Gossip: Is Facebook cutting costs by axing perks?

Rumors say that the social network has cut a big employee benefit: $600 housing subsidies for hires who live close to its Palo Alto, Calif., headquarters. Does this mean Facebook's in trouble?

Caroline McCarthy Former Staff writer, CNET News
Caroline McCarthy, a CNET News staff writer, is a downtown Manhattanite happily addicted to social-media tools and restaurant blogs. Her pre-CNET resume includes interning at an IT security firm and brewing cappuccinos.
Caroline McCarthy
3 min read

Facebook might be hiring former Google employees left and right, but if current rumors are true, don't expect them to start instituting a free-food policy like Mountain View's any time soon.

Gossip blog Valleywag has reported for the past few days that Facebook is doing away with a $600 monthly housing subsidy offered to employees who opted to rent living space within proximity the company headquarters in Palo Alto, Calif. The latest rumor says that new hires are losing their housing subsidy, and that existing employees will only keep it until they move to new houses or re-sign their current leases.

A source close to Facebook (who is not a current employee) confirmed that yes, the housing subsidy existed in the first place and wasn't some mythical, Skull & Bones-esque benefit, but was unable to confirm whether the perk was getting the ax. Facebook declined to comment.

Valleywag has created a movie-worthy sort of narrative for Facebook: under the management of new chief operating officer Sheryl Sandberg and communications czar Elliot Schrage, both ex-Googlers, the company has reportedly been chipping away at cushy perks and a dorm-caliber corporate culture. Facebook's New York branch famously canceled its participation in a well-publicized beer-pong tournament against InterActiveCorp's CollegeHumor earlier this month, reportedly at the behest of PR-conscious upper management.

But unlike beer-pong, housing subsidies are something that actually make sense, especially for a company located in an expensive enclave like Silicon Valley as it tries to attract young employees who might not have a whole lot of savings in the bank (as well as student loans potentially breathing down their necks). It's also a "green"-friendly image booster, encouraging Facebookers to cut down on travel times (and hence, emissions) by giving them incentive to live close to the office.

So, if Facebook's housing subsidies were indeed axed, a number of factors could be at hand. On the less scandalous end of things, they could simply have been unpopular for one reason or another, or inefficient, especially as Facebook hires more and more employees. Or (and I'm really speculating here) some flagrant abuse of the privilege might have caused the company to cut them entirely--think about those stories that occasionally pop up in the news about rent-controlled tenants who illegally sublet their apartments at market value and then pocket the profit.

On the other hand, there's also the chance that Facebook is legitimately cutting costs as it attempts to deal with escalating hardware costs and tepid ad revenues--that's an industry-wide problem in social media, not restricted to this one company. Earlier this month, BusinessWeek reported that Facebook had borrowed $100 million to cover infrastructure expenses, and market research firm eMarketer recently lowered its projections for ad spending on social networks like Facebook.

So, by no means is it a concrete sign that Facebook's in financial trouble. But if housing subsidies have indeed been cut at the social network, it could be a sign that operations are in need of some streamlining. Paying for housing might work for a small start-up with healthy investment backing, but for a company that eventually hopes to file for an IPO and hit 1,000 employees by the end of the year--and which doesn't have Google's advertising muscle fueling profits--the situation could be very different.