In the worst year for stocks since the Great Recession, several big names are headed for their worst year on record with just one trading day left in 2022.
The S&P 500 index
SPX,
+1.75%
and Dow Jones Industrial Average
DJIA,
+1.05%
are both headed for their worst year since 2008, with declines of 20.6% and 9.5% respectively through Thursday. But at least 19 big-name stocks — and half of another — are headed for a more ignominious title for 2022, according to Dow Jones Market Data: Worst year ever.
Tesla Inc.
TSLA,
+8.08%
is having the worst year among the group of S&P 1500 constituents with a market capitalization of $30 billion or higher headed for record annual percentage declines. Tesla shares have declined 65.4% so far this year, which would be easily the worst year on record for the popular stock, which has only had one previous negative year since going public in 2010, an 11% decline in 2016.
Tesla may not be the worst decliner on the list by the time 2023 arrives, however, as another Silicon Valley company is right on its heels. Meta Platforms Inc.
META,
+4.01%,
the parent company of Facebook, has fallen 64.2% so far this year, as Chief Executive Mark Zuckerberg has stuck to spending billions to develop the “metaverse” even as the online-advertising industry that provides the bulk of his revenue has stagnated. It would also only be the second year in Facebook’s history that the stock has declined, after a 25.7% drop in 2018, though shares did end Facebook’s IPO year of 2012 30% lower than the original IPO price.
Only one other stock could contend with Tesla and Meta’s record declines this year, and Tesla CEO Elon Musk has some familiarity with that company as well. PayPal Holdings Inc.
PYPL,
+4.46%,
where Musk first found fame during the dot-com boom, has declined 63.2% so far this year as executives have refocused the company on attracting and retaining high-value users instead of trying to get as many users as possible on the payments platform. It would be the second consecutive down year for PayPal, which had not experienced that before 2021 since spinning off from eBay Inc.
EBAY,
+4.76%
in 2015.
None of the other companies headed for their worst year yet stand to lose more than half their value this year, though Charter Communications Inc.
CHTR,
+1.99%
is close. The telecommunications company’s stock has declined 48.2% so far, as investors worry about plans to spend big in 2023 in an attempt to turn around declining internet-subscriber numbers.
In addition to the list below, Alphabet Inc.’s class C shares
GOOG,
+2.88%
are having their worst year on record with a 38.4% decline. MarketWatch is not including that on the list, however, as Alphabet’s class A shares
GOOGL,
+2.82%
fell 55.5% in 2008; the separate class of nonvoting shares was created in 2012 to allow the company — then still called Google — to continue issuing shares to employees without diluting the control of co-founders Sergey Brin and Larry Page.
Apart from that portion of Alphabet’s shares, here are the 19 large stocks headed for their worst year ever, based on Thursday’s closing prices.
Company
% decline in 2022
Tesla Inc.
TSLA,
+8.08%
65.4%
Meta Platforms Inc.
META,
+4.01%
64.2%
PayPal Holdings Inc.
PYPL,
+4.46%
62.6%
Charter Communications Inc.
48.0%
Edwards Lifesciences Corp.
EW,
+2.87%
41.9%
ServiceNow Inc.
NOW,
+3.67%
39.9%
Zoetis Inc.
ZTS,
+3.00%
39.3%
Fidelity National Information Services Inc.
FIS,
+2.03%
Meta Platforms Inc. has long given unfair deference to VIP users of its Facebook and Instagram services under a program called “cross check” and has misled the public about the program, the company’s oversight board concluded in a report issued Tuesday.
The report offers the most detailed review to date of cross check, which Meta has billed as a quality-control effort to prevent moderation errors on content of heightened public interest. The oversight board took up the issue more than a year ago in the wake of a Wall Street Journal article based on internal documents that showed that cross check was plagued by favoritism, mismanagement and understaffing.
Dec 3 (Reuters) – Amazon.com Inc (AMZN.O) and Apple Inc (AAPL.O) are planning to resume advertising on Twitter, according to media reports on Saturday.
The developments follow an email sent by Twitter on Thursday to advertising agencies offering advertisers incentives to increase their spending on the platform, an effort to jump-start its business after Elon Musk’s takeover prompted many companies to pull back.
Twitter billed the offer as the “biggest advertiser incentive ever on Twitter,” according to the email reviewed by Reuters. U.S. advertisers who book $500,000 in incremental spending will qualify to have their spending matched with a “100% value add,” up to a $1 million cap, the email said.
On Saturday, a Platformer News reporter tweeted that Amazon is planning to resume advertising on Twitter at about $100 million a year, pending some security tweaks to the company’s ads platform.
The Amazon logo is seen outside its JFK8 distribution center in Staten Island, New York, U.S. November 25, 2020. REUTERS/Brendan McDermid
However, a source familiar with the matter told Reuters that Amazon had never stopped advertising on Twitter.
Separately, during a Twitter Spaces conversation, Musk announced that Apple is the largest advertiser on Twitter and has “fully resumed” advertising on the platform, according to a Bloomberg report.
