Zuck on Notice: Facebook Investor Blasts Metaverse, Suggests Layoffs

Brad Gerstner, the founder and CEO of Altimeter Capital, critiqued Facebook (now known as Meta) CEO Mark Zuckerberg’s depth of focus on building its metaverse in an open letter published this week.

Gerstner says Facebook has become inefficient and wasteful, particularly with the company’s spending on its virtual reality technologies and metaverse, a personal obsession of Zuckerberg.

He wrote, “Meta has drifted into the land of excess — too many people, too many ideas, too little urgency. This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes.”

We just published an Open Letter to Mark Zuckerberg and the Meta Board urging them to tighten their belt and sharpen their investment focus. The plan would 2x annual FCF to $40B, double down on AI, and put a cap on metaverse related investments. https://t.co/jcvyRyWMjg

— Brad Gerstner (@altcap) October 24, 2022

“Meta needs to get fit and focused,” Gerstner wrote. “Meta needs to get its mojo back,” he added. He called on Zuckerberg to reduce personnel costs by 20 percent, to lower annual capital expenditures by $5 billion or more, and to limit annual spending on the metaverse — including Meta’s Reality Labs subsidiary — to $5 billion or less:

To accomplish this goal, we recommend a three step plan that will double FCF to $40 B per year and focus the company’s teams and investments:

1. Reduce headcount expense by at least 20%;

2. Reduce annual capex by at least $5 B from $30B to $25B; and

3. Limit investment in metaverse / Reality Labs to no more than $5B per year.

In relation to what he described as wasteful personnel spending at Facebook, Gerstner recently replied to a viral video originally published on TikTok by a 23-year-old female product manager in which she described as a “day in the life” montage.

Hmmm – nothing to see here. Looks like girding for battle to win the next big prize in tech.

— Brad Gerstner (@altcap) October 25, 2022

Gerstner warned, “It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people. I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion.”

Facebook spent about $10 billion on Reality Labs and metaverse development in its last fiscal year, with projections of increased annual spending towards these ends going forward. Gerstner warned that the company’s projection of “an estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards.”

Altimeter Capital owns over two million Meta shares, according to a CNBC report. Facebook’s total number of outstanding shares is nearly 2.3 billion.

Follow Robert Kraychik on Twitter @rkraychik.