Meta job cuts highlight pressure on social media giants

Today’s top stories

• A wave of support for Republicans failed to materialise in the US midterm elections but the GOP is still set to take the House of Representatives, while control of the Senate is on a knife-edge. Get the latest from our live results blog. Join FT journalists and veteran commentator Norm Ornstein on November 10 1300 GMT/0800 EST for a subscriber-exclusive webinar to discuss the results. Register for free here and submit your questions in advance.

• China’s factory gate prices fell 1.3 per cent in October, the first year-on-year decline since December 2020, in another sign of the damping effect of Covid-19 lockdowns on demand. Factory managers in southern China reported a fall in orders in October of as much as 50 per cent.

• UK chancellor Jeremy Hunt is considering cutting the threshold on the top rate of income tax and targeting inheritance tax as he seeks solutions to the country’s £54bn black hole in next week’s Autumn Statement. Plans for low-tax investment zones are to be scrapped.

Good evening.

Today’s announcement by Meta of 11,000 job cuts, the largest retrenchment in its history, is a striking example of how the global economic downturn is hurting Big Tech.

Last month we reported that the broader technology sector had lost nearly $1tn in market value in the course of a week, but the most noticeable signs of slowdown are at social media companies.

Their biggest headache is the abrupt halt to a decade-long boom in social media advertising. US advertisers are forecast to spend $65bn on the sector in 2022, a year-on-year increase of just 3.6 per cent and about 10 times slower than in 2021, according to eMarketer.

This is creating serious problems at companies such as Meta — owner of Facebook, Instagram and WhatsApp — where advertising is the main source of revenue. Ecommerce has declined from its pandemic peaks, while competition for eyeballs has increased. Investors are also failing to share head honcho Mark Zuckerberg’s enthusiasm for the metaverse.

On top of this, Meta faces difficulties in targeting and measuring advertising because of changes in privacy policy at Apple. Apple last year began forcing app developers to get permission to track users and serve them personalised ads on their devices, a move that has also led to small businesses cutting back marketing spending.

One of Meta’s newer competitors, TikTok, is also in trouble. Although the Chinese-owned company is still growing quickly, it is struggling with the same problems as its older rivals. As we report today, it has slashed global revenue targets after making sweeping leadership changes in the US, its largest market. Staff have also been told that the planned Hong Kong IPO of parent company ByteDance was unlikely to take place this year.

Job cuts are also the order of the day at Twitter as new “chief Twit” Elon Musk takes a scythe to the company’s workforce to address a “massive drop in revenue”.

Advertisers, including big brands such as L’Oréal, General Motors and Mondelez, have also got the jitters over Musk’s plans to relax controls of content, fearful the platform will be swamped by a wave of hate speech and misinformation.

There was bad news, too, for YouTube, owned by Google parent Alphabet, which reported disappointing ad revenues — falling for the first time since the company started reporting its performance separately in 2020. Smaller social media company Snap has also ditched about a fifth of its workforce after reporting slowing growth figures.

One final sobering thought: social media’s forecast growth rate for 2022 is almost the same as traditional outlets such as TV and radio — whose audiences have been shrinking for years.

Need to know: UK and Europe economy

UK plans to review or repeal all EU-derived laws by the end of 2023 have hit a snag: ministers have discovered an additional 1,400 pieces of legislation.

European Central Bank officials challenged the idea of a “dovish pivot,” arguing for the continuation of aggressive rate rises. The ECB will also be on the lookout for signs of a wage-price spiral after a new tracker showed pay growth accelerating.

New proposals from Brussels would tighten sanctions on EU members that violate the bloc’s fiscal rules, as contained in the stability and growth pact. The rules were suspended during the pandemic but enforcement resumes in 2024.

Energy crisis latest: Economic advisers to the German government said it should consider raising taxes on the rich to fund its €200bn plan to cap gas and electricity prices. The threat of widespread blackouts and rationing is waning but Europe should not be complacent about energy security, argues the FT editorial board. The boss of Spanish utility Iberdrola was also critical of Europe’s response, as was Czech energy minister Jozef Síkela.

Need to know: Global economy

Chief economics commentator Martin Wolf says faster investment is needed to help poorer countries cope with climate change. And affected nations, many of which are beset by debt, say they need grants, rather than loans. Read more in our special report: Managing Climate Change.

Russia has leapfrogged Iraq and Saudi Arabia to become India’s largest supplier of oil as sanctions force it to cut prices of its crude. Our latest Behind the Money podcast discusses how Russia is plundering Ukraine’s grain industry.

Need to know: business

Fears of contagion hit the crypto industry after a storm engulfed the FTX exchange. Prices have tumbled on investor worries about the possible collapse of Alameda Research, one of its biggest traders, which has sought a rescue from rival Binance.

UK retail bellwether Marks and Spencer said it expected a “material contraction” in customer demand and more company failures next year as the cost of living crisis deepened. Sector data showed a doubling in the proportion of UK households struggling with their finances and annual grocery bills rising by £682.

In the depths of the pandemic in 2020 we spoke to some of the typical small businesses that form the bedrock of the UK economy. Two years later we find them almost as downbeat.

The World of Work

An estimated 100mn people are suffering with long Covid yet the illness is being badly handled in many workplaces. Listen to the new Working It podcast on a growing global health crisis.

One in five Britons say they have faced discrimination at work within the past year, according to a new survey. Ageism was the most common cause and could be one of the factors contributing to the exodus of older people from the workforce.

Lay-offs in middle management in US companies such as Walmart and Ford have raised fears of a “white-collar” recession. One economist blamed the surplus on the rush to snap up professional talent when the economy bounced back from the pandemic.

UK businesses are ditching office space as energy bills soar, gathering staff on fewer floors and shutting down services on others.

Get the latest worldwide picture with our vaccine tracker

Some good news

A company based in the north of England is providing the elderly and disabled with free emergency plumbing and heating services during the winter months. Depher (Disability and Elderly Plumbing and Heating Emergency Repair), which has been commended by the prime minister’s office for its work, relies on public donations to cover labour and materials.