👋 Hi, this is Gergely with a bonus, free issue of the Pragmatic Engineer Newsletter. We cover two out of eight topics in today’s subscriber-only The Scoop issue. To get this newsletter every week, subscribe.
In this issue, we cover:
- Developers on the Rotational Engineering program are not receiving full time offers. Meta has a Rotational Engineering program where, after a year of rotating between teams, engineers become E4 software engineers and graduate to join a team. Now, these engineers are not given the opportunity to join any teams and must leave the company after completing their 12-month contracts. Exclusive.
- Meta’s historic growth challenge. The company’s growth is under more pressure than it has ever been, and in a worse strategic position than Apple, Google, Amazon or Microsoft. Why is this and what can the company do to get out of this situation? Analysis.
1. Developers on the Rotational Engineering program are not receiving full time offers
Rotational Engineering is a neat program at Meta. The company hires less experienced software engineers to this program, on a fixed one-year program. The hires are often new grads, and may be from more diverse backgrounds. Meta puts them through a month of bootcamp and two 5 month-long rotations on two different teams.
Engineers must graduate from the program to become full-time Meta employees. In the past, they could graduate as soon as they could demonstrate performance at the E4+ level. This is a “Software Engineer 2” level: one above the entry-level E3 position, and one below the Senior Software Engineer level at E5. Read more about levels at Facebook in the issue, Inside Facebook’s engineering culture.
In practice, most rotational engineers would graduate out of the program after the second rotation – month 11 of the program – and become full-time employees. It's to be said that Meta never promised anyone that those on the program would get to graduate, and reserved graduation to be based on individual performance and business needs. In practice, up to 2022, a good chunk of these Rotational Engineers ended up getting full-time, E4 offers.
But now, Rotational Engineering graduations are frozen, meaning these developers will not get permanent offers. Along with the hiring freeze, graduations have stopped. This means these engineers must leave the company when they fill out their 12-month contracts.
I talked with both current and former rotational engineers and they’re all disappointed. One rotational engineer who still has months left until the “usual” graduation period, is already interviewing for external opportunities. And a former rotational engineer expressed sadness that graduations are on hold, given this was their own path into becoming a fulltime engineer.
There have been fewer Rotational Engineers onboarded to the program, recently. Not extending fulltime offers to Rotational Engineers is not so surprising, according to an engineer who graduated from it, years back. They said that in 2022, a fraction of engineers were hired onto this program, compared to previous years. For example, in Menlo Park it was typical for a Rotational Engineer class to start with 10 engineers. Recently, this was down to 1 or 2 people.
Update: Meta responded on the day of publication, 6 Oct 2022, claiming the story is not accurate, to which I followed by asking which parts are not accurate. On 10 Oct 2022, I received more background information and updated the story. The story previously stated that 'Developers on the Rotational Engineering program are being transitioned out' which I changed, as the background information I received from Meta indicated that no one in the program is being forced to leave until filling out their contract.
2. Meta’s historic growth challenge
Something strange is happening to Meta’s market cap: it’s shrinking much faster than other Big Tech companies. As of publication, Meta is valued at $373B, making the tech giant the 12th most valuable publicly traded company in the world. Amazon and Google are valued at almost four times as much, Microsoft five times, and Apple six times. Even more interesting is how the value of the stock – and therefore the company – has changed in the past twelve months:
Meta’s value has decreased by 58% during this time; significantly more than Amazon (25%), Google (25%), Microsoft (14%) or Apple (an increase of 3%). So, what happened at Meta that’s not happening at other Big Tech firms?
Meta has a growth problem that other Big Tech companies don’t seem to have in such a pressing way.
Until the end of 2021, Meta had a fantastic run of growth. Here’s the mapping out of the company’s revenue and profit numbers from when it IPO’d in 2012, until today:
Let’s take a look at what these numbers looked like, in terms of growth rates versus the previous year:
Meta is on course for revenue growth to flatline. Based on estimates, it’s expected Meta will record a year-on-year growth which drops from the previous 25-40%, to perhaps a few percent – if even that. This kind of revenue drop is unprecedented for the company. Naturally, it will hit profits.