Musk’s first month as Twitter’s owner has included a slashing of staff including employees who work on content moderation and incidents of spammers impersonating major public companies, which has spooked the advertising industry.
Many companies from General Mills Inc (GIS.N) to luxury automaker Audi of America stopped or paused advertising on Twitter since the acquisition, and Musk said in November that the company had seen a “massive” drop in revenue.
Apple and Twitter did not immediately respond to Reuters request for comment on the matter.
Reporting by Juby Babu and Akriti Sharma in Bengaluru; Additional reporting by Rhea Binoy; Editing by Lincoln Feast and Daniel Wallis
Our Standards: The Thomson Reuters Trust Principles.
AUSTIN, Texas—Even as a cold night started to settle outside
Tesla
‘s headquarters here on Saturday, a group of cryptocurrency entrepreneurs had no plans to leave until
Elon Musk,
the man they named their currency after, accepted a 12,000-pound sculpture of a Mr. Musk-headed goat riding a rocket.
It is the latest stunt in the cryptocurrency space, where jokes and memes about digital currencies regularly flood social media. But a 6-ton sculpture as a marketing gimmick isn’t so common.
The creators of Elon GOAT say the name of their cryptocurrency was inspired by their respect for Mr. Musk. They and his other fans think he is the “greatest of all time,” or a “GOAT.” They took the admiration literally, spending $600,000 to create a sculpture of Mr. Musk’s head, wearing a gold-plated dogecoin necklace on a goat’s body. The rocket can move, pointing to the sky as if it is taking off. Gas lines run through it so that flames can shoot out of the back.
They trucked it to
Tesla Inc.’s
headquarters, in hopes Mr. Musk would accept the gift. The creators are calling called the event “GOATSgiving.”
Elon Musk has warned of dire financial challenges facing Twitter, the social-media company he took over for $44 billion in October. WSJ’s Mark Maurer explains how the company is trying to fix its finances and avoid a potential bankruptcy. Photo Illustration: Laura Kammermann
But about two hours after the co-founders of Elon GOAT parked the sculpture right outside the Tesla building, there was no sign of Mr. Musk.
Dustin Dailey, a security officer at Tesla, walked over to a group of about 15 people and said they couldn’t accept the sculpture on Mr. Musk’s behalf, but would find a spot for it on their property if Mr. Musk gave the thumbs-up.
But so far Mr. Musk hasn’t given any indication he would accept it or whether he knew the sculpture was there. Tesla didn’t respond to a request for comment
“I am fairly certain he does know about it,” said Mr. Dailey of the sculpture. “It’s all over Twitter.”
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Alec Wolvert, an Elon GOAT co-founder and chief marketing officer, said they were planning on camping out on a piece of public land off a toll road that overlooks the headquarters until Mr. Musk accepted the sculpture.
“We’re gonna stay here as long as possible,” Mr. Wolvert said. “I even heard some people say they were going to strap themselves to it.”
The idea of the sculpture came together last year. “It was an evening joke that kind of just came to fruition,” said
Ashley Sansalone,
an Elon GOAT co-founder.
Metal sculptor Kevin Stone spent nearly six months working on the sculpture of Elon Musk.
Photo:
Kevin Stone
The cryptocurrency entrepreneurs asked Kevin Stone, a metal sculptor in British Columbia, Canada, to make the giant sculpture with Mr. Musk’s head. The goal: to get Mr. Musk to tweet about the sculpture to his more than 118 million followers and draw attention to their cryptocurrency, the Elon GOAT.
“Elon tweeting us would legitimize the token,” said Mr. Sansalone, 40 years old.
Mr. Sansalone said he works on the token full time and previously ran a construction company and traded energy. Unlike bitcoin, ether or dogecoin, the Elon GOAT token is far from a household cryptocurrency name. It is ranked well outside the largest cryptocurrencies by market value, according to CoinMarketCap.
Mr. Musk’s head, which took nearly six months to complete was made by Mr. Stone. The goat body and rocket were made by others in Phoenix to speed up the project, Mr. Sansalone said. Then all the pieces were put together and attached to the back of a 70-foot long semi-truck trailer.
“When I first saw the statue my jaw dropped,” said DeMarco Hill, 51, who spotted it in September in Goodyear, Ariz., where he lives. He grabbed his 12-year-old son and they followed it. “It was something you’ve never seen before in your life.”
Mr. Hill, a trucker who owns his own company, Stay Ready Trucking, thought the stunt was so entertaining that he found Mr. Sansalone and asked if he could participate. Mr. Sansalone said Mr. Hill was needed because only someone with a special license could drive around the heaping pile of metal.
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He has since driven the sculpture through California, Arizona and Washington, before bringing it to Texas. People who drive by honk their horns or give a thumbs-up, Mr. Hill said.
“If I pull up to the side of the road it’s like people crowding around,” he said. “It gets crazy.”
Mr. Sansalone said the sculpture has mostly gotten a positive response. He hasn’t heard anyone mistaken Mr. Musk’s face for someone else. “I would say he is probably the most relevant person on the planet right now,” Mr. Sansalone said about Mr. Musk, the world’s richest person who recently bought Twitter Inc. for $44 billion.
