v Speaker 1>the Meta worst segment that they thankful growth you know,

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<v Speaker 1>for the next few years, but essentially, you know, the

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<v Speaker 1>core business is still generating free cash for margins. So really,

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<v Speaker 1>if they peer back the reality labs, then this will

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<v Speaker 1>look a lot better. But otherwise I think we're just

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<v Speaker 1>going back to where they were back in in terms

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<v Speaker 1>of the employee account. Can I push back a little

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<v Speaker 1>bit on that because we know that the digital ad

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<v Speaker 1>market is contracting right now, and I know that Meta

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<v Speaker 1>on that front has to be facing somewhat of a headwind.

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<v Speaker 1>Fair statement, absolutely, and it reflects in the ad pricing.

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<v Speaker 1>So They're pricing has been declined double digits this year,

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<v Speaker 1>but that is something that's affecting everyone Alphabet and you know,

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<v Speaker 1>all the other players in the industry, so that cyclical,

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<v Speaker 1>that component will come back. Yes, they have pressure from TikTok,

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<v Speaker 1>that is the other headmen that they face and which

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<v Speaker 1>is somewhat affecting Meta more than the other players. But

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<v Speaker 1>I think even that will improve over time. Maybe there

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<v Speaker 1>is a band on TikTok that could be good news

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<v Speaker 1>for Meta. You're right as well in some of the

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<v Speaker 1>Bloomberg intelligence pieces that we're looking through that you have

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<v Speaker 1>seen engagement on the core Facebook app peaking, And I

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<v Speaker 1>think that we could all argue that when we look

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<v Speaker 1>at our own interaction with that app, So tell us

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<v Speaker 1>where the bigger growth is then coming through. I mean,

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<v Speaker 1>we chink about reality labs, but is it is it

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<v Speaker 1>the likes of reals? Is it Instagram? Where do we

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<v Speaker 1>see some more kind of a guest movement formata? Yes,

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<v Speaker 1>so on a standalone basis, Instagram is still doing very

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<v Speaker 1>well from an engagement perspective. And the ad pricing compression

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<v Speaker 1>is not affecting Instagram as much as it's affecting the

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<v Speaker 1>core blue app, So clearly Instagram is still working. WhatsApp

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<v Speaker 1>has actually been a bright spots so Matter recently disclosed

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<v Speaker 1>in their earnings that click to message ads is almost

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<v Speaker 1>a nine billion dollar run rate business. And again, this

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<v Speaker 1>company is over a hundred and twenty billion dollars revenue

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<v Speaker 1>run rates, so pretty sizable given you know, the WhatsApp

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<v Speaker 1>was always something that didn't monetize very well, so that

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<v Speaker 1>seems to be improving. So definitely some bright spots to

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<v Speaker 1>call out. But when you look at a company with

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<v Speaker 1>over a hundred billion dollar revenue run rate, you need

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<v Speaker 1>something big to drive that next leg of world. Now

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<v Speaker 1>the company fields its matter worse, but so far there

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<v Speaker 1>hasn't been any commercial success or you know, Uh, it's

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<v Speaker 1>kind of a jump in installed base of r headsets

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<v Speaker 1>and and that's why I think it's too premature to go,

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<v Speaker 1>you know, that big in terms of committing fifteen billion

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<v Speaker 1>dollars in APEX and another ten billion dollars in CAPEX

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<v Speaker 1>spending on something that we don't know it's commercially viable.

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<v Speaker 1>So you mentioned TikTok, they're obviously the social media landscape

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<v Speaker 1>has changed pretty dramatically, and we see what's going on

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<v Speaker 1>with Twitter right now and the challenges facing the new leader,

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<v Speaker 1>Elon Musk. I know, Mandeep, it's a bit of apples

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<v Speaker 1>and oranges. But can you see anyway that Meta or

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<v Speaker 1>any one of its platforms, whether it's Facebook or Instagram,

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<v Speaker 1>any one of those platforms can benefit from a lot

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<v Speaker 1>of what we're seeing at Twitter. They could, But again

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<v Speaker 1>the question is what will move the needle in the

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<v Speaker 1>case of Meta. So even if let's say, you know,

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<v Speaker 1>a billion dollars of ad revenue get split across all

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<v Speaker 1>these competing platforms, whether it's Meta or Snapchat or Pinterest,

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<v Speaker 1>it's not going to move the needle for Meta. It

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<v Speaker 1>could move the needle for Snapchat or Pinterest because they're

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<v Speaker 1>much smaller in size, but for Meta, given their size,

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<v Speaker 1>like the Apple at pricing, headwind is about a ten

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<v Speaker 1>billion dollar drag on their top line this year. So,

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<v Speaker 1>just to give you a sense of the magnitude of

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<v Speaker 1>what Apple has done, because of all the privacy changes

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<v Speaker 1>and the lower ad advocacy that Meta has, they're losing

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<v Speaker 1>almost ten billion dollars. Now something has to offset that. First,

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<v Speaker 1>I don't think it's going to be Twitter's revenue. We

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<v Speaker 1>talked about the fact that losing your job but never

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<v Speaker 1>never something we want to hear of metas workforce that

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<v Speaker 1>is facing that that more than eleven jobs. Who do

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<v Speaker 1>you think might be looking to pick those jobs up?

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<v Speaker 1>Because a smart company is going to look for talent

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<v Speaker 1>when others are saying, look, we can't kind of deal

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<v Speaker 1>with that right now and potentially move their business forward. Yeah,

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<v Speaker 1>So look, I mean there are companies that are looking

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<v Speaker 1>to expand into ads, and what Apple has done is

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<v Speaker 1>really created a level playing field for anyone to benefit from,

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<v Speaker 1>you know, first party data. So even retailers are looking

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<v Speaker 1>to offer their own app platform. A company like Roadblocks

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<v Speaker 1>that reported results today, much smaller in size, but they

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<v Speaker 1>talked about expanding their head count and roadblocks is also

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<v Speaker 1>a metaverse played to an extent because they have you know,

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<v Speaker 1>three D games, even though you don't play it using

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<v Speaker 1>the VR headsets, it's all three D content. So look,

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<v Speaker 1>there will be a company that will uh you know,

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<v Speaker 1>emerge out of this downturn and and really take share.

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<v Speaker 1>And uh, I think the smaller ones I have a

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<v Speaker 1>better shot at it, all right, Man, Deep, always a pleasure,

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<v Speaker 1>Thank you so much, Bloomberg's men, Deep saying from a

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<v Speaker 1>Bloomberg Intelligence he is our senior tech industry analyst.