Decline in net profits – also referred to as net income or net revenue – has happened before, in 2019. However, back then, revenue kept growing, so it was less of a concern.
The challenge Meta has today is how to get revenue back to a healthy rate of growth. “Healthy” would be around the 20% mark. The question is: can the company even do this?
Meta is facing challenges in multiple areas to increasing revenue:
- The TikTok threat. TikTok is the most popular social media app. While it might seem like Meta has made little public response so far, the company is, in fact, doubling down on AI to mitigate this threat and get back to dominating this sector. I cover more about this in The Scoop #22, where I write about Meta preparing for AI/ML “war time”.
- Apple’s App Tracking Transparency in iOS 14. When Apple introduced App Tacking Transparency in 2021, the majority of users opted out of sharing activity with third parties. This change had a ripple effect across the advertising sector, as ad targeting worked less efficiently from then on. The change makes adverts more expensive and less efficient for customers, and contributes to reduced willingness to spend on ads which cannot be run profitably.
- Fewer growth areas. Facebook, Instagram, Messenger and Whatsapp reach close to 3 billion people, every month. This means that almost every second person in the world already uses one of Meta’s services. While there is room for some more growth, it’s clear Meta is running out of new people to onboard. No wonder the company previously invested in Internet.org, to deliver internet services to less developed countries and bring more people online, and to Meta. Note that Internet.org now redirects to Meta Connectivity, which is an initiative to “accelerate the evolution of connectivity to help bring the metaverse to life.”
- A looming recession. There are growing signs we could see a global recession. In a recession, customers spend less, merchants sell less and have less money to spend on advertising and marketing.
Meta has never faced a growth challenge like now. Facebook always had a growth plan, and this plan was to onboard and retain more people to its services, on the solid assumption that advertisers would follow. However, this plan doesn’t look like it will work for much longer.
There are fewer people to onboard, and advertising money is less readily available than before.
And while other Big Tech companies have plenty of other levers to pull for growth, thanks to their businesses being more diversified, Meta has always gone all-in on social media and advertising revenue.
Meta made a major bet on the Metaverse and on owning the full experience, starting with manufacturing the hardware, Oculus. However, there is no sign the Metaverse will gain mainstream adoption. So, what next?
This is the question Meta employees are currently asking, and I’d suspect it’s what keeps Mark Zuckerberg up at night.
These were two out of the eight topics covered in this week’s The Scoop. A lot of what I share in The Scoop is exclusive to this publication, meaning it’s not been covered in any other media outlet before and you’re the first to read about it.
I’m adding an ‘Exclusive’ label to news which features original reporting direct from my sources, as distinct from analysis, opinion and reaction to events. Of course, I also analyze what’s happening in the tech industry, citing other media sources for information and quoting them as I dive into trends I observe. These sections will not carry the ‘Exclusive’ mark.
The full The Scoop additionally covers:
- Meta rescinds intern offers for 2023. In a first for the company, Meta has rescinded offers for what seems like a large group of interns. These interns had been due to start in January 2023 at the London office. What could be behind the rescinding of these offers? Exclusive.
- Will FTE offers be rescinded by the company? Rescinding intern offers were worrying enough that a software engineer with an outstanding offer got on the phone with a recruiter at Meta to find out if their full-time position is safe, or it could also be rescinded. The recruiter shared the official stance of the company with this person. Exclusive.
- Worries about ‘quiet layoffs.’ A few days ago, Business Insider reported that Meta is doing “quiet layoffs,” which could mean as much as 15% of employees being let go. I talked with engineering managers at Meta to find out how much truth they see in this claim. They told me the numbers are incorrect, and shared more details. Exclusive.
- The mood inside Meta. I talked with half a dozen software engineers and managers to get a sense of how employees feel. Exclusive.
- Meta closing an office building in New York City. The company is closing its 225 Park Ave office. Is this a bad sign for the company? I talked with a software engineer based in NYC, and found out it’s not. Exclusive.
- Will Meta do layoffs? This is the question on everyone’s mind who I talked with at Meta. I outline possible options and give my opinion on the likelihood of layoffs in the coming months. Analysis.
Read the full The Scoop.
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