In September, the sculpture sat in front of Tesla’s office in Palo Alto, Calif., during the company’s artificial-intelligence conference. Tesla employees crossed the street to take pictures with the sculpture, Mr. Sansalone said. Mr. Musk was at the conference, according to Twitter posts he made, and Mr. Sansalone assumes the billionaire saw the sculpture.
“All there was to look at was a lit-up rocket erected in the middle of the street,” he said.
On Saturday night, the group remained hopeful.
At one point in the evening, a group of about 20 people who were waiting outside started to chant “Elon claim your goat” in the hopes that the god of crypto, as one co-founder put it, would hear them.
“I’m a huge fan of Elon and I want to give this man his flowers while he’s alive,” said Aamir Manzoor, a 36-year-old from Toronto who is a holder of Elon GOAT. “He’s done a lot for the world.”
Write to Joseph Pisani at joseph.pisani@wsj.com, Alyssa Lukpat at alyssa.lukpat@wsj.com and Adolfo Flores at adolfo.flores@wsj.com
The advertising situation at Twitter has been particularly dire since Musk took over the company in late October
AFP file
By AFP
Published: Fri 25 Nov 2022, 10:08 PM
Is it a pipe dream or possibility? Elon Musk wants to diversify Twitter’s revenue stream beyond advertising, a feat none of the biggest social networks have yet pulled off.
Something of a gold standard, social media ads can be fine-tuned and tailored to individual users on a mass scale, and have been particularly lucrative for Meta’s Facebook and Instagram, as well as Google.
“Facebook pretty much set the standard for having an ad model for social networks,” said Jasmine Enberg, an analyst at Insider Intelligence. “But that doesn’t necessarily have to be the way that social platforms monetise.”
Social networks are facing budget cuts from inflation-afflicted advertisers and increased regulations on the use of lucrative personal data, so it makes sense for them “to be exploring new, non-ad monetisation techniques,” she said.
The issue is delicate for Twitter, whose turnover is 90 per cent dependent on advertising. Advertisers, on the other hand, do not necessarily need Twitter and can turn to other social networks.
The advertising situation at Twitter has been particularly dire since Musk took over the company in late October.
In recent weeks, half of Twitter’s 100 top advertisers have announced they are suspending or have otherwise “seemingly stopped advertising on Twitter,” an analysis conducted by nonprofit watchdog group Media Matters found.
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They fear being associated with toxic content as Musk, who describes himself as a “free speech absolutist,” advocates for laxer moderation.
Social media sites are testing two alternate solutions in particular: Charging everyday users and charging content creators.
The forum platform Reddit has deployed a hybrid model, making money via advertising, paid subscriptions and digital coins that allow users access to special privileges.
That said, “It’s always hard to charge for something that used to be free,” said Carolina Milanesi of research firm Creative Strategies.
“Unless you give something different or create a different product, you can’t go from not charging to charging,” she said.
While Twitter has been offering a paid subscription with additional features since last year, Musk aimed to raise the price to $8 a month and include account verification in the plan’s perks.
A partial launch was chaotic, however, and prompted the proliferation of so many fake accounts that the rollout of so-called Twitter Blue has now been paused.
“Figuring out a way to charge users for premium features and make money off of users is not a bad idea,” Enberg said.
But she said the benefits Twitter offered may not have been enticing enough, and that the verification aspect should be more of a security feature than a monetizable feature.
Finally, because paid subscribers — arguably the most active on the network — would see 50 per cent less advertising than non-paying users, the plan would “dilute the quality and the size of the addressable audience for advertisers”.
Some newer platforms are trying to do without advertising altogether, with no guarantee of long-term viability.
For example, on Discord, a live-discussion social network, subscribers have access to more emoticons.
And on the fledgling photo-sharing app BeReal, users can escape ads with in-app purchases for extra features, according to the Financial Times.
Twitter had some 230 million daily active users as of June, and Musk continues to congratulate himself on growing that number since taking over.
But increased users do not necessarily translate into dollars.
Snapchat, which also launched a paid version in June, has gained more and more users, but not necessarily money.
Faced with this reality, platforms are competing for content creators to attract and retain audiences — and either taking commission or making them pay for the promotion of their messages and videos.
This represents “a really big opportunity” for Twitter, Enberg said.
Twitter “does have a lot of celebrities and big-name influencers, politicians and journalists” with whom it could form a mutually financially beneficial relationship, she said.
Milanesi added that while the network already offers some promotional tools, they are “quite expensive, and not very effective”.
As an art director for Esquire in the 1960s, George Lois assailed Muhammad Ali with arrows, drowned Andy Warhol in a can of soup, and prepped Richard Nixon’s profile for a close-up. He stunned minds to attention, making magazine covers that spoke so urgently, they muted an entire newsstand’s worth of bold headlines. Through Lois’s work, history was reified.
