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Kustomer, the business-software company Meta acquired in 2020 for around $1 billion, is now the center of the tech giant’s bid to refocus on its core business, with the move coming after the company suffered a year of turmoil in digital advertising.

The downturn led CEO Mark Zuckerberg to emphasize the need for greater efficiency. Kustomer’s revenue has flattened since the acquisition, and the company has reportedly burned through approximately $200 million between its operation and one-time expenses. It’s safe to say that Meta bought a lemon with Kustomer. Even though Meta announced its intent to buy Kustomer in 2020, it took until late February of 2022 before it received approval from the European Commission. So it has only formally been part of the company for just over a year before they decided to get rid of it again.

Kustomer provides software for customer-service operations that consolidates conversations from different channels onto a single screen.

Times are changing for tech companies

Kustomer’s recent financial performance and the broader chill that has hit once fast-growing technology companies has led to a planned divestiture in which Kustomer’s valuation is expected to be a small fraction of what Meta paid for it.

According to insiders, Meta has been planning to keep a small stake in Kustomer when it returns to being a standalone business, although those plans could change.

Kustomer founders Brad Birnbaum and Jeremy Suriel have reportedly contacted venture firms to raise money to buy back the business and fund losses. They have discussed significant layoffs among their several hundred employees to help control costs.

Streamlining

“In light of Meta’s efficiency efforts, we’ve made the decision to focus on our fastest growing business messaging offerings, including the monetization opportunity for WhatsApp,” said Ryan Moore, a spokesman for Meta.

He added that Meta is “currently exploring strategic alternatives for Kustomer and will continue to support Kustomer’s product and customer base throughout this process.”

This divestiture is part of Meta’s larger plan to streamline its business and focus on core areas. Despite the expected decrease in valuation, Kustomer’s software remains a valuable tool for customer-service operations and seeing how the company fares as a standalone entity will be interesting.