I wasn’t alive in the ’60s, but I can tell you that many of the era’s visual markers that arise in my mind were made by Lois. (And I’m surely not alone in this—the Museum of Modern Art secured several of his works for its permanent collection.) He was a fierce and uncompromising visual visionary, a provocateur whose wordless commentary refracted America through dozens of roughly 8-by-10-inch canvases. He possessed an uncanny ability to channel collective sentiment in a time of deep political divide, but more than that, he transmitted messages that America didn’t realize it was ready to embrace. Until he died this past weekend at age 91, George Lois was the greatest living magazine art director. He will be remembered as a pioneering graphic artist of the 20th century.
Read: Revisiting the work of one of the 20th Century’s best ad men
Before Esquire, Lois made his bones as an ad man developing campaigns for Xerox and John F. Kennedy’s presidential campaign. He was Bronx-born—brash, passionate, and willing to throw down the gauntlet to defend his ideas. Rumored to be the inspiration for Mad Men’s Don Draper, Lois rejected the comparison altogether (which is fair, because Draper didn’t have nearly as tight a grip on the counterculture as Lois did). Through advertising, Lois honed his stylish and daring sensibilities, which would carry him through a decade in magazines and then on to MTV, where he rescued a flailing brand and turned it into a zeitgeist-defining entity.
In 2019, when Peter Mendelsund and I began redesigning The Atlantic, no designer had more influence on us. Lois’s work left us no choice but to contend with it, occupying, as it does, a dominant space in the cultural imagination. We studied his covers, seeking to bring a similar sensibility to The Atlantic, which is to say we tried to copy him often. A common thread in Lois’s most searing designs is the relationship of typography to image. He frequently relied on a striking central visual component to anchor the cover while the rest of the elements remained deferential. This required bravery—as well as immense trust in the public—and removed the onus from the language. He reduced the cover’s typography to Lilliputian scale in order to harness the image’s massive power.
In 1968, Lois subjected Ali to the fate of Saint Sebastian, using arrows to martyr the iconoclastic athlete. In the cover’s bottom right-hand corner sits a small headline of five words. This magazine cover, among the most famous in American history, manages to confront race, religion, and the Vietnam War in a single conceptual image that is as brutal as it is brilliant.
Two covers designed by George Lois for Esquire. Left: Issue No. 413, April 1968. Right: Issue No. 367, June 1964
Over dozens of Esquire issues, he didn’t just create iconic images; he deployed existing icons in order to subvert, reframe, and recontextualize them. Take his 1964 cover of Kennedy, with a hand photographed in the foreground of the frame, wiping away an imagined tear. This meta visual move adds friction to a static image; it forces us to confront and process tragedy in a new way. It turns the magazine, newsstand price 60 cents, into something that transcends its form—into something more like art.
From Jiffy Lube ads to the campaign for “I Want My MTV” to the boxer Sonny Liston donning a Santa hat on the cover of Esquire, contemporary American culture looks and feels the way it does in part because of Lois’s genius. If you’ve ever been struck by a piece of design in our pages, you might now recognize the traces of his influence. Even if you don’t, I can tell you that it’s there (our December 2019 and November 2021 covers are both valiant attempts at homage). History has no choice but to remember George Lois; he was an integral part of the machine of remembering.
To make the deal work, Mr. Musk has been trying to add subscription revenue and reassure advertisers about the platform’s future. Twitter was losing money before Mr. Musk bought the company, and the deal added a debt burden that requires fresh sources of cash.
It is tough to determine the state of the company. Twitter no longer has to file regular financial reports to the Securities and Exchange Commission, which are crucial tools for determining a company’s financial health.
Analysts and academics have been able to piece together a picture of the company from information Mr. Musk has offered as well as details of the deal and the company’s last regulatory filings. Bankruptcy could be one result. Mr. Musk, the world’s richest person, could also raise new funds, or buy back debt from lenders, giving Twitter a buffer to turn around its business.
Here is a look at their assessments of Twitter’s financial situation and prospects.
Twitter Finances, Pre-Musk
Twitter is and was a popular tool for politicians, celebrities and journalists. But as a business, it was stagnating.
It hasn’t booked an annual profit since 2019, and posted a loss in eight years of the past decade. The company’s net loss narrowed in 2021, to $221.4 million from $1.14 billionthe previous year.
Twitter has struggled to attract new users and increase revenue, which came in at about $5.1 billion last year. In its last quarterly filing as a public company, for the period ended June 30, revenue was $1.18 billion, down slightly year-over-year.
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Nearly 90% of its revenue last year came from advertising, and it traditionally has been the company’s main source of revenue. In 2021, Twitter took in $4.51 billion from advertisers, and $572 million from licensing data and other services.
The company had more than $2 billion in cash and less than $600 million in net debt before the takeover talks—very little debt for a company in the S&P 500 index. But that cash position was down 35% from a year earlier as of June 30, filings show, and Mr. Musk paid for Twitter by taking on $13 billion in debt. He paid for the rest in equity, some contributed by multiple investors.
Twitter had a market capitalization of $37.48 billion in March, the month before Mr. Musk agreed to buy it, S&P data showed. Social-media stocks have slumped sharply since then. But now, according to
Jeffrey Davies,
a former credit analyst and founder of data provider Enersection LLC, “This thing’s probably not worth more than what the debt stack is, quite frankly, unless you put a lot of option value just on Elon.” Mr. Musk last month said he and investors were overpaying for the company in the short term.
Revenue Under Musk
Mr. Musk said earlier this month that Twitter had suffered “a massive drop in revenue” and was losing $4 million a day. It isn’t clear if that reflects the broader downturn in the digital ad market or the pause in advertising by several companies since Mr. Musk bought the business.
Some companies, including burrito chain
Chipotle Mexican Grill Inc.,
cereal maker
General Mills Inc.
and airline
United Airlines Holdings Inc.,
have paused their ad spending on Twitter over uncertainty around where the company is headed. The departure of several top executives from its ad department have soured relationships, The Wall Street Journal has reported.
The exodus of advertisers poses a threat for a company so reliant on that revenue stream. “As an online ad company, you’re flirting with disaster,” said
Aswath Damodaran,
a finance professor at New York University’s Stern School of Business.
Elon Musk has purchased Twitter, ending a monthslong saga over whether or not he would go through with his offer to acquire the social media platform. WSJ takes an inside look at the tweets, texts and filings to see exactly how the battle played out. Illustration: Jordan Kranse
Deal negotiations for long-term contracts that usually begin at the end of the year haven’t taken place yet or have been put on hold. Those deals comprise more than 30% of Twitter’s U.S. ad revenue, The Wall Street Journal reported.
Revenue will likely remain under pressure until advertisers fully grasp the new business model, potentially leading many of them to return to the platform, said
Brent Thill,
a senior analyst at Jefferies Group LLC, a financial-services firm. “Those advertisers will come back if they feel that the users are there and there’s an ability to monetize their advertisement,” Mr. Thill said.
But that could take time. Mr. Thill said it could take months for advertisers to get clarity. “It’s an enigma,” he said.
Market-research firm Insider Intelligence Inc. recently cut its annual ad-revenue revenue outlook for Twitter by nearly 40% through 2024.
Mr. Musk wants the company to lean more on subscriptions and depend less on digital advertising. He said last Tuesday that the company’s upgraded subscription service, costing $7.99 a month, would launch Nov. 29.
A walkway at Twitter headquarters in San Francisco. The company has aggressively cut staff to reduce expenses.
Photo:
George nikitin/Shutterstock
Reducing Costs
The company has moved quickly to slash costs, including cutting its staff by half. Salaries and other compensation make up a large chunk of overall expenses. The company had 7,500 full-time employees at the end of 2021, up from 5,500 a year earlier, filings show.
The layoffs of roughly 3,700 people could save the company roughly $860 million a year, if the employees that are leaving made an average of about $233,000 annually—the company’s most recently disclosed median pay figure. The estimated savings would represent about 15% of Twitter’s $5.57 billion in costs and expenses last year. Its costs and expenses climbed 51% from the previous year, as hiring drove up its payroll.
More employees left the company last week, rejecting Mr. Musk’s demand that they commit to working “long hours at high intensity” to stay.
Debt Mountain
Before Mr. Musk’s acquisition, net debt totaled $596.5 million as of June 30, according to S&P Global Market Intelligence, a data provider. That compares with a negative balance of $2.18 billion the prior-year period, indicating a cash surplus.
Twitter paid $23.3 million in interest expense in the quarter ended June 30, according to a filing.
Now, the company will have to pay at least $9 billion in interest to banks and hedge funds over the next seven to eight years, when the $13 billion in debt matures, according to a review of Twitter’s loans by Mr. Davies, the former credit analyst.
The interest payments are substantial for a company that reported $6.3 billion in total operating cash flow over the past eight years, he said.
What’s more, the company’s debt stack now includes floating-rate debt, meaning that interest costs are set to rise as the Federal Reserve continues to increase interest rates. Twitter’s debt was entirely fixed rate before the deal.
Twitter’s credit ratings, which were below investment grade before the transaction with Mr. Musk, have deteriorated further.
Moody’s
Investors Service on Oct. 31 downgraded Twitter’s rating to B1 from Ba2, a two-notch drop, and S&P Global Ratings on Nov. 1 downgraded it to B- from BB+, a five-notch drop.
If Twitter files for bankruptcy, Elon Musk’s $27 billion investment would likely be wiped out.
Photo:
Susan Walsh/Associated Press
Financial Prospects
Twitter’s financial challenges could result in the company filing for bankruptcy, raising equity or buying back some debt from its lenders, analysts and academics said.
If Twitter files for bankruptcy, as Mr. Musk warned was possible in an all-hands meeting earlier this month, his $27 billion investment would likely be wiped out because equity holders are the last to be paid when a company restructures.
Buying back debt from lenders at a steep discount would help the company reduce its debt load and interest costs as well as its valuation, which would be beneficial in the long run, Mr. Davies said.
“I don’t think they can issue any more debt,” Mr. Davies said. “It’s a really, really tough structure.”
The company could also replace some of the debt with equity, both from Mr. Musk and from outside investors, said
David Kass,
a finance professor at the University of Maryland’s
Robert H. Smith
School of Business. For that, Mr. Musk would need to persuade potential investors that he has a viable long-term business plan, he said. Replacing debt could enable the company to generate cash. Mr. Musk has said some of his latest
Tesla Inc.
stock sale, yielding almost $4 billion in cash, was because of Twitter.
If successful, the company could generate positive free cash flow in two or three years, which it could use to pay down the residual debt and eventually go public again, Mr. Kass said. “The prospect of an eventual IPO within three to five years would be a very attractive enticement for large funds,” he said.
—Theo Francis and Jennifer Williams-Alvarez contributed to this article.
is planning to begin large-scale layoffs this week, according to people familiar with the matter, in what could be among the largest round in a recent spate of tech job cuts after the industry’s rapid growth during the pandemic.
The layoffs are expected to affect many thousands of employees and an announcement is planned to come as soon as Wednesday, according to the people. Meta reported more than 87,000 employees at the end of September. Company officials already told employees to cancel nonessential travel beginning this week, the people said.
The planned layoffs would be the first broad head-count reductions to occur in the company’s 18-year history. While smaller on a percentage basis than the cuts at Twitter Inc. this past week, which hit about half of that company’s staff, the number of Meta employees expected to lose their jobs could be the largest to date at a major technology corporation in a year that has seen a tech industry retrenchment.
CEO Mark Zuckerberg has said recently that ‘some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year.’
Photo:
Michael Nagle/Bloomberg News
A spokesman for Meta declined to comment, referring to Chief Executive
Mark Zuckerberg’s
recent statement that the company would “focus our investments on a small number of high priority growth areas.”
“So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year,” he said on the company’s third-quarter earnings call on Oct. 26. “In aggregate, we expect to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today.”
The Wall Street Journal reported in September that Meta was planning to cut expenses by at least 10% in the coming months, in part through staff reductions.
The cuts expected to be announced this week follow several months of more targeted staffing reductions in which employees were managed out or saw their roles eliminated.
“Realistically, there are probably a bunch of people at the company who shouldn’t be here,” Mr. Zuckerberg told employees at a companywide meeting at the end of June.
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Meta, like other tech giants, went on a hiring spree during the pandemic as life and business shifted more online. It added more than 27,000 employees in 2020 and 2021, and added an additional 15,344 in the first nine months of this year—about a fourth of that in the most recent quarter.
Meta’s stock has fallen by more than 70% this year. The company has highlighted deteriorating macroeconomic trends, but investors have also been spooked by its high spending and threats to the company’s core social-media business. Growth for that business in many markets has stalled amid stiff competition from TikTok, and
Apple Inc.’s
requirement that users opt-in to the tracking of their devices has curtailed the ability of social-media platforms to target ads.
Last month, investment firm Altimeter Capital said in an open letter to Mr. Zuckerberg that Meta should slash staff and pare back its metaverse ambitions, reflecting the rising discontent among shareholders.
Meta’s expenses have also risen sharply, causing its free cash flow to decline by 98% in the most recent quarter. Some of the company’s spending stems from heavy investments in the additional computing power and artificial intelligence needed to further develop Reels, Meta’s TikTok-like short-form video platform on Instagram, and to target ads with less data.
But much of Meta’s ballooning costs stem from Mr. Zuckerberg’s commitment to Reality Labs, a division of the company responsible for both virtual and augmented reality headsets as well as the creation of the metaverse. Mr. Zuckerberg has billed the metaverse as a constellation of interlocking virtual worlds in which people will eventually work, play, live and shop.
Meta has invested heavily in promoting its virtual-reality platform, but users have been largely unimpressed.
Photo:
Guillermo Gutierrez/Zuma Press
The effort has cost the company $15 billion since the beginning of last year. But despite investing heavily in promoting its virtual-reality platform, Horizon Worlds, users have been largely unimpressed. Last month, the Journal reported that visitors to Horizon Worlds had fallen over the course of the year to well under 200,000 users, about the size of Sioux Falls.
“I get that a lot of people might disagree with this investment,” Mr. Zuckerberg told analysts on the company’s earnings call last month before reaffirming his commitment. “I think people are going to look back on decades from now and talk about the importance of the work that was done here.”
Following the call, analysts downgraded their rating of Meta’s stock and slashed price targets.
“Management’s road map & justification for this strategy continue to not resonate with investors,” analysts at RBC Capital Markets said in a note last month.
Write to Jeff Horwitz at jeff.horwitz@wsj.com and Salvador Rodriguez at salvador.rodriguez@wsj.com
Shonda Rhimes attends 2018 Vanity Fair Oscar Party on March 4, 2018 in Beverly Hills, CA.
Presley Ann | Patrick McMullan | Getty Images
Shonda Rhimes, the high-powered producer behind “Bridgerton” and “Inventing Anna,” is among a number of showrunners, creators and writers who have expressed displeasure with Netflix‘s decision to include mid-video ads in their content, according to people familiar with the matter.
Rhimes and Intrepid Pictures’ Trevor Macy and Mike Flanagan are among a group of creators who have told Netflix executives they believe the ads interrupt their storytelling, said the people, who asked not to be named because the discussions are private. Netflix has told creators it won’t be sharing any revenue from advertising with them, the people said.
Netflix isn’t the first streamer to have an ad-supported tier. But it has used its previous aversion to commercials as a marketing tool to help land deals with creators. Rhimes signed a multiyear deal with Netflix in 2021 to exclusively make content for the streaming service. When she inked the deal, Netflix had a firm policy not to include advertising in its programming, a longtime tenet of co-founder and co-CEO Reed Hastings. Both Rhimes and Netflix declined to comment.
Netflix released a lower-priced advertising-supported service in the U.S. and other countries this week. Netflix made the decision to offer an ad-supported tier as revenue and subscriber growth have plateaued coinciding with the end of the global coronavirus pandemic. Netflix has about 223 million global subscribers.
Netflix executives have told creators they have thoughtfully placed midroll advertising at intervals that make sense with each episode’s storyline, according to people familiar with the matter. They’ve also told creators they don’t expect that many people to sign up for the basic advertising tier relative to subscribers who will pay for no commercials, the people said.
“We’re using our internal content tagging teams essentially to find those natural breakpoints so that we can deliver the ad in the least obtrusive point,” Netflix operating chief Greg Peters said in October.
Still, several creators haven’t been pleased with the explanations. Intrepid Pictures makes horror films and series for Netflix. Those are particularly bad fits for ad insertions because they kill building tension. One 50-minute episode of Intrepid’s “The Haunting of Hill House” is comprised of five long, single-shot takes.
That episode, the series’ sixth (“Two Storms”), is now interrupted by three one-minute long commercial breaks, made up of three ads each, in the $6.99 tier. One the main reasons Intrepid signed an exclusive overall deal with Netflix in 2019 was the streamer’s total avoidance of advertising, according to people familiar with the company’s thinking. A spokesperson for Intrepid declined to comment.
No revenue share
Not all creators are upset with Netflix. Ryan Murphy, who signed a $300 million with Netflix in 2018, crafts his series’ episodes in three acts, leading to easy ad placement, according to a person familiar his work. Scott Frank, co-creator of “The Queen’s Gambit,” has also not complained, according to a person familiar with his thinking.
The Directors Guild of America and the Writers Guild of America declined to comment for this story.
Splitting revenue from advertising, especially commercials that interrupt the storytelling flow, could be a way to mollify irritated creators who feel Netflix has changed the rules midgame. But Netflix won’t be doing that, according to people familiar with the matter. Netflix owns its original programming and can insert ads where and when it wants, giving creators little leverage other than voicing complaints.
Still, other media and entertainment companies have avoided the issue of interruptive ads or agreed to share revenue in some cases. Warner Bros. Discovery‘s HBO Max decided not to include midroll advertising in HBO programming to skirt the issue of interrupting prestige programming. When HBO has sold shows to linear cable networks in syndication, such as when “The Sopranos” aired on A&E, creators have been able to participate in revenue sharing, according to a person familiar with the matter. An HBO spokesperson declined to comment.
Some creators that have made content exclusively for Disney+ also have rights to participate in advertising revenue sharing, depending on contractual language, according to a person familiar with Disney‘s policies. But unlike Netflix, Disney owns linear cable networks that could eventually air Disney+ programming with commercials. A Disney spokesperson declined to comment.
–CNBC’s Sarah Whitten contributed to this article.
WATCH: Netflix launches ad-based subscription plan
Twitter Inc. has suffered “a massive drop in revenue” because of advertisers cutting back on using the social-media platform, new owner
Elon Musk
said Friday, as the company started sweeping layoffs just over a week after the billionaire took it over.
Mr. Musk, in a tweet Friday, blamed the cutback in advertising on “activist groups pressuring advertisers.” He said that the company hadn’t changed content moderation and had tried to address activists’ concerns. “Extremely messed up!” he said, casting the pullback as an assault on free speech.
Mr. Musk’s remarks came after several big-name advertisers, including food company
General Mills Inc.,
GIS -0.63%
Oreo maker
Mondelez International Inc.,
MDLZ 0.44%
and
Pfizer Inc.
PFE 0.74%
and others have temporarily paused their Twitter advertising in the wake of the takeover of the company by Mr. Musk, The Wall Street Journal has reported. German car-making giant
Volkswagen AG
said it had recommended to its various brands they pause advertising on Twitter to assess any revisions the company makes to its brand safety guidelines.
Mr. Musk’s tweet comes after Twitter, in a message sent to staff Thursday, said staffers would be notified by 9 a.m. Friday if they had lost their position or were still employed, the Journal reported.
Twitter by early Friday began notifying employees who had been laid off, according to documents viewed by the Journal.
Roughly 50% of Twitter’s workforce has been hit with layoffs, according to an email sent overnight to one of those affected in the U.S. that was viewed by the Journal. It didn’t specify what departments the terminated employees worked in.
Twitter had more than 7,500 employees at the start of this year, according to a regulatory filing.
The staff reductions were intended “to place Twitter on a healthy path,” according to the company’s Thursday email. “We recognize that this will impact a number of individuals who have made valuable contributions to Twitter, but this action is unfortunately necessary to ensure the company’s success moving forward,” the company added.
In the layoff emails, Twitter said employees assigned “nonworking” status would continue to receive compensation and benefits through a separation date, which for one person was designated as early February and for another early January. It said to expect to receive one month’s base pay in severance approximately 45 days after the termination date, in addition to providing instructions for returning company property such as laptops.
Twitter didn’t say whether employees should expect to receive year-end bonuses, which historically have been based on individual and company performance. The company also didn’t mention whether employees would receive equity payments during the nonworking period.
Some employees said they had lost access to Twitter communication tools overnight. An email sent to an employee in Canada and seen by the Journal said that suspended access to the company’s systems didn’t mean the person’s employment has been terminated.
The layoffs cap a tumultuous period for Twitter staff that began in April, when the company disclosed Mr. Musk had become its largest individual shareholder. Mr. Musk then agreed to join Twitter’s board, before deciding not to. He launched a bid for the company that Twitter eventually accepted. Weeks later Mr. Musk raised questions about the deal, then tried to abandon it, before reversing course again last month and saying he would go ahead with the transaction. Along the way, he at times criticized the company and its executives.
The Thursday email said Twitter’s offices would be temporarily closed to ensure the safety of employees, the company’s systems and customer data. Employees who were in an office or on their way to one were asked to go home, according to the email.
Twitter employees have been bracing for job cuts. The Journal previously reported that the company was drafting plans for broad layoffs, with one investor saying up to 50% of staff could be cut and that employees would be evaluated to determine the scope of the firings.
Elon Musk has purchased Twitter, ending a monthslong saga over whether or not he would go through with his offer to acquire the social media platform. WSJ takes an inside look at the tweets, texts and filings to see exactly how the battle played out. Illustration: Jordan Kranse
Signs of pushback against Twitter’s actions emerged in the wake of the apparent dismissals. In a federal lawsuit dated Thursday, a handful of Twitter employees accused the company of violating federal and California law in failing to provide enough warning of a mass layoff.
The lawsuit, filed in California federal court by five former employees of Twitter who said they were terminated this week, said the company’s layoffs violated the federal Worker Adjustment and Retraining Notification Act and its California equivalent, which require giving 60 days of advance written warning of dismissing a large number of employees of a company at once. The lawsuit asked the court to issue an order blocking Twitter from its alleged violations of the acts. Twitter didn’t immediately respond to a request for comment.
In April, as Mr. Musk was moving to buy Twitter, entrepreneur
Jason Calacanis,
a close ally, suggested cutting the number of Twitter employees to roughly 3,000, according to messages between the two, which were released as part of litigation around the transaction.
A staff of 3,000 would represent the lowest level since 2013, the year Twitter went public, when the platform had about 2,700 employees and its revenue was roughly 13% of its level last year.
Twitter’s employee numbers began climbing in 2019, after ranging between approximately 3,000 and 4,000 for several years. Twitter has said that the increase in recent years was driven by investments in engineering, product, design and research.
Even before officially taking control at Twitter, Mr. Musk had indicated that he was concerned about the company’s expenses. Twitter has posted a loss in eight of its past 10 fiscal years, according to FactSet.
Mr. Musk moved quickly to make personnel changes at the top of the company. Last week, on the same day he closed the deal, he fired Twitter Chief Executive
Parag Agrawal
and three other top executives. Mr. Musk fired the executives for cause and is saying he isn’t required to pay them multimillion-dollar severance packages, the Journal reported. Other executives have departed since.
Mr. Musk has leveraged other parts of his business empire to try to put his imprint on Twitter. He brought in some
Tesla
engineers to begin working on reshaping the social-media platform, the Journal reported. Also added to an internal company directory were some people who appeared to work for the Boring Co., a tunneling business Mr. Musk founded.
Broadly, the social-media industry is struggling with weaker revenue from digital advertisers. Such advertising has slowed due to several factors, including rising inflation, the war in Ukraine, and
Apple
privacy changes that have made it harder to track the performance of ads. Twitter rival Snap Inc. this year said it was letting 20% of staff go.
Facebook
parent Meta Platforms Inc. also has indicated it was trimming ranks.
Tech companies beyond social media also have embarked on belt tightening that is leading to job losses and hiring freezes. On Thursday, ride-hailing company
Lyft Inc.
and payments company Stripe Inc. announced major layoffs, and
Amazon.com Inc.
said it would freeze corporate hiring for months.
Write to Sarah E. Needleman at sarah.needleman@wsj.com and Alexa Corse at alexa.corse@wsj.com
